This is the most common business form among start-ups. You do not need a separate legal entity and therefore act as a natural person. The sole proprietorship is established by one natural person, who has unlimited liability.
This also means that there is no clear separation between your private assets and the assets of your business. If you have debts, creditors can claim all your assets. Your private home is also covered by this liability, although you can make a declaration of non-viability for seizure with a notary, so that your home is kept out of harm's way when things go wrong.
Before you can start, you need to complete a number of formalities:
Prove your entrepreneurial skills.
Open a current account (checking account).
Register your business in the Crossroads Bank for Enterprises (CBE).
Activate your VAT status.
Apply for one or more (additional) licences.
Join a social insurance fund.
You can make decisions quickly and in a less formal way
You decide how much profit to invest in the business
You have limited administrative and accounting obligations
You have unlimited liability and guarantee the commitments of your business with your personal assets.
Working out succession and takeover is more difficult.
All income is taxed via personal income tax.
When you set up a company, you create a new legal entity, unlike a sole proprietorship, where you act as a natural person yourself. There is a clear difference between your private assets and those of your business. The founders of a partnership enter into a contract that defines the purpose and activities of the business and aims to give the partners a capital gain.
There are different forms of partnership, each with its own legal framework, advantages and disadvantages.
A company has its own rights and obligations (legal entity).
Some companies have limited liability.
The company is taxed through corporate income tax.
All agreements between partners are clearly written down.
You can work out a proper succession fairly easily before death.
There are formal decisions and procedures.
You have more legal, administrative and accounting obligations, so more costs.
You have to join a social insurance fund and pay an annual company contribution.
You cannot simply touch your company's profits for private purposes.
The profit you make in a sole proprietorship is taxed via your personal income tax: so you do not file a separate tax return for your business. The advantage is that you decide how to spend the profit.
The taxable result of a company is taxed according to the corporation tax system. However, the tax advantage of a company lies not so much in the accompanying lower rates, but in the possibility to strive for an optimal income mix.
The trick is to balance your own income and that of your company in such a way that you pay as little tax as possible. On the other hand, you cannot simply use the profits your company makes for private purposes.
To launch your business, you went to the enterprise counter and maybe the notary. Switching to another business form is done via the same intermediate stations.
From sole proprietorship to company
This is the easiest transition. Your affiliation as a self-employed person simply continues. Just keep in mind that your company must also join a social insurance fund like Xerius.
Converting to a company is the same as starting a new company. So the knots to cut are identical. Who do you go into business with? Which company form do you choose? How much start-up capital do you need?
You can find inspiration for your answers on this page about setting up a company. Of course, you can also ask your accountant. This expert can help you with another job: drawing up your financial plan.
Have you chosen a company form? Draw up your articles of association and knock on the notary's door for incorporation. Are you starting a vof or a comm.v.? Then you don't need to pass by the notary.
Will your private income from the company remain more or less the same as with your sole proprietorship? Then don't touch your social contributions.
Will your income increase? Then it's a good idea to pay more social contributions. You have three excellent reasons to do so:
you avoid regularisations, where you have to pay a pretty penny extra.
you reduce your taxes. After all, higher social contributions are a bigger tax deduction.
voluntary additional payments end up in your annual reserve. That amount is first used when calculating your final contributions.
https://www.liantis.be/en/starting-a-business-belgium-as-a-foreigner
Ideally you should have registered at a social secretariat like Liantis, Xerius, ... So I would strongly suggest you reach out to them 😊
Author - Valesca Wilms
As content marketing lead at Accountable Belgium, Valesca writes about freelancing, self-employment, and taxes based on her own experience as a freelancer.
Who is Valesca ?Thank you for your feedback!
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