How to Register a Business in the US from Hungary

Step 1: Benefits of starting your US business from Hungary

Starting a US business from Hungary offers numerous advantages that can propel your entrepreneurial aspirations to new heights. One significant benefit is the ability to access the world's largest economy. The diverse and robust US market provides a wealth of opportunities for Hungarian entrepreneurs to expand their reach and tap into a wide customer base. Furthermore, the US has a highly developed infrastructure and business-friendly environment that can streamline operations and foster growth. By leveraging these resources, Hungarian businesses can effectively compete on a global scale.

Another noteworthy benefit is the potential for financial gains and investment opportunities. The US boasts a strong venture capital ecosystem, offering startups and small businesses abundant opportunities to secure funding. By establishing a business presence in the US, Hungarian entrepreneurs can attract American investors and partners, which can lead to substantial financial backing and collaboration. Additionally, the favorable tax policies and incentives available in certain US states can enhance profitability, making it an attractive destination for business expansion. Embracing these advantages can significantly boost the success and sustainability of a venture started from Hungary.

Step 2: How to start your US business from Hungary

Starting a US business from Hungary involves several steps that need careful planning and execution. Firstly, it is necessary to decide on the type of business entity you want to form such as a corporation, limited liability company (LLC), or sole proprietorship. Each type has its own legal and tax implications. Once the decision is made, you will need to register your business with the appropriate US state authority. Certain states like Delaware, Nevada, and Wyoming are popular among foreign entrepreneurs due to their business-friendly regulations.

After selecting the state, you'll need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is essential for tax purposes and to open a US bank account. Additionally, it's crucial to understand and comply with federal, state, and local regulations related to your business. You may also require specific licenses and permits depending on your business type and location. Utilizing services of a registered agent and legal experts can be very beneficial to ensure all legal requirements are met efficiently.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Hungary

Understanding Compliance Requirements for Running a US Business in Hungary

Expanding your US business to Hungary can be an exciting opportunity, but it also requires understanding and adhering to various compliance requirements. Here's a quick guide to help you navigate through some of the key considerations.

1. Legal Structure and Registration

When setting up a business in Hungary, you must choose an appropriate legal structure. Common forms include:

• Limited Liability Company (Kft.)
• Private Company Limited by Shares (Zrt.)
• Branch Office

After selecting a legal structure, you will need to register the company with the Hungarian Company Court.

2. Taxation

Understanding the Hungarian tax system is crucial for compliance:

• Corporate Income Tax: The standard rate is 9%.
• Value Added Tax (VAT): The standard rate is 27%, with reduced rates of 18% and 5% for certain goods and services.
• Local Business Tax: Up to 2% based on net sales revenue minus certain costs.

It’s advisable to consult with a tax professional to ensure compliance with these regulations.

3. Employment Laws

Complying with Hungarian employment laws is essential:

• Labor Contracts: Must be in writing and comply with Hungarian labor standards.
• Working Hours: Standard working hours are 8 hours per day, 40 hours per week.
• Leave Entitlements: Employees are entitled to annual leave, sick leave, and parental leave as per Hungarian law.

4. Data Protection and Privacy

Ensure compliance with data protection regulations:

• GDPR: As an EU member, Hungary follows the General Data Protection Regulation, which impacts how businesses collect, store, and use personal data.
• Local Laws: Additional requirements may apply under Hungarian data protection laws.

5. Banking and Financial Reporting

Managing your finances in Hungary involves:

• Bank Accounts: Opening a local bank account is required for financial transactions.
• Financial Reporting: Annual financial statements must be prepared and filed with the Hungarian authorities.

6. Intellectual Property

Protecting your intellectual property is essential:

• Trademarks: Register your trademarks with the Hungarian Intellectual Property Office.
• Patents: Ensure inventions are patented to secure exclusive rights.

By understanding these considerations, you can ensure your US business operates compliantly in Hungary. Consulting with local experts in legal, tax, and business advisory services can further smooth the transition and ongoing operations.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Hungary

Understanding Tax Obligations for Running a US Business in Hungary

When running a US business in Hungary, there are several tax obligations and considerations that need to be addressed. Understanding these requirements will help ensure compliance and optimize your financial operations. Here are some important factors to consider:

1. Corporate Income Tax

Hungary offers one of the lowest corporate income tax rates in the European Union, at a flat rate of 9%. This makes it an attractive destination for US businesses. However, it’s crucial to understand how profits are calculated and what deductions or credits are available.

2. Value Added Tax (VAT)

VAT in Hungary is levied at three different rates: the standard rate of 27%, a reduced rate of 18%, and a super-reduced rate of 5%. It’s important to understand which rate applies to the goods or services your business provides. Registering for VAT and complying with reporting requirements are also key considerations.

3. Double Taxation Agreements

Hungary has double taxation agreements with numerous countries, including the United States. These agreements are designed to prevent double taxation of income and can impact your tax liabilities. Familiarize yourself with the US-Hungary tax treaty to understand how it influences your obligations.

4. Social Security Contributions

If you have employees in Hungary, you will need to navigate the social security system. Employers are required to make contributions, which cover health insurance, pension funds, and other social benefits. These contributions can significantly affect your overall payroll expenses.

5. Withholding Taxes

Withholding taxes may apply to various types of payments, such as royalties, interest, and dividends. The rates can be reduced under applicable double taxation treaties. Ensure you are aware of these obligations to avoid any penalties or legal issues.

6. Local Taxes and Surcharges

Besides the national taxes, there may be local taxes and surcharges depending on the municipality where your business operates. These can include business tax, property tax, and other local levies. Research the local tax landscape to budget accordingly.

7. Transfer Pricing Regulations

If your US business engages in transactions with related entities, transfer pricing regulations will apply. Hungary follows the OECD Transfer Pricing Guidelines, requiring you to maintain documentation and adhere to arm's length principles.

8. Compliance and Reporting

Proper compliance and timely reporting are essential to avoid fines and penalties. Understanding the Hungarian tax year, filing deadlines, and required documentation will help keep your business in good standing with tax authorities.

In conclusion, while Hungary offers a business-friendly environment with low corporate tax rates, it’s vital to navigate the complexities of local and international tax regulations effectively. Consulting with tax professionals who are well-versed in both US and Hungarian tax laws can provide invaluable guidance.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country