Kft vs Bt vs Sole Trader: Which Business Form to Pick

Kft, Bt or sole trader: which one should you choose?

The short answer: register a sole trader status (egyeni vallalkozo, sole trader) if you are a solo freelancer with low financial risk, form a Kft (korlatolt felelossegu tarsasag, limited liability company) if you want to protect your personal assets or plan to grow, and consider a Bt (beteti tarsasag, limited partnership) only in the narrow case where a simple two-partner setup fits. In practice most foreigners in Budapest end up choosing between the sole trader and the Kft.

All three let a foreigner run a legitimate business in Hungary and benefit from the country's low-tax environment, including the 9% corporate income tax, the lowest headline rate in the European Union. The differences that actually decide the choice are liability, setup cost, paperwork and how your profit is taxed. This guide compares the three so you can shortlist before speaking to an accountant or a lawyer.

What is a sole trader (egyeni vallalkozo)?

A sole trader, or egyeni vallalkozo, is the simplest way to work for yourself in Hungary. There is no separate company: you and the business are the same legal person. Registration is handled online through the client portal, it carries no state duty and no minimum capital is required, so many people are up and running within days according to business advisers in Hungary.

The trade-off is personal liability. Because there is no legal separation, your private assets can be reached if the business runs up debts. This form suits freelancers, consultants and one-person service businesses whose work carries limited financial exposure. Sole traders also get access to simplified tax regimes, including flat-rate taxation and, for eligible small activities, the KATA scheme, which keep the bookkeeping light.

What is a Bt (beteti tarsasag)?

A Bt, or beteti tarsasag, is a limited partnership that needs at least two members. One must be a general partner and one a limited partner. According to company formation guidance, the general partner bears joint and several liability for the partnership's obligations, while the limited partner is not liable beyond the contribution promised in the articles of association.

The Bt needs no minimum capital and its registration is exempt from duty, which historically made it a cheap way to run a small business. The catch is the general partner's unlimited liability, which exposes personal assets in the same way a sole trader is exposed. Since Hungary tightened the KATA rules, much of the Bt's appeal has faded, and today it is mostly a niche option for family or two-person setups where one partner accepts full responsibility.

What is a Kft (korlatolt felelossegu tarsasag)?

A Kft, or korlatolt felelossegu tarsasag, is Hungary's most common company form and the default choice for anything beyond solo freelancing. It is a separate legal entity, so your liability is normally limited to the capital you put in rather than your personal wealth. The minimum share capital is 3,000,000 HUF (about 7,500 EUR), with no single member's contribution below 100,000 HUF, and that capital can be spent on running the business after incorporation.

Registration itself is exempt from duty and, under the simplified electronic procedure, the court decides within one working day. The founding deed must be drafted and countersigned by a Hungarian registered attorney, so a lawyer is part of the process rather than optional. A Kft is favoured by founders who want limited liability, who plan to bring in partners or investors, or who work with larger clients that prefer dealing with a company. In return it requires double-entry bookkeeping and, in practice, a monthly accountant. The full procedure is covered in the guide on how to register a Kft.

How do the three forms compare at a glance?

The table below lines up the points that usually decide the choice. Read it as a starting filter, then confirm the tax detail with an accountant, because your revenue level and client mix change the maths.

Setup cost follows the same pattern: a sole trader pays almost nothing, a Bt pays only for the lawyer, and a Kft adds the 3,000,000 HUF capital on top of legal and accounting fees.

How are the three business forms taxed?

The tax split is the single biggest reason to pick one form over another. A Kft and a Bt are both companies, so their profit is taxed at the 9% corporate income tax. When you then pay that profit out to yourself as a dividend, a 15% personal income tax applies, plus a social contribution up to an annual cap.

A sole trader is taxed under the personal income tax system instead. Two simplified routes exist. Flat-rate taxation (atalanyadozas) lets you deduct a fixed expense ratio of between 40% and 90% depending on the activity before the tax applies, and that ratio is rising from 2026. The KATA scheme is now restricted to businesses invoicing private individuals only, with an annual cap of 18,000,000 HUF. Whichever form you choose, the same value added tax rules apply once you pass the threshold, so budget for Hungary's 27% standard VAT, the highest in the European Union.

Which business form should you pick?

Match the form to your risk and your ambition rather than to a headline tax rate. The following profiles cover most newcomers.

• Freelancer or consultant with low risk: a sole trader status is usually the right start. It is cheap, fast and light on admin, and you can move to a company later.
• You want to protect personal assets, raise capital, hire or sign larger contracts: a Kft is the standard answer, and its limited liability is worth the capital and the accountant.
• A simple two-person venture where one partner accepts full responsibility: a Bt can work, though many founders now prefer a Kft for the liability protection.

One planning point catches people out: a sole trader cannot simply convert into a Kft through a statutory process. You incorporate a new company and transfer the activity across, so it is worth choosing with a two-year horizon in mind rather than switching casually.

Why the founding documents need a Hungarian lawyer

For both a Kft and a Bt, the constitutive document must be drafted and countersigned by a Hungarian registered attorney (ugyved, attorney). This is a legal requirement, not a formality you can skip to save money, and the registration will not proceed without it.

A lawyer does more than sign, though. Choosing between the three forms, splitting ownership between partners, drafting the articles of association and avoiding the liability traps that come with a general partnership are exactly the decisions where local legal input pays for itself. A sole trader registration does not need a lawyer, but even there the tax structuring is worth a professional conversation before you commit. Getting the structure right at the start is far cheaper than restructuring after the business has assets and clients.

Frequently asked questions

Can a foreigner be a sole trader in Hungary?

Yes. European Union and EEA citizens can register as a sole trader (egyeni vallalkozo) freely once they have their Hungarian address and tax number. Non-EU nationals generally need a residence status that permits self-employment before they can register, so the immigration route is the first thing to confirm.

Can I convert a sole trader into a Kft later?

Not through a direct statutory conversion. A sole trader and a Kft are different legal persons, so in practice you incorporate a new Kft and transfer the activity, contracts and assets across. It is doable, but it is extra work, which is why the choice is worth making with growth in mind from the start.

Is a Bt cheaper to set up than a Kft?

On paper yes, because a Bt has no minimum capital while a Kft needs 3,000,000 HUF, and both are exempt from registration duty. The saving comes at a price: a Bt's general partner has unlimited personal liability, so you trade capital for risk. Both still require a Hungarian lawyer to form.

Which business form is best for a freelancer?

For most freelancers and consultants the sole trader status is the best starting point, because it is the fastest and cheapest to set up and its simplified tax regimes keep paperwork low. Once revenue, risk or the size of your clients grows, moving to a Kft for limited liability becomes the natural next step.