Company finance

Share Capital or Owner Loan: How to Fund Your New Bulgarian Company

Before a company earns anything, someone has to put money into it. Here is when to register capital, when to lend to your own company instead, and why the choice matters for the balance sheet and for tax.

← Blog · 08 January 2026

Share capital vs. owner loan: two ways to put money into your company

When you register a Bulgarian EOOD or OOD, you need money in the company to pay suppliers, rent, or the first bills before real revenue arrives. There are two standard ways to get funds in: the registered share capital of the company, or a loan you, as the owner, make to it.

Share capital is the amount you register with the Commercial Register when you set up the company. It belongs to the company and sits on the balance sheet as equity.
A shareholder loan (owner loan) is a straightforward cash loan: you, as an individual, lend money to your own company, which owes it back to you, with or without interest.
The two are not mutually exclusive. Most founders register with the legal minimum capital and immediately top up the company's bank account with a loan instead of going through a formal capital increase.

The choice is not just paperwork. It affects the balance sheet, the tax bill when you eventually take money back out, and how easily you can recover what you put in.

The minimum capital for an EOOD or OOD: from a symbolic 2 leva to euro

Bulgarian company law sets a minimum share capital only for EOOD and OOD companies. Historically it was a symbolic 2 leva, split into shares of at least 1 lev each. Since Bulgaria adopted the euro on 1 January 2026, that figure converts to euro at the fixed lev to euro exchange rate, which works out to roughly 1 EUR.

The minimum is symbolic and has nothing to do with what the business actually needs. It will not cover a month of rent, stock, or a single invoice.
Nothing stops you from registering a higher capital, a few thousand euro for example, if you want the company to look more solid to a bank, a supplier, or a future partner.
Whatever capital you register has to actually be paid into a company bank account before registration, at least the portion required at formation, not just declared on paper.

Because the legal minimum is so low, most founders cover real operating costs through a loan rather than through capital.

Equity vs. liability: how each shows up on the balance sheet

The two instruments land on the balance sheet in completely different places, and that has real consequences for how the company looks from the outside.

Share capital sits in equity, alongside retained earnings and reserves. It increases the company's net worth and is not owed to anyone.
An owner loan is a liability: the company owes it to the individual. In accounting terms it is no different from a loan from a bank or a supplier, except the lender happens to be the owner.
A bank, a leasing company, or a future investor reads the balance sheet with exactly this distinction in mind. High equity reads as stability, while a large share of liabilities, even ones owed to the owner, pushes up the debt-to-equity ratio.

For a small company with no plans to seek bank financing, this rarely decides anything on its own, but it is worth knowing before you decide how to structure the cash going in.

Tax and getting your money back: loans repay tax-free, dividends get taxed

This is the most practical difference between the two, especially once you want to take the money back out.

Repaying the principal of a shareholder loan is not taxable income for the individual. You are simply getting your own money back, so the repayment itself carries no income tax and no social security charge.
To take money out of share capital, you have two routes: a dividend distribution from accumulated, approved profit, taxed at a final 5 percent withholding tax when paid to an individual, or a formal capital reduction, which needs a shareholder resolution, a Commercial Register filing, and a waiting period for creditor objections.
Dividends can only come out of actual, approved profit, not simply because cash happens to sit in the company account. If the company has not turned a profit, the capital stays locked in.
A loan can move in and out quickly. A bank transfer and a bit of paperwork let the owner contribute and withdraw funds repeatedly, while capital is a structurally more static position.

For a founder who expects to put money in and take it back out over the first few years as the business needs it, a loan is usually the more flexible tool.

Interest, arm's-length terms, and the paperwork you actually need

An owner loan is not just a verbal understanding, even if it is between you and your own company.

The loan can be interest-free or carry interest. Either way, put the terms in writing in a loan agreement, in Bulgarian a договор за заем, stating the amount, the repayment term, and, if it bears interest, the rate.
If you do charge interest, it should be close to market rates for a comparable loan, not arbitrarily high or low. The tax authority can challenge an unrealistic rate between related parties and adjust the company's taxable result accordingly.
Bulgaria's thin capitalization rules under the Corporate Income Tax Act limit how much interest expense a company can deduct once its liabilities significantly exceed its equity. For a typical small-company owner loan this rarely bites, but it is worth watching as the amounts grow.
Keep the loan agreement, bank statements for every contribution and withdrawal, and a shareholder resolution if the company has more than one owner. This is the first paperwork an auditor or the tax authority will ask for.

Even interest-free, a written loan agreement is cheap insurance: it proves where the money came from and protects both the owner and the company if questions come up later.

Which option to pick when you are starting out

The practical rule of thumb: register the legal minimum capital at formation, and fund the actual running costs of the business, the ones that keep the lights on in the first months, through an owner loan. If you later want the company to look more solid to a bank or a partner, you can always increase the capital with a separate resolution.