Company registration in Hungary is a lengthy and detailed process. If you’re planning to set up a business in Hungary, make sure you follow the correct procedures from the start.
Failing to meet the necessary requirements from the outset could result in your business being delayed or even denied. Company formation in Hungary involves several steps, each of which needs to be completed before moving on to the next one.
Undertake company registration in Hungary as soon as you’ve found an appropriate business location, organized your finances and chosen a name for your operation. The sooner you complete these tasks, the sooner your new company can get underway.
Budapest Consulting will help you understand what is company registration in Hungary and what documents are required for company formation, company name registration process and procedure for setting up a new company as well as outline potential pitfalls along the way so that you can complete this important task smoothly.
Why Register a Company in Hungary?
There are several reasons why setting up a company in Hungary is a good idea. The first is that Hungary offers you a more than attractive, 9% flat rate of annual corporate tax rate, which is one of the lowest among EU jurisdictions.
The second reason is to protect your personal assets from being used as collateral for your business. This is particularly important in Hungary, where most businesses operate as “limited liability companies (KFT)” and have their owners’ personal assets protected from any business liabilities.
Company formation in Hungary is also a good way to get start-up capital. You can borrow money on the strength of your company’s future profits, using the equity in your business as collateral.
Company Registration Service
It’s time to start your own business in Hungary! As a new company, you will need to obtain a company registration. You may not know where to begin, but we’re here to help. Whether you are an individual or a legal entity, our team can help you set up your business in Hungary.
When you set up a legal entity in Hungary, you can choose from a number of different legal forms. A company registration is the process of acquiring a legal entity that is entitled to transact business in the country.
These companies are also known as “companies,” “commercial entities,” or “business entities.” By registering a new company in Hungary, you can do many things including:
- choose a legal form for your company;
- open a bank account;
- register a trade name;
- apply for a tax number;
- apply for a limited liability company (LLC);
- apply for a commercial import/export license;
- apply for a mortgage;
- apply for an operating license.
The Hungarian Limited-Liability Company or LLC (KFT) is the preferred corporate form for foreigners for inward investment into Hungary, and for investors or entrepreneurs who want to minimize their taxes and conduct business internationally.
Company registration in Hungary has a long-established system, designed to be both legally solid and fitting, flexible and fast. Our professional assistance guided thousands of satisfied clients through this gateway over the last thirteen years, since the very beginning of the current legislation came into effect.
The 9% corporate tax rate can be applied equally to small and medium-sized enterprises as well as large corporations.
The benefits of starting an LLC in Hungary are tremendous. Besides the lowest corporate tax rate, foreigners can own 100% of the shares, and the liability of its owners to the company extends only to their capital contributions.
Steps to register a new company in Hungary
Before you can start your company registration process, you will need to determine the legal entity you will use.
- Corporate documents must be prepared
- Registered Office Address for Seat Registry
- Constitutive documents must be signed in the presence of a local Hungarian lawyer or via skype
- Client Gate and Company Portal registration
- Hungarian Personal Tax Number if needed
- Registering the company in the Court of Registration of Hungary and obtaining a (EU) tax ID.
- Business Bank account can be opened by the founders in person and the authorized capital is paid in to it
- Sign agreement with a qualified local accountant, for providing accounting support.
- Registry of Chamber of Commerce and the Government Municipality.
Organizational Structure of a Limited-Liability Company:
The supreme body of a Hungarian company is the members' meeting. Members' meetings are to be convened at least once every year.
The principal duty of the supreme body of a business association is to adopt decisions on fundamental and strategic issues. The matters rendered under the exclusive competence of the supreme body are defined by the provisions pertaining to the specific company forms.
Meetings of the supreme body may be attended by the members of the business association, and - without voting rights - any person invited according to legal regulation or the memorandum of association. All members of the business association have the right to partake in the activities of the supreme body.
Administration of the company's affairs and representation of the company are carried out by one or more managing directors elected from among the members or third persons.
The memorandum of association may provide that all members be entitled to exercise management and representation. Managing directors keep records of the members of the Hungarian company. Also, a legal entity can be the manager of the company.
Owners and Directors
The owners of a Hungarian LLC may be of any nationality without a Hungarian residency status. The minimum number of owners is 1. Supervisory board is not required if the number of employees are less than 200.
Owners for a Limited-Liability Company in Hungary are called members. The whole business structure of an LLC is known by its flexibility. A lone member cannot draw a salary, for the IRS considers all profits of the business as part of the owner's personal income.
Multi-member LLC's roles are the same as for partners. Members can decide to share profits disproportionally to each member's investment, or giving a greater share to those more actively involved with running the business.
The number of directors is not limited. The LLC director is responsible and liable for everything that happens within the company.
The auditor may be appointed (not obligatory) by the supreme body of the business association is responsible for carrying out the audits of accounting documents as specified in the Accounting Act, including determining whether the annual report of the business association has been filed as prescribed and is in conformity with legal requirements, and whether it provides a true and fair view of the company's assets and liabilities, financial position and profit or loss.
Read more about our Audit Service.
The managing directors and the member’s details as well as the bank account(s) of the company are publicly accessible. The shareholders of company limited by shares under 50% are not shown in the company register.
Business shares of a Limited-Liability Company:
Following registration of the Hungarian company, the rights of members and their share from the assets of the company are embodied by their business shares. Unless otherwise drawn in the memorandum of association, the business shares of members must be consistent with their respective capital contributions.
Identical membership rights must be attached to equivalent business shares. The shares can be given by the individual or by any other entities, specified by the memorandum of association.
Each member may have only one business share. One business share may be owned by several persons. With the exception of the company's own business share, business shares may be freely transferred among the members of the company.
Members are entitled to receive a share from the Hungarian company's taxed profit. The profit cannot be distributed till the initial capital has not paid up full.
The company's capital:
The initial capital of the Hungarian company consists of the capital contribution of the individual members. Capital contributions are provided by the members in cash and in kind to comprise the capital of the company.
The amount of initial capital for an LLC in Hungary may not be less than 3 million Hungarian forints. It's not necessary to pay up full the initial capital at the time of the registration, however in-kind contributions must be made available to the company at the time and in the manner specified in the memorandum of association.
If the in-kind contribution was not made available to the company in its entirety at the time of foundation, it has to be provided within 2 years from the company's registration.
A company may be registered only if, prior to the submission of the application for registration, all in kind contributions are available, along with the minimum amount of cash contribution.
Requirements to start the incorporation procedure:
In case of the shareholder being a natural individual person, we only need a passport copy or a European ID. European national insurance number (if exists), and the mother's maiden name of the shareholder and manager(s) are also necessary.
In the case of a legal entity, a paper format extract of the company register would be required, showing the name of the representative person. This document cannot be older than 3 months. These documents must be apostilled in the source country and officially translated in Hungary before the submission. (The application can be only submitted once the translated original document is available.)
The presence of the representative person is also required for signing documents. The registration procedure for a Hungarian company can be done remotely by signing the documents in front of the consul. In this case we prepare the documents and send you by email.
Contact us to set up an appointment in Budapest, Hungary or at the nearest Hungarian consulate. The whole procedure can be done remotely and by our law firm's legal representation.
Naming Your Company - How to choose a Company Name?
Choosing a company name isn’t just about sounding good. There are certain requirements and restrictions that you need to meet in order to register a business name in Hungary.
When you set up a Limited-Liability Company in Hungary, you need to choose a name that is not similar to other names.
Your company name must be recognisable as a business name, not an individual’s name. This is to avoid confusion, especially when it comes to paying taxes. Your company name must not be misleading and must not infringe on the rights of any other person or business.
The company name can include certain letters that aren’t used in Hungarian or English, or can be translated into Hungarian. You can also mix both languages, for example “Delicious Gulyás leves Kft.”
In Hungary, the name Limited-Liability Company-or the abbreviation of ' Kft. '-must be indicated in the company's name.
Choosing Your Registered Office
Choosing your registered office will depend on your business’s type. You can choose to set up your company in Hungary as a domestic or foreign corporation. Domestic corporations are registered at the company’s place of business. Foreign corporations must be registered in a place where they’re allowed to do business, like Hungary.
You’ll need to choose a registered office at which you’ll keep the corporation’s official documents, such as the articles of incorporation and financial records.
Your registered office doesn’t have to be where your company’s business operations are carried out.
Read more about our Virtual Office service.
Completing the Registration Forms
Depending on your business type, there are different forms to be completed at this stage of company registration in Hungary. Some of the forms you’ll need to complete include:
Articles of Incorporation – This sets out your company’s name, registered offices, nature of business, amount of company capital and the names, addresses and signatures of the company’s shareholders.
Get your Client Gate and TAX number
You’ll need to get your Client Gate and TAX number before you open a business bank account. Your Client Gate account is used to identify your company and to report taxes, while your TAX number is used to report your income and other financial information.
You can apply for both of these numbers at the same time by visiting the Tax and Customs Administration. You’ll need to bring your company’s articles of incorporation, along with proof of your company’s legal address. You’ll also need to provide a bank account number and a representative’s name. Your Client Gate number is valid for one year.
Open Business Bank Account
Before you open a business bank account, you’ll need to complete your company registration in Hungary. You’ll need your Client Gate number, TAX number and a letter from the Tax and Customs Administration confirming that your company has been registered.
Your letter of confirmation will have your TAX number printed on it. You’ll also need documentation proving that you’re a genuine representative of your company, along with your business identification card.
Read more about Banking in Hungary.
How long does it take to register a company in Hungary?
The process of registering a company will depend on the type of entity you choose and how busy the authorities are. Generally, the process will take only 4-5 days to complete. It’s important to note that the process can take longer if you are registering as a domestic company.
Please contact us now by email or phone and get answers today to your questions about this topic.
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