What’s the first thing to do?
You have an amazing idea for a business, but you don’t know where or how to start. One of the main questions you should first clarify is the so-called legal status of your company. There are not a few options for this, but the main ones, so to say the most common and the most suitable in general are three – ST, Limited liability company or LTD
Features of an ET
Let’s first focus on the Sole Trader /ET/. Generally this is an outdated and not very efficient form of running your business, enjoying σ some tax breaks in the past, but at the present time – not a very suitable option. I could hardly point out the positive sides of ET, so I will mainly focus on the disadvantages of this form.
First of all, an ET is an unlimited liability company! What does this mean? Simply put, it means that the individual – the trader – is liable to creditors and the state with all his personal assets, not only with the property he owns as an ET, but also with everything that is your personal property (this includes your flat, car, villa, property, etc. ) At some point, if for some reason through your business you get stuck in debt that you cannot cover, in addition to having to close down your business, you may also end up with absolutely no personal assets (literally, you may end up on the street). Generally speaking, an ET is not considered a legal entity by its very nature, and for this it is entirely subject to personal income tax law. I don’t recommend you start a new business using an ET, and for those of you who are sole traders through registered old businesses, I recommend you convert your status. If you are wondering how this can be done, you can always contact us and get the information you need.
E/Ltd – the best option!
The other group mentioned is the so-called limited companies. As you may understand, in their name lies their biggest advantage – Their owners are liable to creditors and the state only to the extent of their share contribution in the company’s capital. Unlike an LLC here, whatever happens to the business you’ve started, your personal assets will always remain protected and intact. The current law allows companies to be set up with a capital of BGN 2, which in this case will also be the amount of your personal liability as the owner. At the same time, it makes opening and starting a business affordable even for people with little financial means. Depending on whether the company has only one owner or several partners, both types of companies are now distinguished: EOOD and Ltd. In contrast to the sole proprietorship, the E/LC is a legal entity and as such is subject to the rules set out in the Corporate Income Tax Act.
Summary of the topic
Of course, whatever form you choose, the commercial, employment, tax and legal features and obligations are far from simple. They require a wealth of experience and in-depth knowledge of the subject matter, which is why it’s particularly important, I’d go so far as to say your top priority when starting a business, to find the right people to entrust with your accounting services. That way you can save yourself a lot of future problems and at the same time make the most of all the legal and tax benefits and privileges.
In conclusion, if you are still wondering what form to choose, I strongly recommend you to bet on Limited Liability Companies – the most suitable and secure path to your success.
Source:Boncho Yanchev – Assistant Auditor