In the world of Hungarian businesses, the Betéti Társaság (Bt.), commonly translated as a limited partnership, was long considered one of the most popular forms of business entity. Although an increasing number of entrepreneurs have opted for the Limited Liability Company (Korlátolt Felelősségű Társaság, or Kft.) in recent years, the Bt. has by no means disappeared from either public awareness or economic life.
How Many People Are Required to Establish a Limited Partnership?
One of the defining characteristics of a Hungarian limited partnership is that it requires at least two members: one general partner (beltag) and one limited partner (kültag).
The most significant distinction between these two roles lies in their liability. As a general rule, the limited partner is liable only up to the amount of their capital contribution to the partnership. The general partner, however, bears unlimited liability for the obligations and debts of the partnership.
One of the greatest advantages of a Bt. is its simplicity. Hungarian law does not prescribe a minimum capital requirement, meaning that the partnership can be established with relatively low start-up costs, potentially with a contribution of as little as HUF 1,000. This can be particularly attractive for entrepreneurs launching a small service-based business or seeking to bring a business idea to market without significant initial capital. The organisational structure is also generally simpler than that of capital companies, allowing for quicker and more flexible decision-making.
At the same time, anyone considering the establishment of a Bt. should carefully assess the risks that may arise in the long term. In practice, unlimited liability means that in the event of business failure, significant tax debt, or a successful damages claim, the general partner’s personal assets may also be exposed. This can be especially problematic in industries involving higher business risks.
“I’ll Just Resign as General Partner. Problem Solved?”
In short: no.
The Hungarian Civil Code contains strict provisions designed to prevent general partners from avoiding their liability simply by leaving the partnership.
Under Hungarian law, a former member of the partnership, as well as the successor of a former member, remains liable for partnership debts that arose during the existence of their membership for a period of five years following the termination of that membership. This five-year period is a statutory limitation period and applies regardless of whether the individual is still actively involved in the partnership.
Put simply, a general partner cannot walk away from obligations that arose while they were a member of the partnership. Even after their membership has ended, they remain liable for pre-existing partnership debts for an additional five years.
Liability or “Standing Good for the Debt”?
To understand the above rules, it is important to clarify the legal concept commonly referred to in Hungarian law as “helytállás”.
The legislation intentionally does not use the ordinary term for civil liability in relation to partnerships such as the Bt. or the general partnership (Kkt.). The concept of helytállás differs from traditional civil-law liability in that it does not allow for the usual defences that might otherwise exempt a person from liability.
In practical terms, if the partnership is unable to satisfy its obligations, the general partner must answer for those obligations with their personal assets and does so without any statutory limitation. From a creditor’s perspective, the general partner’s assets effectively serve as additional security alongside the assets of the partnership itself.
By contrast, traditional civil liability rules often provide opportunities for a party to avoid liability by demonstrating the existence of certain exonerating circumstances. The general partner’s obligation to stand good for the debts of the partnership is therefore considerably stricter.
In order to facilitate effective debt recovery, a creditor involved in litigation arising from an unpaid obligation may bring legal action not only against the partnership itself but also against the general partner or partners. Where multiple general partners exist, they are jointly and severally liable. During enforcement proceedings, the court will first examine the assets of the partnership. If those assets are insufficient to satisfy the creditor’s claim, the personal assets of the general partner or partners may be pursued.
Bt. or Kft.?
In today’s business environment, a Bt. is generally best suited to smaller businesses operating with relatively low levels of risk, particularly where there is a close relationship of trust between the owners. However, where a business aims for long-term growth, substantial revenue generation, the employment of a larger workforce, or the involvement of external investors, a Kft. (Limited Liability Company) or even a private company limited by shares will often provide a more appropriate structure.
If the primary objective is a simple and low-cost start-up, the Bt. remains a viable option. However, where the protection of the owners’ personal assets, market credibility, growth potential, and access to investment are important considerations, the Kft. will typically prove to be the superior choice.
It is therefore no coincidence that the majority of newly established business associations in Hungary today choose the Kft. form. The Bt. remains popular primarily among niche and smaller-scale businesses, where minimising start-up costs and maintaining a simple organisational structure are more important than the protection afforded by limited liability.
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