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Why do people become self-employed?
Most people become self-employed professionals for one reason: more freedom. Freedom to:
· set your own calendar.
· choose your own projects.
· manage your own income.
· build something your own way.
Perhaps you want more control over your time. Perhaps you want to grow and build something bigger.
Or perhaps you simply want to do what you're good at, without limitations.
Whatever your motivation, it determines how you best organise your business. And that's exactly where the structure of your company comes into play.
· Are you looking for simplicity?
· Do you want to grow and invest?
· Do you want to structure your income smartly?
Each choice demands a different approach.
Are you starting small and looking for simplicity? A sole trader is often the best choice in this case.
Are you still at the beginning of your journey? Or do you simply want to work flexibly without too much administration? In this case you want simplicity and speed and a sole tradership (or sole proprietorship) is usually the best choice.
It is the most accessible way to start as a self-employed professional in Belgium. There's little red tape and often you can be up and running in just a few days.
Why opt for a sole tradership?
· You can start quickly and easily.
· You have little administration.
· You keep full control.
· The start-up costs are low.
For many starters, a sole tradership simply feels like the most logical option. You are your business, you make all the decisions and you don't have to deal with complex structures. Especially if you're still exploring or want to build your activity step by step, it provides peace of mind. You keep a clear overview and can act quickly when needed.
Typical profiles:
· freelancers,
· people with a secondary self-employed activity,
· creative self-employed professionals,
· coaches, photographers, designers,
· small service providers.
But bear in mind:
· you're personally liable.
· your private assets are not protected,
· you are taxed through personal income tax, which can be quite high when profits increase.
If your profits are not high and you want freedom, a sole tradership is often the most logical first step.
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Do you want to grow and invest? In that case a company structure such as a private limited company (BV) is interesting.
Is your business starting to grow? Are you thinking about investing, hiring staff or taking on bigger projects? Your situation has changed.
You no longer only want freedom, but also security and structure. That is when a company structure such as a private limited company (BV) becomes interesting. In a private limited company, your business is legally separate from you as a person. This means you create a clear distinction between your private life and your business.
Why choose a private limited company?
· Better protection of your private assets.
· Easier to invest.
· More flexible remuneration.
· Scalable business.
· Professional image.
A private limited company is often the logical next step when a self-employed activity grows into a fully-fledged business.
In addition, you have more opportunities to develop your business over the long term. You can collaborate more easily with other partners, attract investors or structure your activities better.
You also have more flexibility when it comes to remuneration. Instead of having one single income as in a sole tradership, you can combine different forms of income and align them better with your personal situation and future plans.
Important nuance
A private limited company is often seen as more tax-efficient than a sole tradership, but this is not automatically the case. Everything depends on:
· how much private income you need.
· how you pay yourself.
· what you do with your company profits.
The choice is therefore always tailor-made.
Typical situations:
· you work with stock (for example e-commerce),
· you invest in equipment or infrastructure,
· you want to hire staff,
· you take on greater financial risks,
· you want to grow actively.
When does a private limited company become interesting?
Usually from around €50,000 to €70,000 profit per year. But this is not a fixed threshold. The right choice also depends on:
· your family situation,
· your private income needs,
· your investment plans,
· the risks linked to your activity.
Also bear in mind:
· higher start-up costs (through a civil-law notary),
· more red tape,
· more complex accounts.
In return, you have more opportunities to develop your business strategically.
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If you want to optimise your income you might want to think about a management company.
Are you already a step further? Are you earning well and looking to structure your income more smartly? Your focus has shifted. You no longer only want to work and grow, but also optimise. That’s when a management company is interesting.
It's important to know that a management company is not a separate legal structure. In most cases, it's simply a private limited company (BV) that is used to invoice management or consultancy services.
Specific example
You're a director or consultant and receive your remuneration through your own private limited company, which sends invoices for your services.
Why choose this structure?
· You can decide yourself how to remunerate yourself.
· You have more options to structure your income.
· You can build wealth within your company.
· You work more efficiently within a professional or group structure.
For many entrepreneurs, this is a way to organise both their professional and financial life better. You create a buffer, plan more strategically and gradually build up wealth.
Typical profiles:
· consultants with higher day rates,
· directors,
· liberal professionals,
· entrepreneurs with several activities.
Important to know:
· the structure is more complex,
· it involves more red tape,
· the agreements and remuneration must be set up correctly,
· proper tax and legal guidance is essential.
This is usually not a starter’s choice, but a next step for those who want to work strategically.
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What is the difference between a sole tradership, a private limited company and a management company?
In short:
· Sole tradership: you and your business are one and the same.
· Private limited company: your business is a separate legal entity.
· Management company: a way of working through a company and invoicing services.
The main difference therefore lies in how you set up and structure your business.
Are you unsure whether to choose a sole tradership or a company?
That's quite normal. This is by far the most common consideration. In practice, it often comes down to this:
Do you want to start quickly and simply without too many obligations?
A sole tradership is the best choice.
Do you want to grow, limit the risks and have more options to structure your income?
A company structure becomes more interesting.
The transition usually happens gradually. Your business grows and you notice that your needs change.
When is the right time to switch from a sole tradership to a company structure such as a private limited company (BV)?
There are a number of clear signs that it may be time to review your structure:
· you consistently make profits above €50,000,
· you pay a high amount of personal income tax,
· you want to invest or hire staff,
· you want to protect your private assets,
· you're thinking in the longer term,
· the way you work with clients or partners is changing.
If you switch too early, you create unnecessary costs. If you wait too long, you often end up paying too much tax.
The right timing depends on your personal situation.
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Don't only think about today, think about tomorrow too.
Choosing a specific structure should not only be based on your current situation. It’s just as important to look ahead.
Where do you want to be in one, three or five years? Do you want to keep working alone, or do you dream of building a team? Do you want a stable income, or do you want to grow and invest?
The best structure is not necessarily the cheapest one in the short term, but the one that fits where you want to go. Your structure should be able to grow with your ambitions, not hold you back.
Ready to make the right choice?
The experts at our offices will look at the best way to structure your business together with you. No standard advice, but an approach tailored to your plans and ambitions.
Interested? Do not hesitate to contact an office near you. We're happy to help.
