Since the new Belgian Companies Code came into force in March 2019, it’s never been more straightforward to set up a business of your own. But you do need to take care. When it comes to entrepreneurship ‘straightforward’ should never equate with ‘quick’. Here are five important points to consider before you start.
1. Choose between self-employment as main or secondary occupation
Which status you choose will depend on the nature of your business. If your self-employed activity takes up less than 50% of your time and brings in less income than your activity as an employee, it’s better to choose self-employment as secondary occupation and keep your activity as an employee as your main occupation.
If you spend less than half your time working for your employer, you will automatically be classified as self-employed as main occupation.
Good to know: you have the same administrative obligations whether self-employment is your main or your secondary occupation: reporting your income and costs, preparing your VAT returns, paying your social security contributions, etc.
Your social security contributions amount to 20.5% of your net taxable income, but the minimum contribution varies according to your status.
You are exempt from contributions if your income from self-employment as secondary occupation is less than 1 553.48 euros.
If your income exceeds this threshold, you will have to pay a minimum contribution of 80.76 euros a quarter.
The minimum quarterly contribution in the case of self-employment as main occupation is 748 euros.
The difference reflects the fact that if you are self-employed as secondary occupation, your social security cover is already provided by your activity as an employee. A person who is self-employed as main occupation has to build up all that cover. Note that the full contribution (20.5%) is payable where income from self-employment as secondary occupation exceeds 14 000 euros.
2. Starting your business as a company or as a sole trader
Whether you opt for self-employment as main or secondary occupation, you still have to decide whether or not to set up a company. Once again, the answer depends on the nature of your business. Business starters generally prefer to begin as a sole trader (‘natural person’) to try out their activity and then switch to a company (‘legal person’) later, depending on how things turn out.
To set up as a sole trader, you need to:
- Open a professional bank account
- Register your business with the Crossroads Bank for Enterprises
- Activate your VAT number
- Join a Social Insurance Fund
- Demonstrate your entrepreneurial competence (automatic if you have a higher education qualification) and apply for any licences/permits your activity might require
Advantages:
- No minimum capital requirement
- You don’t need a notary
- You get to decide everything yourself
- Limited amount of red tape (you don’t have to publish a balance sheet or income statement)
- Any profits go directly to you personally
Drawbacks:
- No separation between your company and your personal finances (your personal assets could be seized if you default on your payments)
- Hard to transfer or cease the activity, as it is linked to you personally
- Business failure can lead to personal bankruptcy
- Less generous tax treatment (your earnings are taxed at personal income tax rates, i.e. up to 50% compared to around 30% or even less for a company)
To set up a company, you need to:
- Choose among the five existing types of company in Belgium: limited liability company (BV/SRL), public company (NV/SA), cooperative company (CV/SC), simple partnership and limited partnership (société en commandite/commanditaire vennootschap or société en nom collectif/vennootschap onder firma). The most common choice, due to its simplicity, is the BV/SRL (formerly BVBA/SPRL). A limited company like this can be set up by one person or in partnership.
To create a limited company, you need to do the following (in addition to the steps for setting up as a sole trader):
- Have enough starting capital (there is no longer a minimum capital requirement, but your capital has to be sufficient to allow the launch of your business and its financial survival, otherwise you could be held liable in the event of default).
- Draw up a detailed financial plan
- Visit a notary
Advantages:
- Your liability is limited, which means your personal assets are more protected
- A company can borrow more readily than an individual
- Succession and transfer are more straightforward
- A company enjoys fiscal advantages (tax deductions, optimisation, etc.)
- Your income is taxed at a lower rate and you are better able to optimise your salary
Drawbacks:
- You have to show that your starting capital reflects the reality of your business for the next two years
- Higher start-up costs
- More red tape and administrative obligations (accounting, publishing a balance sheet, stopping the activity, etc.).
3. Starting capital
If you’re planning to set up as a sole trader without creating a company, you don’t need starting capital.
If you want to set up a limited company, sufficient capital must be available to ensure that the business can operate for the first two years. There is no longer a minimum capital requirement, but you will need to demonstrate that you have enough to cover the launch of your business.
If your company fails within three years of incorporation because you did not set aside sufficient reserves, you could be held personally liable and the receiver might seize your private assets.
What if you don’t have the necessary starting capital? Several financing options are available. You can find an overview on the KBC Brussels business website:
4. Steps
Several steps are needed to create a limited company:
- Open a professional bank account
- Draw up a detailed financial plan, usually with the help of an accountant (this will be an overview of the company’s viability, including all sources of finance at the moment of incorporation, a two-year budget forecast, a forecast of results after one and two years, and a description of the assumptions used to estimate turnover and profits)
- Prepare your company’s articles of association (effectively your company’s birth certificate, which sets out what activities it will perform, the amount of capital, the shareholders, procedures for transferring shares and dissolving the company, management, decision-making, the dates of the general meeting, and so on)
- Visit a notary to have the company incorporated and the articles of association published
- Register the company with the Crossroads Bank for Enterprises via a Corporate Office, so you can get your enterprise number, which will also be your VAT number.
5. Costs
As a sole trader, all you have to pay for is your registration with the Crossroads Bank for Enterprises to obtain your company number and activate it for VAT purposes. This costs about 160 euros.
If you set up a limited liability company (BV/SRL), you will also have to pay the notary’s costs (notary’s fee, publication in the Belgian Official Gazette and any other administrative charges), amounting to around 1 400 euros.
