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Sole trader, flat-rate or LLC: which to choose

An overview of the three Serbian legal forms (flat-rate sole trader, sole trader on business books, and an LLC) compared by liability, taxation, bookkeeping and capital, so you can pick the form that pays off best for you.

Reviewed by Biljana Risteski, certified accountant

Choosing a legal form is the first and one of the most important business decisions, because it determines how much tax you pay, how many books you keep and how personally liable you are for debts. In Serbia you usually choose between a flat-rate sole trader, a sole trader who keeps business books, and a limited liability company (LLC, in Serbian d.o.o.). The right choice depends on your activity, expected turnover and how much you want to protect your personal assets.

Flat-rate sole trader

Best for Freelancers and small, low-cost activities with turnover up to 6 million dinars a year.

Liability
Personal assets, unlimited.
Taxation
Fixed monthly tax and contributions by ruling.
Bookkeeping
No business books, only the KPO ledger.
Capital
None required.
Limits
Turnover up to 6 million and eligible activities only.

Sole trader (on books)

Best for Entrepreneurs outgrowing the flat-rate or with significant deductible costs.

Liability
Personal assets, unlimited.
Taxation
10% tax on actual profit, with the option of a personal salary.
Bookkeeping
Business books (single or double-entry).
Capital
None required.
Limits
More obligations than flat-rate; personal liability.

LLC (d.o.o.)

Best for Growing companies, with partners, investment or higher risk.

Liability
Limited to the contribution; personal assets protected.
Taxation
15% profit tax and 15% dividend tax on payout.
Bookkeeping
Mandatory double-entry books and financial statements.
Capital
Minimum 100 dinars.
Limits
The most administration and running costs.

Other company forms

Joint-stock company (a.d.)

Capital divided into shares, suited to large companies and raising capital from investors. Limited shareholder liability, a statutory minimum capital of 3,000,000 dinars, the most complex administration and a mandatory audit.

General partnership (o.d.)

Two or more partners doing business together, where all partners are liable without limit and jointly with their entire personal assets. Rarely used in practice.

Limited partnership (k.d.)

At least one general partner liable with their entire assets and at least one limited partner liable only up to their contribution. Rarely used.

What you should know

  • A flat-rate sole trader pays a fixed monthly tax and contributions set by a Tax Administration ruling, keeps no business books (only the KPO ledger), and qualifies only with annual turnover up to 6,000,000 dinars and an activity not excluded from the flat-rate scheme (e.g. advertising and market research, accounting services, wholesale trade).
  • A sole trader on business books is taxed on actual (taxable) profit at a 10 percent rate, keeps single or double-entry books and may pay themselves a personal salary, but is liable for obligations with their entire personal assets.
  • With an LLC, the owner's liability is limited to the amount of the registered contribution, so your personal assets are in principle protected, while the statutory minimum founding capital is just 100 dinars.
  • An LLC must keep double-entry books and file annual financial statements, pays 15 percent corporate profit tax, and on distributing profit to an individual owner additionally pays 15 percent dividend tax.
  • The flat-rate scheme usually pays off for small, low-cost activities, business books for higher income or when you have significant deductible costs, and an LLC when asset protection, bringing in partners or a larger scale of operations matter.

How we handle it

  1. 01 Activity analysis We assess your activity, expected turnover and costs and check whether you qualify for the flat-rate scheme or are better suited to business books or an LLC.
  2. 02 Comparing options We prepare a clear overview of taxes, contributions and bookkeeping obligations for each form, with an estimate of monthly and annual costs.
  3. 03 Setting up the form We prepare and file the registration documents with the Business Registers Agency and the Tax Administration, including the activity code and tax regime.
  4. 04 Bookkeeping setup We establish the right records, from the KPO ledger for flat-rate traders to double-entry books and financial statements for an LLC.
  5. 05 Ongoing advice We monitor your turnover and the regulations and recommend switching to another form in good time when it becomes more favorable or mandatory.

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