1. Hungary >
2. Starting a Business >
3. Company Formation

Company Formation

Registration in Hungary is a 4-stage process, which is as follows:

1. Hire a lawyer to represent the company and prepare the legal documents. This takes 1 to 2 days and costs from 100,000 HUF.
2. Pay at least 50% of the subscribed capital into the company's bank account. This takes a day.
3. Register with the Registration Court and obtain a certificate. This takes 2 to 3 days and costs approximately 15,000 HUF.
4. Register for social security, taking one day.

Registering a corporation in Hungary

The following details are necessary in order to register a corporation:

• A trade license
• Documents of incorporation
• Company name and the address of its registered office(s)
• Location of the company's activities
• Nature of the company's activities
• Form of incorporation
• Approval for foreign workers

When you register a company in Hungary, it immediately becomes a member of the local Chamber of Commerce.

The company is required to register with the following associations once the documents above have been submitted:

• The Central Office of Statistics (KSH)
• National Income Tax (APEH)
• Regional Income Tax
• The (Regional) Court of Registration
• The Institute of National Insurance

You are able to incorporate a business in Hungary in one of the following forms:

• General Partnership (KKT must be added after the name of the Partnership). In any joint undertakings, all the partners accept/have unlimited liability. According to Hungarian Law, a partnership of any kind is not a separate legal entity.
• Limited Partnership (BT must be added after the name of the Partnership). At least one of the general partners has unlimited liability, the other partners only have limited liability. Legally, the general partner can be a limited liability company.
• A partnership, general or limited, is not permitted to be a partner with unlimited liability in any other partnership.
• Joint Stock Company (RT must be added after the name of the Company). It may be a private or public company. A joint stock company can have 1 shareholder, but the board of directors must have a minimum of 3 members and a maximum of 11 members. The minimum share capital required is HUF 20 million, and either HUF 10 million or 30% of the capital (whichever amount is higher) must be paid in cash.
• The Companies Law states that banks, insurance companies and investment corporations must be incorporated as joint stock companies.
• Limited Company (KFT must be added after the name of the Company). A company under the classification of KFT prohibits the public to subscribe to any shares, and the shareholders have limited liability. The minimum required equity must be above HUF 3 million, and a minimum of HUF 1 million or at least 30% of the total capital (whichever amount is higher) must be paid in cash. Each shareholder is required to have a minimum share capital of HUF 100,000.
• It is necessary for a Limited Company with a single shareholder or a company with a share capital above HUF 50 million to submit audited accounts.

Offshore Companies

By choosing to incorporate an offshore company, business owners and  investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
  
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
  
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
  
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
  

Characteristics of an offshore company:

• Memorandum and Articles of Association
  
• Certificate of Incorporation
  
• Registered Office/Agent
  
• Shareholders / Members
  
• Directors / Managers
  
• Company secretary
  
• Statutory Register
  
• Bookkeeping
  

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

Click here to Ask an Expert about Company Formation in Hungary