Company formation
in Hungary
Main issues in company formation
The company formation process involves a number of legal and administrative steps. Here are some important things to know about company formation:
Choosing the type of company:
The first step is to choose the right type of company for your business.
Choosing a company name:
Specific rules apply to the name of the company; an appropriate and unique name must be chosen.
Preparation of the Memorandum and Articles of Association:
The Memorandum and Articles of Association is the basic document necessary for the establishment of the company. It sets out the name of the company, the scope of its activities, its share capital, the rights and obligations of its members, the person of the managing director, the right to register the company, etc.
Contribution of share capital:
In the case of an LLC, a certain amount of capital must be paid in or made available as a contribution (non-cash contribution) at the time of incorporation. In the case of a limited liability company, the share capital is provided through the issue of shares.
Attorney countersignature:
The articles of association are countersigned by an attorney. A lawyer’s countersignature and involvement are mandatory in the company procedure.
Registration at the Company Court:
The company must be registered at the Company Court by a lawyer, which constitutes the formal establishment of the company.
Tax number and other permits:
Upon registration at the Company Court, the company obtains a tax number from the tax authority and, if necessary, additional permits from the authorities to carry on business.
Establishment of an accounting system:
It is important to have a proper accounting system, so it is essential to employ an accountant to monitor the company’s economic activities after the company is set up.
Employee issues:
If the company plans to employ staff, it is necessary to ensure compliance with labor regulations, to draw up appropriate employment contracts and to engage the services of an employment lawyer or company lawyer.
Legal and business advice:
When setting up a company, you may want to seek legal and business advice to ensure that all legal requirements are met.
In different cases and for different types of companies, the procedures and rules for company formation may differ, so it is always worth seeking the advice of a lawyer or law firm.
Which company form should you choose?
The choice of the right company form depends on several factors, including the business plan, the level of responsibility, the ownership structure, and the administrative needs. Some common company forms and some aspects to consider:
Limited partnership (Bt.):
Ideal for small businesses, but where the sole shareholder has unlimited liability for the company’s debts.
Limited liability company (LLC. / Kft.):
This form is suitable for small and medium-sized businesses. The liability of the owners is limited to the amount of the share capital. It is the most popular choice because of its simplicity. Easy to manage and adapt.
Joint Stock Company (Ltd. / Zrt.):
Recommended for larger companies and their shareholders. The liability of shareholders in the case of a limited company is limited to the nominal value of the shares.
European Company (SE):
May be ideal for companies with international operations, as the European Company is a special European legal status.
Hungarian branch of a foreign company:
For international companies, it can facilitate entry into Hungary through a subsidiary.
Non-profit organizations:
If the primary purpose of the activity is not to make a financial profit, it may be worth registering the company as a non-profit organization. However, this is subject to completely different rules from companies.
Important considerations when choosing the form of the company
Liability:
How far are you willing to take responsibility for any risks that your business may take?
Taxation:
What are the tax implications of the chosen company form?
Administration:
What is the level of administration involved in the chosen form of company?
Ownership structure:
What ownership and management structure do we want for the business?
Legal and business advice:
When setting up a company, you may want to seek legal and business advice to ensure that all legal requirements are met.
Based on the business plan and the specific characteristics of the company, it is recommended to seek advice from a lawyer to help you choose the right company form.
The costs of setting up a company
The costs of setting up a company can vary depending on the type of company. Some typical costs that may be incurred when setting up a company are:
Legal fees:
The lawyer will help with the preparation of the articles of association and related documents, administrative procedures, and other legal issues. The lawyer’s fee may vary depending on the work done and the legal advice given. The involvement of a lawyer in company proceedings is mandatory under current Hungarian legislation.
Registration fee at the Court of Registration:
The fee varies depending on the type of company and the form of the procedure (simplified or ordinary company procedure).
Financial advice, tax advice:
If expert advice is obtained, for example from an accountant or tax adviser, this will also incur a charge.
Costs of other licenses:
Depending on the nature of the business, other licenses, such as activity licenses, may be required and may incur additional costs.
Bank account fees:
There may also be a cost for maintaining the bank account required to set up a company.
Other administrative and office costs:
Costs related to office equipment, supplies and other administrative expenses.
It is important to note that the specific costs may vary significantly depending on the form of company formation. It is always advisable to consult a lawyer for more precise information and to take into account the Hungarian legislation.