ET, EOOD, OOD or NGO to register?
ET, EOOD, OOD or NGO to register?
I would like you to explain the difference between a company (ET, EOOD, OOD) and a non-profit association (NPO). When starting an activity and its development unknown, which of the two is more suitable for registration?
Thanks in advance!
Companies (ET, EOOD and OOD) are registered by persons who will carry out commercial activity. Commercial activity is the performance of a certain activity as an occupation at one's own risk and at one's own expense with the aim of making a profit.
A non-profit association, on the other hand, carries out an activity that is of public or private benefit. The association sets a goal/s (cause/s) for which it works. It has the right to carry out commercial activity as well, but it must be related to the set goals and, accordingly, the profits realized from this activity must be spent on this specific goal/s. Also, realized profits are taxed as would be the profits of a company.
I.e. in conclusion - if you want to carry out commercial activity, then the logical choice is to register a company in your name. From there on, it remains to choose the form of company - whether to ET, EOOD (OOD is the same as EOOD, but with more than one partner) or to act in the form of a freelance profession. The main differences are as follows:
From a tax point of view, things look like this:
- with ET you declare the amount of income for the year. From the amount received in this way, you deduct the insurances paid during the year and on the amount received in this way, you owe 15% tax.
- with an EOOD, you declare the amount of income and expenses related to your activity. If the income is more than the expenses, then you make a profit and this profit is taxed at 10%.
- in the case of self-employment, you declare the amount of income for the year. From the amount received in this way, you deduct 25% of legally recognized expenses and the insurances paid during the year, and you owe 10% tax on the amount received in this way.
From an insurance point of view, the situation is as follows:
- with ET, you are insured monthly, and accordingly you must declare and pay insurance every month, with the minimum insurance income currently being BGN 780.00, which means minimum insurance in the amount of BGN 240.00 per month. At the end of the year when the annual tax return is submitted, an adjustment is made. In this equalization, the realized profit during the year is looked at, and if the amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which insurance is calculated and paid on an annual basis cannot be higher than BGN 40,800.00.
- with an EOOD, the insurance contributions are paid again on the minimum insurance income for the year - BGN 780.00, the difference being that there is no annual equalization of the insurance contributions.
- if you are self-employed, you are insured monthly, and accordingly you must declare and pay insurance every month, and the minimum insurance income is currently BGN 780.00, which means minimum insurance in the amount of BGN 240.00 per month. At the end of the year when the annual tax return is submitted, an adjustment is made. In this equalization, the realized income during the year is looked at, and if its amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which insurance is calculated and paid on an annual basis cannot be higher than BGN 40,800.00 for the year 2023.
I.e. purely from a tax and insurance point of view, you will need to assess and make some kind of plan as to what income you expect to receive and what expenses you would have. Only in this way would you be able to determine which form of activity is economically more profitable (ie you would pay less tax and insurance).
Apart from the differences from a tax and insurance point of view, there are also several purely functional differences:
- the money you earn as an ET and freelancer is really your money and you can "spend" it whenever and on whatever you want. With an EOOD, the money the company makes stays with the company. If you, as the owner, want to have this money at your disposal, there are several options - to give yourself a salary, to give yourself a loan, or after the financial year is over and the company, if it has made a profit, you will be able to distribute the profit as dividend (but you will have to pay an additional 5% dividend tax on this amount).
- as an EOOD, the company is responsible for its obligations to the extent of its own assets and capital. As an ET and self-employed - you are the company, which means that you are personally responsible with all your assets for any liabilities arising from your activity as an ET.
- in order to register as a self-employed person, you need to provide a diploma or some other certificate with the set of documents (application and declaration) certifying your competence to provide the services you will perform. The registration itself is carried out by the Bulstat Register within 24 hours, and there is also a state fee of BGN 10.00. To register an EOOD, the procedure is a little longer and more complicated. To begin with, a set of documents is prepared (constitutional act, minutes of the founding meeting, management contract, several declarations and a sample signature). Some of the documents are notarized. After that, you need to find a fundraising account in a bank of your choice, to which you can deposit the initial capital. The minimum is BGN 2.00. The import note for the paid-in capital, together with the other prepared documents, is submitted to the Commercial Register, no later than 7 calendar days from the date of the founding act, and the registration takes place within 7 working days . The state fee is BGN 110.00. The notary fee will be BGN 6.00, and the bank fee will depend on the bank you choose, and it will vary between BGN 10.00 and 50.00. ET registration is similar to EOOD, the difference being that no collection bank account is opened and the state fee is BGN 50.00.
We hope we have been helpful!