Sole proprietorship
In a sole proprietorship, the entrepreneur is the natural person him-or herself.
Advantages:
- Easy, cheap and quick to start. Your only start-up costs are the registration of your enterprise in theCrossroads Bank for Enterprises (CBE) and the activation of your VAT number. Securex' company desk handles this for you.
- Simple and manageable administration. A single-entry bookkeeping system is enough. There is plenty of software available today that allows you to do this yourself. Of course, you can always get help from an accountant.
- Closing the enterprise, just like starting it, can be done quickly, simply and cheaply.
Disadvantages:
- There is no separation between the assets of the enterprise and your private assets. As a sole proprietor, you are personally and unlimitedly liable for any debts. If the business goes broke, your private assets, such as your family home, can be used to pay the enterprise's debts.
- Tax-wise: your income is taxed through personal income tax. The more you earn, the more personal income tax you pay.
Company
By establishing a company, you place your enterprise in a separate legal entity (legal person) that exists independently from you as a natural person.
What types of companies are there?
Today, you can choose between six types of companies. Your choice will largely depend on how much you want to spread your liability as an entrepreneur.
There are company forms such as a Private Limited company (BV) where you can limit your liability, and forms such as the Limited special partnership (CommV) where you, as an active partner, remain personally and unlimitedly liable.
✍️Want to know more about all these different company forms? Read about it here
Advantages:
- Some company forms allow you to limit your personal liability and separate your private assets from your enterprise assets.
- Corporate tax is generally lower than personal income tax, which can result in tax savings.
- A company is often easier to sell or transfer than a sole proprietorship.
- A company is very suitable to create a strong legal framework to cooperate with others without exposing your entire assets to the entrepreneurial risk.
Disadvantages:
- Starting a company can be more expensive and time-consuming than starting a sole proprietorship, depending on the chosen form.
- For certain company forms, you will need to consult a notary and prepare a financial plan.
- Even if not mandatory, a financial plan is always useful because it helps you estimate whether you have enough resources to run your enterprise.
- Some company forms, such as the Private Limited company (BV), require double-entry bookkeeping. This means more administration and it is best to hire an accountant.
- Closing a company involves more administration and costs, such as the mandatory intervention of a chartered accountant and/or notary.
Choose a sole proprietorship if you: | Choose a company if you: |
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