Sole Trader or Limited Liability Company
Sole trader or limited liability company: which should you pick? Deciding on the type of incorporation can be of key importance for a young company. Formalistic aspects and established legal provisions provide a framework, which is additionally defined by different provisions on taxes. At the outset, we will address the legal framework for these two forms of company incorporation.
Sole Trader or Limited Liability Company?
Corporations are established through registration, which demands a founding charter, a minimum founding equity and additional type-specific formalities.
Sole Trader (s.p.), commonly also known as self-employed person, is physical person who conducts a certain profitable activity without forming a separate legal business entity.
A Limited Liability Company (LLC or Ltd) is one of many corporate types of private legal entities with their own legal identity, which separates the liability of the company from its employees and shareholders. Companies working under this type of incorporation append an abbreviation d.o.o. to the company name.
The presented types are the generally preferred types of incorporation in Slovenia. Primarily due to relatively low costs and simple bookkeeping in comparison to that of other corporations. Neither of the forms can issue stocks, nor trade shares on the open market.
Comparison between a Sole Trader and a Limited Liability Company (LLC):
| Sole Trader | Limited Liability Company | |
| Corporation Type | Physical person | Legal entity |
| Founding Equity / Capital | none | 7,500 EUR |
| Liability | Full personal liability | Liability is limited to the assets of a company; no personal liability for shareholders |
| Salary | All revenue after taxes and social contributions | Determined in the contract of employment. A salary can consist of a fixed and variable part. The latter might depend on the annual profits |
| Asset Management | Large margin of discretion and leeway when making general business decisions and operating transactions | More tightly regulated: owners take money out as salary, dividends or other lawful payments and cannot use company money freely for private purposes |
| Borrowing Powers | Very low, because there is no minimum founding equity requirement, a generally low debt to equity ratio | Higher borrowing powers, especially with banks. Moreover, the type of incorporation facilitates application to public tender licitations |
| Tax on Profit | Progressive income tax of 16%, 26%, 33%, 39% or 50% (2026 scale; the 50% rate applies above a net annual base of 82,346.23 euros). With normalised expenses, 80% of revenue up to 60,000 euros counts as expenses and the remaining base is taxed at a flat 20% up to 72,000 euros and 35% above it. On revenue up to 60,000 euros this gives an effective tax of 4% of revenue (20% of the 20% that remains as the tax base) | 22% flat corporate tax rate (temporary rate for 2024–2028, see our corporate taxation guide), plus a 25% final tax on dividends paid out, with no reduction for holding period. (If you later sell your shares instead of taking dividends, a separate capital gains tax applies, which does decline with holding period: 25% under 5 years, 20% for 5–10 years, 15% for 10–15 years, 0% after 15 years.) |
| Social Contributions | Special scheme for self-employed persons (in 2026 at least 651.04 euros a month, calculated from a minimum base of 1,521.62 euros) or a reduced flat payment for sole traders who are already fully insured at their place of employment | Social contributions can be deducted from monthly salaries. If the shareholder who is also the director is not already insured on another full-time basis, he or she has to arrange compulsory social insurance for that function. Payment contributions are conducted irrespective of annual profits |
| Accounting | One- or two-fold bookkeeping, or no full bookkeeping if you use normalised expenses (80% of revenue up to 60,000 euros). To use them for a tax year, the average annual revenue of the two preceding years must not exceed 120,000 euros if you were insured as a full-time self-employed person for at least nine months in each of those years, 50,000 euros if you were not, or 85,000 euros in a mixed case | Double-entry bookkeeping, usually done by a professional accountant |
Key figures for an s.p. and a d.o.o.
These are the main figures that differ between the two forms for the current tax year. Check your own situation with an accountant before you decide.
| Item | Sole trader (s.p.) | Limited liability company (d.o.o.) |
|---|---|---|
| Minimum capital | None | 7,500 euros |
| Tax on profit | Income tax of 16%, 26%, 33%, 39% or 50% | Corporate tax of 22% (temporary rate for 2024 to 2028) |
| Taking money out | No extra tax: the profit is already your income | 25% final tax on dividends |
| Flat-rate (normalised) expenses | 80% of revenue up to 60,000 euros, if you meet the revenue conditions | Not available |
| Minimum monthly social contributions | 651.04 euros, from a minimum base of 1,521.62 euros | The owner-director must arrange insurance unless already insured full-time elsewhere |
The 22% corporate rate is temporary and applies to the tax years 2024 to 2028; the standard rate in the corporate income tax act is 19%.
Frequently asked questions
Can I switch from an s.p. to a d.o.o. later?
Yes, this is common. Many founders start as an s.p. for the simplicity and switch to a d.o.o. once turnover and liability risk grow.
Do I pay tax twice if I run a d.o.o.?
Effectively yes, in two stages: the company pays corporate income tax on its profit, and you pay a separate flat 25% tax if that profit is then paid out to you as a dividend. An s.p. only pays tax once, as personal income.
Which structure is cheaper to run day to day?
An s.p. can have lower accounting costs, especially if it qualifies for normalised expenses (limits apply, see the table above). A d.o.o. has to keep double-entry books and usually uses a professional accountant regardless of turnover.
How much capital does a d.o.o. need?
The share capital must be at least 7,500 euros, and each contribution at least 50 euros. Before the company is registered, each founder has to provide at least a quarter of his or her contribution, and all contributions together must reach 7,500 euros. Contributions can be in cash or in assets. The procedure is described on the SPOT portal (in Slovenian).
Can every s.p. use normalised expenses?
No. Normalised expenses cover 80% of revenue up to 60,000 euros. To use them for a tax year, the average annual revenue of the two preceding years must not exceed 120,000 euros for a regular s.p. insured full-time for at least nine months in each year, 50,000 euros for an s.p. who was not insured full-time in that way, or 85,000 euros in a mixed case. The tax base is then taxed at 20% up to 72,000 euros and 35% above it.
What are the income tax rates for an s.p. that keeps actual expenses?
For the 2026 tax year the net annual base is taxed at 16% up to 9,721.43 euros, 26% up to 28,592.44 euros, 33% up to 57,184.88 euros, 39% up to 82,346.23 euros and 50% above that.
See also:
- s.p. Personal Income Tax Slovenia
- Establishing a company in Slovenia
- Establishing a sole proprietorship (s.p.) in Slovenia
- Work permit and residence permit in Slovenia
- Virtual office in Ljubljana Slovenia
- Obligatory contributions for social security in Slovenia
- Corporate taxation in Slovenia
