What are the most common Company types in Hungary?

When you decide to form a company in Hungary, understanding the different types of business entities available is essential to making an informed decision. The structure you choose will influence your company’s operations, tax obligations, and the level of personal liability you will face.

In Hungary, several business structures are available, each offering different advantages and regulatory requirements. This guide will walk you through the key company types: Kft. (Limited Liability Company), Bt. (Limited Partnership), Zrt. (Private Limited Corporation) and Fióktelep (Branch Office).

Limited Partnership or Betéti Társaság or Bt.

A Bt. is a hybrid form of business entity that incorporates elements of both partnerships and corporations.

Key Features:

• No Capital Requirements: This structure does not impose any share capital investment, making it a low-cost option for entrepreneurs just starting out.

• Different Categories of Partners: A Bt. is made up of limited partners, whose liability is restricted to the amount of their capital contribution and general partners, who have unlimited liability.

• Management: The business can be managed by the general partners, while limited partners typically do not participate in day-to-day management.

Why Choose Bt.?

Ideal for small-scale businesses or partnerships where the partners are actively involved in operations and decision-making.

Partners have greater flexibility in dividing profits and managing the company.

Limited Liability Company or Korlátolt Felelősségű Társaság or Kft.

The Kft. is the most popular business form in Hungary, equivalent to the LLC in many other countries.

Key Features:

• Capital Requirement: The minimum capital required to set up a Kft. is HUF 3 million (approximately €7,500).

• Liability Protection: The owners’ personal assets are safeguarded, as they are only liable up to the amount of their investment in the company.

• Ownership Flexibility: A Kft. may be established by a single shareholder or multiple individuals or legal entities.

• Management Structure: The management can consist of one or more directors, depending on the size and needs of the business.

Why Opt for Kft.?

This structure suits both small startups and small and medium-sized companies because of its flexibility and well-defined regulations.

The flat corporate tax rate of 9% applies to all Kft.s, making it an appealing option for entrepreneurs seeking a straightforward tax system.

Private Limited Corporation or Zártkörűen Működő Részvénytársaság or Zrt.

A Zrt. is designed for businesses that need a more formal structure and larger share capital.

Key Features:

• Minimum Capital: The minimum capital to form a Zrt. is HUF 5 million (~€12,500).

• Private Ownership: The shares of a Zrt. cannot be publicly traded, which helps to retain control within a select group of shareholders.

• Governance: A Zrt. must have a board of directors, and may also have a supervisory board depending on its size and structure.

Why Opt for Zrt.?

This entity type is suitable for growing businesses that want to establish a more professional reputation in the market.

Like the Kft., shareholders’ personal assets are protected, and the business is held in high regard due to its formal governance structure.

Branch office or Fióktelep

A branch office or Fióktelep is a foreign company that chooses to operate also in Hungary without establishing a separate legal entity.

Key Features:

• Not a Separate Entity: A branch office is considered an extension of the foreign parent company and does not have its own legal standing.

• Registration: It has to be registered at the Hungarian authorities, and fully comply with domestic  business regulations.

• Liability: The foreign parent company is fully responsible for the obligations of the branch offic and for any debts of the branch office.

Why Choose a Branch Office?

Establishing a branch is generally quicker and simpler than forming an entirely new legal entity.

A branch office allows foreign companies to quickly enter the Hungarian market without creating a distinct corporate entity.