The Hungarian law on setting up new companies allows all interested persons to operate a business without limitation. Foreign individuals and legal entities can operate in all business areas, with some restrictions in agriculture. If the chosen activity requires a permit, such as banking activity, there are the same rules for residents or abroad entities.
TYPES OF BUSINESS ENTITIES IN HUNGARY
When are trying to establish a large business, the Hungarian or foreign individuals can create a joint stock company (RT) which can be set up with a minimum share capital of 5 million HUF by a single individual or corporate body. It can be private or public. The shares issued by a joint stock company are registered at the Stock Exchange and have a predetermined nominated value. The management of such company is made by the board of managers and a supervisory board of at least three members.
A limited liability company in Hungary (Korlátolt Felelosségu Társaság – “Kft.) is based on a contribution of at least 500000 HUF (or 100000 HUF if established by a single entrepreneur). The management is made by a director appointed by the general meeting of the shareholders.
A Hungarian general partnership is composed by at least two members who share the same liability and responsibilities and can use the profits after paying the specific taxes on profits. The main advantage si that it doesn’t requires a minimum share capital.
The Hungarian limited partnership is very similar with the above but it is formed by a general partner, with an unlimited liability and a limited partner that is limited by the capital contribution, monetary or non-monetary.
INCORPORATION PROCEDURE IN HUNGARY
The process of company incorporation in Hungary takes around five working days as it is simplified by the possibility to register an entity electronically. It is advisable to hire a lawyer to represent the company, to create the company incorporation documents and make sure that all the legal actions are taken.
At least 50% of subscription amount must be deposited in a bank account and a certificate of deposit is issued by it in order to be used in the incorporation process.
All the entities must be registered into the company register kept at the competent county court or the metropolitan court. After depositing the application, the Court will also register the entity at the State Tax Authority (for Vat and income taxes) and with the Statistical Office. Not more than two days are necessary for the whole process.
The last step of company incorporation in Hungary is the registration at the Social Security. The procedure is simple and takes 1 day to be completed.
For a foreign company, there are the options of opening Hungarian branches or representative offices. Neither of them has the status of a legal entity. A representative office is easy to administer and the closure doesn’t require deregistration. Non-residents who want to start a company in Hungary can operate a business in this jurisdiction through a branch registered with the Court of Registration. The necessity of a business license is applied in this case as well. The books and financial statements must be kept in accordance with the Hungarian law.
Representative offices have to be registered at the Hungarian Court of Registration. It is not allowed to engage in any commercial activity. May assist in the preparation of contract and provide advertising services on behalf of the parent entity. Neither of the two entities requires a minimum share capital.
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