Companies looking to trade and operate in or from Hungary will typically be required to register a legal entity such as a company or branch. It is important to determine what activities you want to carry out from this entity as early as possible. Some business purposes require application for a related license from the very beginning.
The types of business entities operating in Hungary include:
General Partnership (Közkereseti társaság or Kkt.): this type of company is set up by at least two partners, all of whom are jointly and severally liable for the obligations of the firm
Limited Partnership (Betéti társaság or Bt.): this type of entity is formed with at least two partners, of which, at least one partner has unlimited liability (general partner) and one partner has limited liability up to the extent of his/her capital contribution (limited partner)
Limited Liability Company (Korlátolt felelősségű társaság or Kft.): this is a legal entity established with a minimum capital of HUF 3,000,000. It must have one or more founding members. All members have limited liability up to the extent of their capital contributions
Company Limited by Shares (Részvénytársaság or Rt.): in this type of business entity, capital is divided into shares of a pre-determined number and face value. Such a company is one of two types:
- Private Company limited by shares (Zártkörűen működő részvénytársaság or Zrt.): this is set up by at least one member. Minimum capital required is HUF 5 million. Shares cannot be subscribed to the public
- Public company limited by shares (Nyilvánosan működő részvénytársaság or Nyrt.): this is required to be set up by at least two members with a minimum capital of HUF 20 million. The share capital is subscribed by the public
In addition to the above, foreign entities can also establish a presence in Hungary through the following forms:
- Representative Office: performs liaison functions on behalf of its parent company such as contract negotiation, marketing and advertising. However, it is not allowed to conclude trade contract and/or conduct core business operations
- Branch Office: a business unit of a foreign company that is established to carry out normal business activities in Hungary
- Since Hungary’s 2004 entry into the EU, foreign companies have also been able to set up the following forms of businesses:
- European Economic Interest Groupings (Európai Gazdasági Egyesülés or EGE): a company that is set up in any EU member state and conducts business in different EU states
- European public limited liability company (Európai Részvénytársaság): this has a minimum capital requirement of EUR 120,000, which is divided into shares
A number of legal documents are required in order to form a company, such as a trading licence, a registered office, a bank account, and several documents related to the shareholders and the company executives or representatives.
The newly incorporated company then needs to register with the electronic portal of the tax office (NAV), the Central Statistical Office (KSH), the chamber of commerce in charge, the local municipality (with some exceptions), and - in the case where it has employees- these employees have to be registered with the social and health insurance bodies.
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