Switching to a Company in Belgium: When and How to Create a Legal Entity

Introduction

Many Belgian self-employed workers face the question: should they continue as a sole proprietor or create a company? This decision has major tax, social, and asset protection implications. Here is a complete guide to help you decide.

Sole proprietor vs company: key differences

Tax regime

As a sole proprietor:

• Progressive personal income tax: from 25% to 50%
• Above EUR 48,320, marginal rate of 50%
• Social contributions calculated on total income

As a company (legal entity):

• Corporate tax: 25% on profits
• Reduced rate of 20% on the first EUR 100,000 (subject to conditions)
• Director's remuneration taxed under personal income tax
• Possibility to retain profits in the company

The break-even point

As a general rule, switching to a company becomes fiscally advantageous when your net income exceeds approximately EUR 45,000 to 55,000 per year. This threshold varies depending on your personal situation, deductible expenses, and remuneration strategy.

Legal forms since the CSA (2019)

The SRL/BV (Private Limited Company)

Formerly SPRL/BVBA, the SRL is the most popular form:

• No minimum capital (but mandatory financial plan)
• Limited liability to contributions
• A single partner suffices (single-member SRL)
• Notarial deed required
• Ideal for SMEs and self-employed workers

The SA/NV (Public Limited Company)

Reserved for large structures:

• Minimum capital of EUR 61,500
• At least one shareholder
• Freely transferable shares
• Formal governance structure (board of directors)

The SC/CV (Cooperative Company)

For cooperative-purpose projects:

• Minimum 3 partners
• Variable capital
• Cooperative principle (one person, one vote)
• NRC accreditation possible

Advantages of a company

Personal asset protection

In an SRL, your liability is limited to your contributions. Your personal assets (home, savings) are in principle protected from the company's creditors, except in case of serious management fault.

Tax optimization

• Reduced corporate tax rate of 20% on the first EUR 100,000
• Deduction of car expenses, offices, equipment
• Creation of liquidation reserves (taxed at 10% instead of 30% withholding tax)
• Supplementary pension via EIP/IPT (Individual Pension Commitment)
• Investment deduction

Continuity and transfer

• The company has its own existence, independent of the founder
• Easy transfer (sale of shares)
• Simplified estate planning

Disadvantages to consider

Operating costs

• Incorporation costs: notary fees (EUR 1,500-2,500), financial plan
• Mandatory double-entry bookkeeping
• Filing of annual accounts with the NBB
• Higher accounting fees (EUR 2,000-5,000/year)

Administrative obligations

• Mandatory annual general meeting
• Filing of annual accounts with the National Bank
• Publication in the Belgian Official Gazette of important acts
• Maintenance of corporate registers

Minimum director's remuneration

To benefit from the reduced 20% rate, the director must pay themselves a minimum remuneration of EUR 45,000 gross per year (or at least equal to the company's profit if lower).

Incorporation procedure

1. Prepare a financial plan

The financial plan is mandatory and must cover at least the first two years of activity. It must demonstrate that the initial equity is sufficient. In case of bankruptcy within the first three years, the founder may be held liable if the plan was manifestly insufficient.

2. Draft the articles of association

The articles of association define the company's operating rules. They must be drafted by notarial deed and include:

• The company name and registered office
• The corporate purpose
• Contributions and shares
• Governance rules
• Share transfer modalities

3. Notary visit

The deed of incorporation is signed before a notary, who then files it with the clerk of the enterprise court and publishes it in the Belgian Official Gazette.

4. Administrative registrations

• Registration with the CBE through an enterprise counter
• VAT number activation
• Joining a social insurance fund (for the director)
• Opening a bank account in the company's name

Conclusion

Ready to make the switch to a company? LegalBelgique supports you through every step of incorporating your SRL or SA. From the financial plan to the articles of association and administrative procedures, our legal experts ensure a smooth and tax-optimized transition.