Have you decided to be your own boss and bring your own ideas to life? Here’s what you should know about starting a sole proprietorship!
Running your own business is full of exciting opportunities, but in the initial period you need to make many decisions. The first is choosing the business structure. While operating as a company has its own advantages, which may be worth considering in the long term, as a beginner a sole proprietorship is usually the best option. It can serve your basic needs for years, and you can always upgrade later, but let’s see what you can gain from it at the start!
Compared to other business structures, in this case no share capital is required, and apart from a few incidental costs, starting the business is free, and maintenance doesn’t require significant investment either. Every decision is yours, you don’t need to employ staff, and if circumstances change, you can suspend your activity. Another advantage of sole proprietorship is the simplified administration, which significantly eases the startup process.
After all this, the only question is who can be a sole proprietor. Hungarian, EU or EEA citizenship, or a settlement permit, and being at least 18 years old are essential, as are legal capacity and a clean criminal record. If these are in order, and you don’t already have sole proprietor status, and you’re not an unlimited liability member of a sole proprietorship company or other business association, you meet the requirements.
But what does starting a sole proprietorship actually look like? Below we’ll explain this so you know what to expect.
Client Gateway and Web Assistant
Although you can choose in-person administration, if you have a Client Gateway account, you can handle everything online, simply and conveniently. Registration has its advantages even as a private individual, but as an entrepreneur it makes your life even easier. In many cases you can avoid in-person administration, handling official correspondence and tax return tasks is just a few clicks. So if you haven’t registered yet, start here: https://ugyfelkapu.gov.hu/regisztracio
For starting your business, the Web Assistant will provide the administration interface, and it’s good to know that you can modify your data here later as well. Just open the website, click on “Sole Proprietorship” and upload the requested data into the system:
https://www.nyilvantarto.hu/ugyseged/
Registered Office
The registered office is essentially the official address of the business, this is where the company sign is displayed, where mail arrives and where official inspections can be expected. It’s important to know that the registered office of a sole proprietorship can even be your home address, yet it’s not advisable to mix private life and work in this way. If you don’t need an office, registered office service can be a solution, as it’s cost-effective, flexible and also helps reduce administrative burdens.
Scope of Activity
In the next step you need to decide on your business activity. Browse through the TEÁOR code list carefully, you’ll find every available activity there, categorized, so you’ll have an easy time. You’ll need a main activity, this is what takes up a significant part of your working time, and you can also choose secondary activities.
You can expand the list at any time later, so it’s not worth selecting more just for the possibility, only if you actually engage in that activity from the start. Additionally, it’s good to know that certain activities may require a permit, you can find information about this in the KSH list. This usually means municipal notification or some qualification, but you definitely need to research it thoroughly.
Taxation
For sole proprietorships, KATA worked well as a tax form for a long time, and although many still choose it, today it’s not necessarily the best choice, it’s worth discussing the options with an expert. You can also choose whether you want VAT-registered or tax-exempt status, this is just one click. With the latter, up to 12 million forints annual revenue you don’t have to pay VAT, but you can’t deduct its value from expense invoices either, and if you exceed the limit, additional tax burdens the revenue.
Once you’ve submitted all the data, starting the sole proprietorship is complete, and as soon as they accept the application, you’ll receive a tax number and a registration number.
Chamber Registration
Within 5 days of starting, you must register with the Chamber of Commerce and Industry according to the business’s registered office location. The cost is 5,000 forints, this is the chamber contribution, which must be paid once a year. As with starting up, you can handle registration online here as well, on the Chamber of Commerce and Industry website: https://mkik.hu/vallalkozoi-regisztracio
Local Business Tax
You also need to register with the local municipality according to the registered office location, this can be done through the Client Gateway. The municipality will then inform you about the local business tax rate and payment deadlines. However, it’s good to know that this is a tax burden you can be exempt from if you choose a local business tax-exempt registered office service. Whether you can take advantage of this option depends on which municipality the chosen registered office provider is located in—Csomád, for example, is local business tax-exempt.
Commercial Activity
If you’ve chosen commercial activity, you also need to report this to the municipality according to the registered office location. For this you only need to fill out a form, which is usually available on the municipality’s website as well, there are no other tasks.
Invoicing Software
Invoices can be paper-based, but software solutions are much more worthwhile. Modern invoicing software makes work easier on multiple fronts, as everything can be handled with a few clicks. If you use one, issuing invoices is faster and simpler, payments are transparent, and the number of administrative errors is minimal.
Accountant
The administrative burden related to finances depends on the tax form, and although KATA may seem particularly simple on this front, as a beginning entrepreneur it’s still worth choosing an accountant. An experienced professional helps you navigate the maze of legal regulations, draws your attention to deadlines and answers questions. Registered office service can be an advantage for sole proprietors here as well, as such an office can also recommend an accountant.
Business Bank Account
A separate bank account is only required if you choose VAT-registered status. Nevertheless, it’s still worth separating the business finances, but a sub-account may be sufficient, the key is transparency.
Although every decision is worth examining thoroughly and choosing partners is an equally important task, starting a sole proprietorship is not as complicated as it may seem at first. If you want to use registered office service as a sole proprietor, you’ve come to the right place, and you can count on us if you need the help of an accountant or lawyer as well. Contact us with confidence!
