Sole proprietorship or limited company? How to choose in 2026

Starting entrepreneurs almost always choose a sole proprietorship: you register with the Chamber of Commerce and can invoice immediately. It requires no start-up capital and is administratively simple. The fiscal benefit lies in the entrepreneurial deductions — self-employment deduction, starter deduction and SME profit exemption — which only apply to entrepreneurs in the income tax system.

But there are two downsides. First, liability: as a sole proprietor you are personally liable for business debts. Second, tax: you pay income tax on your profit, at progressive rates as your profit grows.

A limited company (BV) follows different rules. You incorporate it through a notary, the corporate tax rate is 19% on the first € 200,000 of taxable profit and 25.8% above that, and as director-majority shareholder you pay payroll tax on your own customary salary. In return you get: limited liability and more flexibility in how and when you distribute profit.

The tipping point depends on your profit, risk profile and personal situation. As a rule of thumb, up to roughly € 100,000 of profit a sole proprietorship is often more tax-efficient thanks to the entrepreneurial deductions, while above that level — and certainly for risky activities — the BV becomes more attractive. Because deductions have been reduced in recent years, this point keeps shifting; always have it calculated with current figures.

• Risk and liability: sole proprietorship = personally liable, BV limited in principle

• Tax: entrepreneurial deductions only in the sole proprietorship; flat rates in the BV

• Flexibility: BV is stronger for distributions, financing and partnerships

• Costs: BV requires a notary, incorporation and somewhat more administration

We calculate both scenarios with your actual figures and factor in the future: do you expect to grow, hire staff or need financing? Then starting with a BV may be wise, even if the sole proprietorship is slightly cheaper today.