Key takeaways
- The sole proprietorship is the activity carried out as a natural person: no separate legal person, a single set of assets merged with yours.
- Liability is unlimited: your own property answers for professional debts, unless a home exemption-from-seizure declaration is made before a notary.
- Profits are taxed under personal income tax (progressive rates), not corporate income tax.
- No capital or notarial deed: incorporation is simple and cheap, but switching to a company (SRL) becomes necessary as soon as profit and risk rise.
The sole proprietorship in Belgium is the most direct form to start out: the activity is carried out in your own name, without creating a legal person. It is also the most exposed. Unlike an SRL, the sole proprietorship does not separate your private assets from those of the activity, and its profits are taxed under personal income tax, whose progressive rates climb fast. This article does not repeat the social-affiliation route or the registration steps, dealt with in our guide becoming self-employed in Belgium. It focuses on what is specific to this legal structure: a single set of assets, personal income taxation, the absence of capital and notary, and above all the decision-making comparison with the company to know when to stay a natural person and when to switch to a company.
The sole proprietorship, an activity without a distinct legal personality
The sole proprietorship, or activity as a natural person, is not an entity separate from you. There is no legal personality of its own, no dedicated pool of assets: legally, the entrepreneur and their activity are one. This is what radically distinguishes it from a company, which creates an autonomous legal person with its own assets and its own liability.
This unity explains almost everything else. As there is no distinct entity to set up, there is no capital to contribute, no articles to draft, no notarial deed to execute. Registration with the Crossroads Bank for Enterprises via an approved enterprise counter is enough to exist legally. In return, no barrier protects your private property from the ups and downs of the activity.
A single set of assets and unlimited liability
This is the point with the heaviest consequences. In a sole proprietorship, you answer for the debts of your activity on the whole of your assets, including your private property. If the activity can no longer honour its commitments, a professional creditor can in principle turn to your personal accounts, your car or your home. Liability is said to be unlimited, as opposed to the liability limited to contributions of an SRL.
Belgian law does, however, provide a corrective. A self-employed natural person can have their main residence protected by a declaration of exemption from seizure, made before a notary and published. Once recorded, it shelters the home from creditors whose claim arises from the professional activity, under the conditions and limits set by law.
Personal income taxation, not corporate income tax
Taxation is the second major specificity. The profits of a sole proprietorship are added to your other income and subject to personal income tax, on the progressive bracket scale of the FPS Finance. There is no border between the activity's result and your personal income: everything the business generates is, for tax purposes, your income for the year.
This progressivity is neutral, or even favourable, on modest profits, but it becomes penalising when the result rises, because the marginal bracket climbs. A company changes the game: its profits fall under corporate income tax, at the normal rate of 25%, and the manager pays themselves a remuneration which is subject to personal income tax. This two-tier structure opens optimisation margins that do not exist as a natural person, but that only become interesting beyond a certain level of profit.
regime of profits
progressive bracket scale, with no separation of income
corporate tax, normal rate
regime of a company's profits (SRL, SA)
start-up capital
no capital or notarial deed required in a sole proprietorship
Sole proprietorship or company (SRL): the decision-making comparison
This is the central trade-off of every founder. The sole proprietorship wins on simplicity and cost; the company wins on protection and, beyond a threshold, on taxation. The following table places the two options face to face on the criteria that really weigh in the decision. For the full overview of all legal forms in Belgium, see our dedicated guide; here, the comparison is limited to the natural person versus the SRL, the most frequent pair.
| Sole proprietorship | Company (SRL) | |
|---|---|---|
| Distinct legal personality | ||
| Liability | Unlimited on own property | Limited to contributions |
| Taxation of profits | PIT (progressive rates) | Corporate tax (25% normal rate) |
| Start-up capital | None | No legal minimum, financial plan required |
| Notarial deed at incorporation | ||
| Cost of incorporation | Low | Higher (notary, financial plan) |
| Accounting | Simplified possible below a threshold | Double-entry mandatory |
The SRL no longer requires a legal minimum capital since the 2019 reform of the Companies and Associations Code, but it requires a financial plan and a visit to the notary. To decide between SRL and SA when the company is chosen, see our comparison SRL or SA in Belgium.
Advantages
- Immediate incorporation, without a notary or capital
- Low start-up and management cost
- Lightened accounting possible below a turnover threshold
- Full control: a single decision-maker, no company formalism
Disadvantages
- Unlimited liability on private assets
- Profits taxed under PIT, heavy when income rises
- Sometimes lower credibility with some partners or banks
- Transfer and entry of partners awkward without a legal person
When to stay a natural person, when to switch to a company
There is no universal magic amount: the threshold depends on your profit, your desired remuneration, your family situation and your risk exposure. A few markers, however, allow you to decide without getting the direction wrong.
The signals that guide the decision
Modest and stable profit
As long as the result stays low, PIT and the simplicity of the sole proprietorship often outweigh the cost of a company.
Durably rising profit
Beyond a certain level, corporate tax combined with a manager's remuneration may become more advantageous; to be costed with an accountant, not by guesswork.
Private assets to protect
An activity with debts, stocks, commitments or high liability: a company's limited liability shelters your private property.
Partners or investors in sight
Bringing in a partner, raising funds or dividing shares requires a legal person: the SRL, not the sole proprietorship.
Transfer or resale anticipated
Selling company shares is simpler and often better treated for tax than selling a business in your own name.
The right reflex is not to choose once and for all. Many start as a sole proprietorship to validate the activity at lower cost, then switch to an SRL when profit and risk justify it. This switch is a new undertaking, with a deed of incorporation and financial plan, which our company formation service handles end to end.
Launching your activity in Belgium?
Whether you start as a sole proprietorship or switch to a company, Monsiegesocial steers you towards the suitable structure and handles the steps.
Going further
- Becoming self-employed in Belgium: conditions, CBE registration, social fund and contributions of the self-employed status.
- Legal forms in Belgium: comparison and guide to choosing: the overview of all the forms, from the sole proprietorship to the ASBL.
- Setting up an SRL in Belgium: the essential steps: the procedure to follow when switching to a company becomes relevant.
- Secondary self-employed in Belgium: the scheme suited to testing an activity while keeping a salaried job.
