Freelancer or Company: The Big Decision

One of the first questions foreigners ask when planning to work or do business in Bulgaria is whether to register as a freelancer (sole trader) or to establish a limited liability company (EOOD/OOD). Both options are available to EU citizens and, under certain conditions, to non-EU nationals as well. The answer depends on your income level, risk tolerance, and long-term plans.

Here in the Troyan area and the broader Lovech region, we regularly advise expats who are relocating from Western Europe and need a proper business structure. This guide breaks down the key differences.

What Is a Freelancer (Sole Trader) in Bulgaria?

A freelancer in Bulgaria typically operates as a sole trader, known as ET (Ednolichen Targovets). Alternatively, some professionals register as persons exercising a liberal profession (svobodna profesiya), which is common for consultants, translators, and IT professionals.

Key features of freelancing:

• Simple registration process
• Lower initial setup costs
• Personal income tax of 10% on net income
• Social security contributions of approximately 25-30% on chosen insurable income
• Unlimited personal liability for business debts
• Simplified accounting for small turnover

What Is an EOOD/OOD Company?

An EOOD (single-member LLC) or OOD (multi-member LLC) is a separate legal entity. The minimum capital requirement is just 2 BGN (about 1 EUR), making it extremely accessible.

Key features of a company:

• Separate legal personality from the owner
• Corporate tax of 10% on profit
• Additional 5% dividend tax when distributing profits to individuals
• Limited liability (your personal assets are protected)
• Greater credibility with clients and partners
• More complex accounting and reporting obligations

Tax Comparison

Understanding the tax implications is critical when choosing between the two options.

Freelancer Taxation

• Income tax: 10% on net income (after recognized expenses)
• Recognized expenses: 25% automatic deduction for certain professions, or actual documented expenses
• Social security: Approximately 25-30% calculated on insurable income (minimum base around 933 BGN in 2025)
• VAT registration: Mandatory once turnover exceeds 166,000 BGN per year

Company Taxation

• Corporate tax: 10% on profit
• Dividend tax: 5% on distributed dividends
• Effective combined rate: Approximately 14.5% if all profit is distributed
• Social security: The manager pays social contributions on their salary
• VAT registration: Same threshold applies

For lower income levels, freelancing can be more tax-efficient. Once your annual profit exceeds roughly 30,000-40,000 BGN, a company structure often becomes more advantageous.

Liability and Risk

This is where the two options differ most dramatically.

As a freelancer, you are personally liable for all business debts. If your business fails or faces a lawsuit, creditors can go after your personal savings, property, and other assets.

With a company, your liability is limited to the capital you have invested. Your personal assets remain protected unless you have personally guaranteed debts or engaged in fraud.

For anyone operating in a field with potential liability exposure, the company structure provides significantly better protection.

Administrative Burden

Freelancers enjoy simpler administration:

• Annual tax return (by April 30)
• Monthly social security payments
• Simpler bookkeeping requirements

Companies face more obligations:

• Monthly accounting entries
• Annual financial statements
• Annual activity report
• Publication of financial statements in the Trade Register
• Corporate tax return (by June 30)

Many expats in the Lovech region hire a local accountant to handle company administration, with monthly fees typically ranging from 150 to 400 BGN depending on transaction volume.

Which Should You Choose?

Choose freelancing if:

• You are starting small with limited income
• You work alone as a consultant or creative professional
• You want minimal paperwork and setup costs
• Your liability risk is low

Choose a company if:

• You expect significant revenue
• You want to protect personal assets
• You plan to hire employees
• You need credibility for contracts and tenders
• You want to optimize taxation on higher earnings

How We Can Help

At our law office in Troyan, we assist foreigners throughout the Lovech region with both freelancer registrations and company formations. We analyze your specific situation, help you understand the tax implications, and handle all paperwork with the relevant authorities.

Contact Attorney Biser Dimov for a consultation to determine which business structure is right for you.