UK Ltd vs Bulgarian ЕООД: The Definitive Founder Entity Guide

Choosing your founding entity is one of the highest-leverage decisions you will make before writing a single line of product code. Get it wrong and you face costly restructuring, double taxation, or ineligibility for the very investor tax reliefs that make early-stage fundraising possible in the UK. This guide walks through the two structures used most by UK and EU founders: the English private limited company (Ltd) and the Bulgarian single-member limited liability company (ЕООД, pronounced "e-ood").

The Core Trade-Off: Investor Access vs Tax Efficiency

An English Ltd is the default for founders who intend to raise angel or seed-stage venture capital. UK investors expect a Companies House entity because it unlocks SEIS and EIS tax reliefs — the most generous early-stage investor incentives in Europe. A Bulgarian ЕООД, by contrast, operates under EU single-market rules but comes with a flat 10% corporate income tax rate and a 5% dividend withholding tax, making the effective dividend extraction rate 14.5% — the lowest in the EU. For bootstrapped or revenue-first founders who do not need SEIS eligibility, this is transformative.

UK Ltd: Tax Rates, Filing Obligations & SEIS Window

UK corporation tax is 19% for profits up to £50,000 and rises to 25% for profits above £250,000 (with marginal relief between those thresholds as of April 2023). For a seed-stage company with minimal early profits, the small profits rate of 19% is the operative figure. The annual filing obligations are straightforward: confirmation statement, annual accounts to Companies House, and a CT600 corporation tax return to HMRC. The SEIS window is critical: to qualify, the company must have been trading for less than three years, have fewer than 25 full-time equivalent employees, and gross assets of under £350,000 at the time of the share issue.

• Corporation tax: 19% (profits ≤ £50k) / 25% (profits > £250k)
• Dividend tax (basic rate shareholder): 8.75%
• SEIS investor relief: 50% income tax credit on up to £250,000 invested
• Incorporation cost: ~£12–50 via Companies House or a formation agent
• Annual accounts: mandatory, typically £500–1,500 with a small-firm accountant
• SEIS advance assurance available from HMRC before share issue

Bulgarian ЕООД: Structure, Taxation & EU Compliance

Bulgaria has been a member of the EU since 2007 and uses the Bulgarian Lev (BGN), which is pegged to the Euro at a fixed rate of 1.95583 BGN/EUR — meaning there is effectively zero exchange-rate risk for EUR-denominated operations. The ЕООД (Едноличено дружество с ограничена отговорност) is the Bulgarian equivalent of a sole-member LLC. It can be incorporated in approximately five business days at the Bulgarian Commercial Register for roughly €100–200 in state fees. Corporate income tax is a flat 10% with no progressive bands. Dividends distributed to individual shareholders carry a 5% withholding tax, creating a combined extraction rate of approximately 14.5%.

Bulgarian companies are subject to EU VAT rules and can register for EU VAT OSS (One Stop Shop) to collect and remit VAT across all EU member states through a single filing. This makes the structure fully viable for B2C SaaS, digital goods, and e-commerce businesses selling across the EU. Annual financial statements must be filed with the National Revenue Agency (НАП), and the company must maintain proper accounting records — a Bulgarian accountant typically costs €80–200/month for a small tech company.

Cost Comparison Summary

• UK Ltd incorporation: £12 online / £50 same-day / £1,000–2,500 via a solicitor with bespoke articles
• Bulgarian ЕООД incorporation: ~€150–250 in state and notary fees
• UK annual accounts (small company): £500–1,500/year
• Bulgarian annual accounts: €1,000–2,400/year (€80–200/month accountant)
• UK corporation tax: 19–25%; Bulgarian corporation tax: 10%
• Dividend extraction (UK, higher-rate taxpayer): up to 33.75%; Bulgaria: 14.5% effective

The Dual-Entity Structure

Some founders building pan-European businesses establish both: a UK Ltd as the SEIS-eligible fundraising entity and investor-facing cap table vehicle, with a Bulgarian ЕООД as an operating subsidiary for EU revenue, product development, and cost allocation. This is not a tax avoidance scheme — both entities pay tax in their respective jurisdictions — but it allows you to maximise access to UK angel capital while retaining EU operational flexibility and lower corporate tax rates on the profit-generating subsidiary. Transfer pricing rules apply; consult a cross-border tax adviser before implementing this structure.