Landing.work: Being an Individual Businessman or having Your Own Company?

The choice you make will determine your tax burdens, so it is vital to be aware of all the advantages and disadvantages that come with each regime.

As a sole proprietor, we can identify two legal personalities: Individual Businessman and Sole Proprietorship through shares.

What’s an Individual Businessman?

This is the individual that starts his business activity in his own name, affecting his own assets and patrimony to the exploit of the chosen business activity.

This way, the individual starts a company without a mandatory minimum amount but stays bound to the company. In the case of debt, the individual is always responsible for them and their patrimony contributes for accounting purposes.

Main Advantages:

1. Possibility to opt for the simplified scheme of IRS if the annual volume of business income is less than 200,000€ in the previous fiscal year;
2. When opting for the simplified, the businessman can ask for VAT exemption if the annual volume of business income is less than 10.000€ in the previous fiscal year (art.53º CIVA);
3. Exemption from paying accounting in the case of opting for the simplified scheme of IRS;

What’s a sole proprietorship?

A sole proprietorship is a company with one single partner, who has a responsibility according to the shareholder subscribed. Because there is only one partner, he’s responsible for all the company’s capital.

This type of commercial company can be created by anyone, with a minimum investment of only 1€! Besides, if in the future you decide so, you can bring other partners in.

Main Advantages:

1. The partner’s patrimony as an individual is protected in case of debt. This means that if your business doesn’t meet the expectations, only the company’s assets and patrimony will be held accountable.
2. The application of an organized accounts system is mandatory because it is a commercial society. This brings the advantage of determining the profit or loss with extreme accuracy, thus making the company more efficient from a fiscal point of view.
3. All the expenses with the company are deductible, which doesn’t happen with the simplified scheme.

You have different advantages in each of the options, but we believe that the sole proprietorship is a safer bet, since your assets are protected. Nonetheless, we advise you to look for an accountant and understand what is the best option for you.

If you have any questions, would like to receive personalized information or need help regarding any next steps, please reach out to the Landing Team through [email protected].

Aim for more,

João Ramadas

Operations Lead @ Landing.work