What is a sole proprietor? 🔎
A sole proprietorship is a ‘form of business’. You have 2 categories of business forms: sole proprietors and companies.
Within companies, you have a lot more – maybe you’ve heard of the private limited company, general partnership or limited liability company?
Most entrepreneurs start with the business form ‘sole proprietors’.
What is the difference between a sole proprietor a partnership? ⚖️
A sole proprietorship is a lot simpler, but provides less legal protection. A company is more complex and more expensive to start. But it has other advantages, such as limited financial liability.
Here is an extensive article to explain the differences between sole proprietors and companies.
Did you know.
Starting a sole proprietor costs €105.5
What types of statutes are there as sole proprietors?
After you have chosen your business forms, you have three more social statuses. These are: self-employed in main occupation, self-employed in secondary occupation and self-employed student.
- Self-employed student: you are 25 years or less and you are still studying
- Self-employed in secondary occupation: you work at least half-time as an employee
- Self-employed in main occupation
What taxes do you pay in a sole proprietor? 💰
1️⃣ Social security contributions
As a self-employed person, you are legally required to close with a social insurance fund such as Acerta, Liantis or Xerius. You then pay your social security contributions to them every quarter. They forward the contributions to the government. A more detailed explanation of what social security contributions entail can be found here.
2️⃣Personenbelasting
With a sole proprietor, profits are automatically considered your income, because a sole proprietor is not a separate legal entity. That also means you don’t have to pay profit tax, but you do have to pay income tax, i.e. personal income tax.
Everyone has to share their income with the tax authorities yearly, so they can determine how much taxes you owe the state. Read all about personal income tax in this article.
3️⃣Gemeente & county tax
On top of the taxes mentioned above, there are also the so-called additional taxes. We are happy to explain city and county taxes in more detail in the next article. This way you are sure not to be surprised!
Tip:
Do not start on 1 January but on 2 January to avoid these taxes for a year
4️⃣Btw
VAT, or value-added tax, is a tax that only impacts the end user. Depending on your statute, you may have to file a vAT declaration every year. Read all about VAT here, or here about how to file your vAT declaration as a self-employed person.
Whether you actually have to pay VAT depends on your statute. Here is a summary of the different statutes and their differences.
Bookkeeping for sole proprietors
The good news is that sole proprietors are allowed to keep simplified accounts. This makes things a lot simpler, which means you don’t have to worry about your bookkeeping at all. You can even do it all by yourself!
Tip:
Get your accounting certificate through this free accounting course
Are you ready to do business, but are you still put off by the bookkeeping or price of an accountant? Then be sure to check out our articles on accountants and doing your own bookkeeping.
How many people are allowed to set up a sole proprietorship?
It’s actually stated in the word, a sole proprietorship is set up by one man. Contrary to what many people think, you can employ staff.
If you still want to do business with 2, it might be interesting to set up a VOF or each start a sole proprietorship and invoice each other.
How do I set up a sole proprietorship in practice? 💪
Are you fully ready to start your own business? Then you need to go to a recognised enterprise counter to question your company number. Some enterprise counters are Acerta, Liantis and Xerius.
Be sure to check out our step-by-step plan for setting up a sole proprietorship! Here we guide you step by step through your start-up.
