You have an idea but don’t know how to make it happen?

Think your needs over and choose the form of business that is best suited to your objectives.
You think you could do with some help? Take your pick:

Choose from the above!

Sole trader

This form of business can be started through your public administration access point (‘ügyfélkapu’). This is a one-person business, which can be transformed into any other form of enterprise should you decide to do so later.

You must take out a sole trader’s licence in either of two ways:

  • you can have your licence in electronic form, which is free of charge; or
  • get a physical licence certificate for HUF10,000.

The procedure goes like this:

  • Register with the tax authority, NAV.
  • Register with your local government, to which you will have to pay the local business-activity tax (‘iparűzési adó’).
  • Register with your local Chamber of Industry and Commerce (‘Kamara’), to which you will have to pay a contribution of HUF5,000 a year.

Being a sole trader is ideal for anyone doing their business as a second job and for relatively smaller expected revenue to start with.

You will have to specify your business activity. Choose the most appropriate one from the list of individual business activities by clicking HERE!

A major advantage to this form of business is that it can be suspended––for not more than five years––and resumed at any time.

A disadvantage is your unlimited personal liability for any debt your business may incur.

You will have to earn a ‘wage’ (salary) while you are active, with a prescribed minimum, and pay the corresponding taxes and contributions. Besides, you may not retain your earnings in your business, which entails more tax payment.

One-person company

It is usually created from a sole trader business by transformation.

The main difference compared with a sole trader is that a one-person company has to have a founding document, which has to be countersigned by an attorney and registered with the companies’ court.

Liability can be:

  • limited, in which case additional contribution has to be set forth in case the company should run up debt to an extent its assets do not cover. The business owner shall not be liable with their own assets; or
  • unlimited.

Limited partnership (Bt.)

This form of business may be suitable for those who are not prepared to commit much capital, prefer to run a relatively small risk, or want to keep the business within the family.

This form of business has become less common, mostly because of the few advantages it has to offer over the Kft (see below).

To set up a partnership you will need at least one unlimited partner and at least one limited one.

  • Unlimited partner: is personally liable for the partnership’s debt with their own private assets;
  • Limited partner: is liable for the partnership’s debt up to their financial contribution to the partnership.

The virtually only advantage of a Bt over a Kft is the smaller statutory founding capital requirement. The main disadvantage is the unlimited partners’ liability with their own private assets. Note that in setting up a partnership, an attorney is required to be involved.

Limited liability company (Kft.)

A limited liability company is a form of business typically bringing together investing business partners.

The assumptions underpinning this form of business are fundamentally different from those of a sole trader business. You may wish to opt for a Kft if your business requires more substantial initial (capital) investment and you expect higher turnover.

Your capital contribution may be––in whole or in part––in cash or in kind (e.g. some machinery or equipment). The minimum statutory founding capital of a Kft is currently HUF3 million.

Advantages: The participation holders are liable for the company’s debt up to their respective capital contributions only (there are exceptions though), earnings can be retained, or paid out in dividends.

Drawbacks: Higher initial capital requirement, higher administration costs.

Taxation: The terms are better than for a sole trader. The profit is subject to 9% corporate income tax, with several possible deductions.

If the company pays dividends, the natural person beneficiaries are to pay 15% personal income tax and 15.5% social contribution tax.

Company limited by shares (Rt.)

The Rt is a form of business for financial investors.

It can be:

  • public: called ‘Nyrt’––these are big listed companies, or
  • private: called ‘Zrt’––these are typically medium-sized enterprises.

All Rts are set up as private companies, and then some may get listed through a process called initial public offering (IPO).

The shareholders’ liability for the company’s debt is limited to the par value of their outstanding shares.

Therefore, a company limited by shares can only be founded with a considerable amount of minimum statutory capital, equal to the aggregate par value of outstanding shares.

A private Rt’s subscribed capital may not be less than HUF5 million (requirement as of 1st Sept 2007).

A public Rt’s subscribed capital may not be less than HUF20 million.

Unlimited partnership

This form of business has become quite unusual. It has to be established by at least two partners. All partners are unlimited.