EOOD or OOD: What Is the Difference and Which Structure Should You Choose?

One of the first questions when starting a business in Bulgaria is whether the company should be formed as an EOOD or an OOD. The two structures are similar in legal nature, but the difference in ownership affects management, decision-making and the relationship between the participants.

The main difference: one owner or several shareholders

An EOOD is a single-member limited liability company — its share capital is owned by one person. An OOD has two or more shareholders who hold shares in the company and participate in it in accordance with the articles of association and the law.

This distinction matters more than the abbreviations themselves. In an EOOD, decisions of the owner do not need to be agreed with other shareholders. In an OOD, the participants should establish in advance who owns which share, how voting works, how profits are distributed and what happens when a shareholder leaves or a new shareholder joins.

Who manages the company?

Both EOOD and OOD companies are managed by one or more managers. The sole owner or a shareholder may also act as manager, but this is not mandatory. The role of owner and the role of manager should not be treated as identical — they involve different rights and responsibilities.

When is an EOOD the logical choice?

EOOD is a natural structure where the business has a single owner and there is no immediate plan to bring in a business partner as a shareholder. The governance structure is simpler because shareholder decisions are made by one person.

This does not mean that the owner “has no personal risk”. Limited liability does not remove personal liability in certain cases involving breaches of law, guarantees or other specific circumstances.

When is an OOD more appropriate?

OOD is appropriate where two or more partners genuinely participate as owners. The most important step is to agree the relationship from the outset, including:

• shareholdings;
• decision-making rules;
• commitments to the business;
• financing provided by shareholders;
• profit distribution;
• conditions for transferring shares and leaving the company.

Should tax alone determine the choice?

It is not advisable to choose the legal structure based on a single tax consideration. Ownership, social security status, how owners will receive income, future financing and plans to bring in partners should all be considered.

How is the company registered?

Formation and changes involving Bulgarian limited liability companies are registered through the Commercial Register. The A4 application form is used for OOD/EOOD companies, while the exact supporting documents depend on the circumstances and the method of filing.

Choose a structure that will still work in a year

The cheapest or quickest formation process is not always the most appropriate. If there are plans for a business partner, investor, international operations or a more complex governance structure, this should be considered before the company is registered.

DESLIN assists with Company Formation and with organising the accounting steps that follow incorporation.

This material is for general information only and does not constitute legal advice. The appropriate structure depends on the specific owners, business activities and future plans.