There are many reasons to consider setting up a sole proprietorship (often referred to as JDG). The advantages of this solution include simplicity in terms of paperwork, minimised bureaucracy and tax advantages. We explain how to set up a sole trader and for whom it is the most cost-effective solution.
What is a sole proprietorship?
A sole proprietorship is an organised activity of a profit-making business that is conducted in its own name on a continuous basis. This form is very often chosen because of its flexibility and reduced bureaucratic and accounting burden. It is a suitable a solution for those who want to run their business independently business, having full control over business processes and finances.
How to set up a sole trader - key steps
Setting up a sole trader involves several basic steps. Above all, you need to keep in mind actions such as:
- Choice of company name: the name should be unique and not infringe on the rights of others.
- Choice of company address: this can be your home address or rented premises. You must have a legal title to use the premises, such as a title deed to the property or a lease agreement.
- TIN and REGON: if you do not have a NIP (Tax Identification Number) and REGON (National Economy Register) number, you must obtain them.
- Opening a business account with a bank (optional): although not a requirement, it is recommended to set it up for better financial management of the company.
- Registration in CEIDG (Central Registration and Information on Business Activity): this is the key step whereby the official registration of the company is carried out. Company registration is free and can be done online.
- Choice of form of taxationa: You can choose between several forms of taxation, such as tax card, lump sum, flat tax or general rules.
- Notification to ZUS (Social Insurance Institution): within 7 days of starting your business, you must report to the Social Security to regularise your social security.
- Accounting: you can do your own bookkeeping or hire an accountant to do it for you. Using a professional accounting firm is a safer option to avoid mistakes and possible penalties.
- Permits and licences: depending on the type of activity, the applicable legislation may require additional permits or licences. This applies to the transport industry, among others.
Remember that legal requirements may vary depending on the specific industry and location. To be safe, it is advisable to consult a legal advisor or experienced accounting office. Professional assistance will make sure that all legal requirements are met.
Who can set up a JDG - Mandatory requirements
A sole proprietorship can be set up by any natural person of full legal capacity. This means that the future entrepreneur/entrepreneur must be at least 18 years of age and must not be incapacitated by a court judgment.
Who is most likely to set up a sole trader?
The JDG is very often chosen by:
- Budding entrepreneurs. People who are just starting out in business choose sole proprietorship as an affordable and flexible way of doing business.
- Freelancerswhether persons providing professional services. These include programmers, graphic designers, consultants, trainers and copywriters. Often opting for this form of business because of its simplicity and favourable tax aspects.
- Start-ups of small commercial and service businesses. For owners of small shops, workshops, beauty salons, hairdressers who want to be self-employed, JDG is the preferred solution.
- Those looking for an additional source of income. Some people set up a sole proprietorship as an additional source of income that allows them to earn earnings in addition to their full-time salary.
- Artists and creators. Painters, writers, poets, musicians and other creatives often choose a sole proprietorship in order to be able to sell their works and services legally.
- Career changers. JDG is a popular option for people who decide to make a career change or start their own business after years of employment.
- People re-entering the labour market. Women after maternity leave who want a flexible work-life balance can benefit from setting up a sole proprietorship.
JDG is a good and effective solution for a wide range of people. Especially those who want to grow their business while reliably fulfilling the legal requirements. If you want to find out how to set up a sole trader or are looking for a company to do your bookkeeping, contact us.
