Sole proprietorship

Starting as a self-employed entrepreneur as a sole proprietorship is easy: just sort out a few basic formalities and you can get started.

What makes up a sole proprietorship?

The activity you want to carry out as a self-employed entrepreneur is the core of the sole proprietorship. To get started, take the following steps:

• Provide proof of your business management skills
• Open a current account with a recognised financial institution
• Register your business with the Crossroads Bank for Enterprises (KBO)
• Register with the VAT administration as a taxable person for turnover tax and obtain a VAT number
• Join a social insurance fund.

For professions/activities requiring a licence: apply for the appropriate licence. It's best to do all this via a business one-stop shop (ondernemingsloket), where specialised staff provide advice and complete the necessary formalities. 

Important: the sole proprietorship coincides completely with you as a natural person. So there is no separate legal personality or separation of assets. What belongs to you personally belongs to the sole proprietorship and vice versa. This means unlimited liability for the obligations, so creditors can lay claim to all your possessions, even your private home. To prevent the latter, you can make a declaration of unseizability before a notary. Definitely do this, because then your home stays out of harm's way if, unexpectedly and unintentionally, business does go wrong.

Financial obligations

Setting up a sole proprietorship is not subject to specific financial conditions. For example, there is no minimum required assets to start. Most sole proprietorships are mandatorily subject to VAT legislation (the business one-stop shop knows the exceptions). Registration with the VAT administration is important. The monthly or quarterly VAT returns must be filed on time and correctly, and amounts due must be paid. This administration is not lenient with fines and claims for those who don't follow the rules scrupulously. So make sure you make VAT payments on time. Paying social security contributions is also an essential and sensitive point. Sensitive because delays are not tolerated there either.

Simple bookkeeping

The sole proprietorship must also keep its own administration, but this is rather limited in the form of single-entry bookkeeping (sometimes also called cash accounting). Specifically, every sole proprietorship must keep a sales journal and a purchase journal (and of course the related VAT administration). Furthermore, costs must be substantiated with incoming invoices in the name of the sole proprietorship (cf. purchase journal), and invoices to customers must be issued in accordance with the law (part of the sales journal), respecting among other things the legally required archiving and availability for audits.  

The profit you make in a sole proprietorship is taxed via personal income tax and not via a separate corporate tax. The tax rates there are much higher and the possibilities for offsetting costs are somewhat different and less favourable. Does that make the help of a bookkeeper/accountant unnecessary? Maybe, but probably not. After all, who has the knowledge to apply the existing rules and legislation correctly and, above all, to follow their rapid evolution and put it into practice? Few self-employed people. Hence the advice to use a professional bookkeeper or accountant anyway, even though in principle they will have somewhat less work than with a company.