Is it time to set up your own one-man business? Great! But what exactly is a one-man business, and how does it work in practice? Don't worry - you'll find all the answers here before you start your own business. At Qred, we explain everything you need to know about setting up a sole proprietorship.
In 5 minutes or less you'll discover what a sole proprietorship is, how to set one up from scratch, and how Qred can help you finance your company's growth.
What is a sole proprietorship?
A sole proprietorship is a common business structure that is often chosen by small businesses. It is a form of business where you, as the owner, are the same entity as the company, which means that you are personally fully responsible for the company's debts and liabilities. Benefits of being a sole trader include a simple and fast registration procedure, as well as full control over the company and its profits. There's also accounting and tax flexibility, and you can even use your personal bank account for business transactions if you want to.
Differences between different business structures
Now that we understand what a sole trader is, how do other common business structures work?
Private Company (BV): A Private Company (BV) is a separate legal entity from the owner, so personal liability is limited. In other words, as an owner, you are not personally responsible for the company's debts. However, a BV involves more complex bookkeeping and higher registration costs.
Company under Company (VOF): A Company under Firm (VOF) is a legal structure where two or more people run the business together. Each partner is personally responsible for the company's debts, and there is no limitation on ownership. It is a good legal form for partnerships, but like a sole trader, it does not offer the tax protection that a BV can offer.
Are you hesitating between setting up a sole proprietorship or a BV? Weigh the pros and cons of these three types and choose the one that best suits your needs.
Step by step: How to set up a sole proprietorship
Step 1: Register your sole proprietorship
Start by registering your sole proprietorship with the Federal Public Service (FPS) - thanks to this portal, all relevant authorities have access to your registration. Registering your sole proprietorship means officially establishing your company and giving it a legal identity.
Step 2: Request F-valuation approval
The next step is to apply for an F valuation certificate. The F-tax is a prerequisite for carrying out business activities, allowing you to invoice your customers and pay income tax. It is also required for VAT registration.
Step 3: Register for VAT
If your annual turnover exceeds a certain threshold, you must register your sole proprietorship for VAT. This means that you will calculate VAT on your invoices and report the collected VAT. VAT registration involves additional administrative obligations, but can be beneficial depending on your company and customers.
Step 4: Protect your company name and consider insurance
Finally, choose an appropriate company name that is unique and not already used by anyone else. Also, make sure that your company name is registered and does not infringe other people's trademark rights. In addition, consider relevant insurances for your company, such as liability insurance and business insurance.
How much does it cost to set up a sole proprietorship?
Setting up a sole proprietorship can be cost-effective compared to other business structures. There is no required initial capital, and the registration fee is usually around 90.50 euros. In addition to other incidental costs, you may also need to consider possible advisory costs, such as an accountant or legal advisor, as well as any initial capital to cover your company's initial expenses.
Here's how to set a realistic budget for your business:
Identify costs: Identify all of your company's costs, including salaries, rent, operating costs, advertising, etc.
Plan income: Estimate your company's revenue based on your sales forecasts and customer expectations.
Long-term perspective: Think about long-term investments and save for future growth and unexpected costs. A realistic budget is the key to your company's financial stability.
Grow your sole proprietorship with a Qred business loan
With a Qred business loan, you can purchase new equipment, stimulate marketing, and hire qualified staff for your new company. At Qred, we offer business loans from 1000 to 500,000 euros, and with a simple application process, you can get quick and easy access to capital - if everything is in order, you can even receive the funds in your account on the same day!
Frequently asked questions about setting up a sole proprietorship
How much does it cost to register a sole proprietorship?
The registration fee for a sole trader is usually around 90.50 euros, which is generally much lower than for other business structures, as there is no minimum capital requirement.
What do you need to set up a sole proprietorship?
To set up a sole proprietorship, you must register your company, apply for an F valuation certificate and, if your annual turnover exceeds a certain threshold, register for VAT.
Is it worth setting up a sole proprietorship?
Absolutely! If it fits your business model and you're willing to be personally responsible for the company's debts, setting up a sole trader can be beneficial, especially if you have simple financial needs.
How much can you earn with a sole proprietorship?
There is no specific income ceiling for a sole trader. Your income depends on the type and size of your business, as well as applicable tax laws. You pay income tax based on the applicable tax rates.
