More and More Sole Proprietorships in Hungary

More than 578,000 active sole proprietorships were operating in Hungary at the end of June; their number increased by more than 30,000 over the past year and by 21,000 in the first half of this year, the business information provider OPTEN reported on Monday.

The announcement noted that 2024 marked the first time there were more active sole proprietorships in Hungary than corporations; five years earlier, corporations still clearly outnumbered sole proprietorships. Since then, the number of active sole proprietorships has grown by nearly 19%, while the number of corporations has declined by 7%. The two business forms have been converging year by year, until the balance tipped.

According to OPTEN, the numbers alone do not prove that corporate entities have been converting en masse into sole proprietorships, but they clearly show that a different business structure is emerging in Hungary than it was five years ago. The economic environment of recent years has favored more flexible forms of operation, which is reflected in the rise of sole proprietorships across numerous service sectors.

Although the number of active sole proprietorships has grown in nearly every sector, a significant portion of the growth over the past five years has been concentrated in a few sectors. Transportation and warehousing lead the way with a 55% increase, followed by other services with a 40% increase, arts, sports, and recreation with a 36% increase, and education with a 31% increase.

Lower capital requirements, more flexible operations, and simpler administration make sole proprietorships a competitive alternative for many activities. In addition, there are an increasing number of professions where the ability to work independently and realize one’s own professional vision is driving entrepreneurs toward sole proprietorships, according to OPTEN.

The number of active sole proprietorships has increased in every county over the past five years. In Budapest, the number of active sole proprietorships rose by 26,300 over five years, while the number of partnerships decreased by 26,900; Budapest’s business structure is transforming more rapidly than that of the country as a whole. In the press release, Csaba Alföldi, a business information expert at OPTEN, pointed out that sole proprietorships offer flexibility, a lower barrier to entry, and greater autonomy, but can also become a limitation once a certain size is reached; corporate entities typically offer more opportunities for organizational development, raising capital, and growth on a larger scale.