10 1 things you need to know when setting up a limited company in Hungary

1. Folder

A limited liability company can be set up as a single or multiple company, and the founder can be a natural person or another company, for example a foreign company. The number of founders also determines whether the most important operational decisions are subsequently taken by one person or by the general meeting. A specific feature of a limited liability company is that the newly created legal entity is separate from the persons who created it, so that, for example, the members are not liable for the company's debts with their own unlimited assets, but only with the part of their assets that they contributed to the creation of the company at the time of its formation.

2. Company name

Once the intention to incorporate has been expressed, the first and most important question in the life of a company is under what name it should continue its business. The importance of this question is best illustrated by the fact that there are a number of rules governing the name that the founder can give to his company. In terms of structure, the name chosen is composed of the motto and the name of the company form. The choice of the motto is more flexible and may include an abbreviation or a number, but it is important that the name chosen should not be confused with other previously registered company names, should be consistent with the economic activity the company intends to carry out and should comply with the linguistic and social requirements of name use according to the rules of Hungarian spelling.

3. Place of registration

Once we have the name of our business, the next important question is where we intend to do business with it. We therefore need to have a registered office for our company, which will in principle be the same as the place of central administration.

4. Total capital

To set up a business company, it is essential that we have all the start-up capital. Legislation sets out the minimum amount of capital that is required to form a company. For example, if you want to set up a limited liability company, you will need a minimum of HUF 3,000,000. The share capital can consist solely of money or you can also contribute various assets to the company, such as a car or real estate. The share capital does not necessarily have to be paid up at the time of incorporation, the member can also provide the share capital from the dividends he or she receives. The time limit for this is 2 years from the date of incorporation, and if the required amount has not been raised by then, the member must pay the remaining share capital within 3 months.

5. Managing Director

The company is managed by one or more managers. The managing directors may act individually or jointly as representatives of the company. However, it is important to note that representation can only be made in one way, either jointly or individually. The managing director performs his duties independently on the basis of the company's best interests. In this capacity, he is subject only to the law, the articles of association and the decisions of the decision-making body. The chief executive may not be instructed by a member of the company and his powers may not be withdrawn by the supreme body. However, in the case of a single-member company, the sole member may give instructions to the management, which the chief executive officer must carry out.

6. Scope of activities

A company may select the economic activities it carries out by using the TEÁOR'25 nomenclature. If the carrying out of an activity is subject to a licence, the company may only start this activity if it holds the licence.

7. Accountant, auditor

Auditing is required by law for companies above a certain turnover and number of employees, but a company may decide to appoint an auditor to audit its accounts even if these conditions are not met. However, to properly perform the accounting and tax tasks related to the economic activity, the company will necessarily need an accountant.

8. Documents required for filing

To incorporate a limited liability company, the appropriate documents must be prepared, signed and submitted to the Companies Court. For this very reason, the law provides for mandatory legal representation for the company registration procedure.

9. Expected costs

The formation of a limited liability company is free of charge, i.e. there is no fee to be paid to the court for registration, so the cost of incorporation is only the lawyer's fees.

10. How long does this take?

The company registration process is now done online, which significantly shortens the time it takes to complete the paperwork. In the case of a simplified procedure, you can register your limited company within one working day, but the normal procedure also takes up to a week or two, depending on the court's workload.

1 A good lawyer

Besides the fact that legal representation is mandatory in the proceedings, a good lawyer can also be useful in navigating the above, helping you to see through the maze of legal issues and, if necessary, advising you on legal issues arising in the operation of the company, suggests the author, Dr Ivett Bognár, a lawyer at act legal Hungary.