The Hungarian law regarding the creation of new companies allows all interested persons to operate without restrictions. Foreign persons and legal entities can operate in all sectors of the economy, with certain restrictions in agriculture. If the chosen activity requires a permit, such as banking, the same rules apply for residents and foreign entities.
When opening a limited liability company in Hungary, the founders are liable for the debts and obligations of the company according to their contribution accounting and auditing to the share capital. The limited liability company is the most common type of company and can be established abroad through power of attorney. There are no restrictions regarding the citizenship of the founders, but in some cases it is necessary to provide certain documents, depending on the nationality of the directors. Companies incorporated in Hungary require an address in Hungary. There are also some cases when the entrepreneur must be present to open a bank account.
You have to consult an expert, usually a corporate lawyer or tax lawyer, who can recommend what type of company is right for you. You can also ask in that sector, what is the type of company that is usually used. For example, most tour guides use the self-employed company form and that’s what I did.
For a foreign company, there are also the options of branches or representative offices in Hungary. None of them have the status of a legal entity. A representative office is easy to administer and closure does not require termination. Non-residents can operate a company in Hungary through a branch registered with the Chamber of Registration. The need for a business license applies here as well. Books and financial statements must be kept according to Hungarian law.
Representative offices must register with the Hungarian Chamber of Registration. No commercial activity can be undertaken. It can assist in the preparation of contracts and provide advertising services on behalf of the parent company. Neither entity requires a minimum share capital.
To register for VAT, the Hungarian Tax Law requires companies that market products or services subject to VAT tax in order to apply for VAT registration. It is a simple procedure that the employer or the representative must carry out by submitting an application to the Hungarian Tax Authority. This should include the articles of incorporation and a copy of the registration certificate issued by the Hungarian Trade Register.
Choose your Business
To choose your business, you should ask yourself and answer at least the following questions, although the best thing would be a good and detailed business plan. I recommend this to you, no matter how small your business is.
Is the product or service something that people need? Are you in demand? Are there already providers of this service or product on the market? Do you have the tools to provide that service or product? Do you like that type of service or product? Is it something you would like to do in the medium or long term? Is it something that will generate enough money for your expenses (and a little more)? Is it something you can market? Do you know how you are going to acquire clients? Do you have enough funds to pay expenses while the business takes off? Important: in general, 30% of businesses fail in less than a year due to lack of funds to survive that first year.
If all those responses were positive and you are convinced that it is something that will work, I recommend that you do not start the business yet. If you can, do a test. The best thing is that the test is as real as possible, but avoids charging, because as long as you do not have the business registered, all these transactions would be illegal. So, offer the product or service free for a month or two. The best way to know if it will work is if people recommend you without your asking.
If so far everything seems positive, then you proceed to the next step. And here I am not referring to the positive that of the clouds and the rainbow, I mean the positive objective and without any illusions. Optimism is one thing you need, but decisions have to be based on facts and real data.