Setting up a Limited Partnership in Bulgaria
A limited partnership company in Bulgaria (also known as Командитно дружество – КД and the German equivalent Kommanditgesellschaft – KG OR GmbH – Co. KG) is a partnership business structure in which two or more entrepreneurs or companies team up to run a trade under a common company.
A KG differs significantly from a limited OOD company in the fact that there is always at least one fully liable partner (the general partner) and at least one limited partner who provides investment but does not participate in the management of the company.
Partnership companies in Bulgaria
According to German legislation, in a GmbH & Co., the shareholders are limited companies, while in a KG, the shareholders are private individuals. Bulgarian legislation does not distinguish this difference. In both cases, the company is called a limited partnership KG company and the client decides whether the shareholders are companies or private individuals.
Directors of a limited partnership company
For a director of a limited partnership company, you can appoint another company. This means that not only can the shareholders be limited companies, thereby eliminating the partners exposure to liability, but the directors can also be companies.
The director can be an offshore or onshore company, and there are no restrictions of the jurisdiction of incorporation. The offshore company can be virtually incorporated anywhere, e.g. in Dubai, Hong Kong, Belize, etc. This technique can be used to minimalise your liabilities in unfavourable circumstances for your business.
Management of KGs
While the KG’s general partner is obliged to conduct the business of the KG, the limited partners are excluded from management. They can only object to extraordinary transactions, such as taking out considerable loans or real estate purchases.
Bulgarian KGs & liability
Under the KG limited partnership in Bulgaria, the general partner is always directly and personally liable for all business debts with his private assets (which can be limited by registering a company as a general partner). On the other hand, the limited partners’ liability is limited to the amount recorded in the commercial register.
Since a KG is in the commercial register and thus subject to Bulgarian commercial law, it is obligatory to conduct double-entry bookkeeping, publish annual accounts and preserve records for at least five years. You can find more information about accounting in Bulgaria.
A KG company’s payroll is no different to the payroll of any other legal entity. You can read more about Payrolls in Bulgaria.
Key features of a KG
• Establishment: Article of association; registration in commercial register
• Capital: Minimum of 1 BGN only.
• Governance: Only by the general partner(s); limited partners are excluded from management.
• Liability: Unlimited liability with private and business assets for general partner; limited partner’s liability limited.
Establishing a limited partnership in Bulgaria
Since a minimum capital is required to establish a limited partnership in Bulgaria, you may first need to obtain a Bulgarian residency card. The incorporation of a limited partnership requires the opening of a deposit/ accumulation bank account. This account is opened for the sole purpose of depositing the company’s founding capital. If you do not wish to obtain a Bulgarian residency card, our team will assist you in the purchase of a ready-made company.
Your corporate income will be taxed in Bulgaria. However, your private income should be taxed in your home country, unless you obtain tax residency in Bulgaria.