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What is a Civil Partnership in Bulgaria

What is a Civil Partnership in Bulgaria?

A civil partnership, as regulated by Bulgarian law, is a form of association where two or more persons unite their resources, skills, or efforts to achieve a common goal. Unlike a commercial company, a civil partnership does not have legal personality, making it a unique choice for individuals or entities looking to collaborate without the formalities of registering a company.

This article outlines the key aspects of a civil partnership, its formation, operation, and benefits.


 

Definition and Characteristics of a Civil Partnership

A civil partnership is governed by the Obligations and Contracts Act (OCA). It is characterized by:

  • Lack of Legal Personality: Unlike companies, a civil partnership cannot own property or act as a separate legal entity.
  • Joint Contributions: Partners contribute resources, assets, or labor toward a shared goal.
  • Shared Management: Partners participate equally in decision-making unless otherwise agreed.
  • Flexibility: The partnership structure and rules can be customized in the agreement.

 

Formation of a Civil Partnership

  1. Partnership Agreement
  • A civil partnership is established through a written or oral agreement between the partners.
  • The agreement should detail:
    • The purpose and goals of the partnership.
    • Contributions of each partner (financial, labor, or material).
    • Rules for managing and distributing profits or losses.
    • Terms for dissolving the partnership.
  1. Registration
  • Unlike companies, civil partnerships do not require registration in the Commercial Register or Bulstat Register.
  • However, for tax purposes, a VAT registration may be necessary if the partnership engages in economic activities exceeding the VAT threshold.
  1. Contributions
  • Contributions can include:
    • Money.
    • Real estate.
    • Equipment or other material assets.
    • Intellectual property or labor.

Operation and Management

  1. Decision-Making
  • Unless specified otherwise, decisions are made by unanimous agreement of all partners.
  • The partnership agreement can allow for a majority-based decision-making process.
  1. Profit and Loss Distribution
  • Profits and losses are shared equally unless the agreement specifies a different ratio.
  1. Tax Obligations
  • Each partner is individually responsible for reporting their share of income and paying taxes.
  1. Liability
  • Partners have joint and several liability for the obligations of the partnership.
  • Creditors can claim debts from any or all partners.

Benefits of a Civil Partnership

  • Simplicity: Easy to form and operate without extensive regulatory requirements.
  • Flexibility: The agreement can be tailored to the needs of the partners.
  • Cost-Effective: Minimal setup and operational costs compared to companies.
  • Direct Taxation: Partners are taxed individually, avoiding corporate tax.

 

Dissolution of a Civil Partnership

A civil partnership can be dissolved in the following ways:

  1. Completion of Purpose: When the goal of the partnership is achieved.
  2. Mutual Agreement: Partners agree to terminate the partnership.
  3. Withdrawal or Death of a Partner: If a partner withdraws or passes away and the remaining partners do not wish to continue.
  4. Breach of Agreement: If a partner violates the terms of the agreement, others may seek dissolution.
  5. Court Decision: In cases of disputes, a court may order the dissolution.

 

When to Choose a Civil Partnership

Civil partnerships are ideal for:

  • Temporary or project-based collaborations.
  • Individuals or entities seeking flexibility without forming a company.
  • Situations where minimal administrative burdens are preferred.

 

Legal Assistance for Civil Partnerships

Setting up a civil partnership requires careful drafting of the agreement to avoid potential conflicts and ensure smooth operation. Legal Frame provides expert legal services to help you:

  • Draft and review partnership agreements.
  • Advise on tax and legal implications.
  • Resolve disputes among partners.
  • Assist in dissolving partnerships.

 

Frequently Asked Questions

  1. Can a civil partnership own property?
  • No, the partnership itself cannot own property. Assets are held jointly by the partners.
  1. Is registration mandatory for a civil partnership?
  • Registration is not mandatory, but tax registration may be required depending on the partnership’s activities.
  1. Can a civil partnership be converted into a company?
  • Yes, partners can dissolve the partnership and form a company to continue their activities.
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