A business in Serbia can be opened in three ways: as a limited liability company, as a sole trader, or as a flat-rate entrepreneur. The difference between them is not the registration cost but the rules of the game for years ahead. Getting this step wrong is expensive: the form is later changed by closing down and registering again.
Liability
A company answers for its obligations with its own assets: the founder's personal funds are separate and the risk is limited to the capital invested. A sole trader, the flat-rate entrepreneur included, answers for obligations with all of his property. For calm dealings with large counterparties and for hiring staff, a company is usually preferable for precisely that reason.
Entry cost
Registering a company costs 8,000 dinars plus a minimum capital of 100 dinars, which stays with the company. Registering a sole trader costs 2,500 dinars. The difference is about 5,500 dinars, and it decides almost nothing: the real cost of a form shows up later — in taxes, reporting and record-keeping requirements.
Reporting and bookkeeping
A company must keep double-entry books from day one, file financial statements and work with an accountant. A flat-rate sole trader keeps no books, has minimal reporting and incomparably lower accounting costs. A sole trader taxed on actual income does keep books, but under rules different from corporate ones.
Tax
A company pays corporate income tax at 15%, while the director's and employees' salaries are additionally taxed with contributions. A flat-rate entrepreneur pays a fixed sum depending on the city and type of activity, but is constrained by a turnover limit: 6,000,000 dinars in a calendar year. A sole trader who has moved to taxation on actual income pays on a progressive scale on actual profit, not on turnover.
Which suits what
The flat rate is for one person or a very small team whose turnover is predictable and stays within the limit: services, repairs, work for several clients. A sole trader on books suits someone with higher income and significant expenses, which are recognised, so tax is calculated on profit rather than turnover. A company is for when you need partners, large clients, employees, limited risk and growth at which the flat-rate limits no longer fit.
What to weigh when choosing
First, who you work with: corporate clients prefer dealing with a company, and VAT payers with a VAT-registered supplier. Second, how many people are on the team: hiring in a company is standard, and possible for a sole trader too, but with a different set of obligations. Third, what turnover is expected over the next year or two: if it crosses 6,000,000 or 8,000,000 dinars, the form should be chosen with those thresholds in mind in advance. Fourth, how much time you are ready to spend on reporting: with a company it is objectively more. And fifth, whether you plan to bring in partners' money: investment by third parties closes off the flat-rate regime, which requires another form.