The short answer
If your priority is the lowest tax and you work alone — a sole proprietorship (flat-rate while you qualify, personal salary afterwards). If protection of personal assets, partners, investors or stepping outside the independence test matter — an LLC. Now the detail.
Sole proprietor
- Registered in a day or two, low costs
- Flat-rate (a fixed amount) or personal salary (10% on profit)
- Money is withdrawn with no further tax
- Liable with all personal assets
- Subject to the independence test
LLC (d.o.o.)
- A separate legal entity — limited liability
- 15% profit tax + 15% dividend tax
- Minimum share capital of RSD 100
- Not subject to the independence test
- Room for partners, investors and a team
Taxes: what is actually being compared
A sole proprietor on a personal salary pays 10% on profit — and that is the end of it: the remainder is withdrawn freely. An LLC pays 15% on profit, and when the owner wants to pay it out as a dividend, a further 15% (a dividend is only possible out of realised profit). For the same profit fully distributed to the owner, an LLC is noticeably more expensive — that is the price you pay for limited liability and flexibility.
Flat-rate tax is a different story: a fixed monthly amount independent of earnings, but capped by the RSD 6 million limit and a list of excluded activities. Check the approximate amount in our flat-rate tax calculator.
Liability and risk
A sole proprietor is liable for the obligations of the business with all of their personal assets — even after the business is closed. An LLC is liable with its own assets, and the founder as a rule only up to the value of their contribution. For activities with genuine risk — larger contracts, goods, employees, potential damages — this often matters more than the tax difference.
The independence test as a deciding factor
If you work mainly for one client — typical in IT — check the independence test before choosing a form. The test applies to all sole proprietors, both flat-rate and personal salary; only an LLC is outside its scope. Where the risk is high, an LLC is often the only long-term peaceful solution, despite the higher tax.
Administration and costs
A flat-rate sole proprietor has minimal administration — just the KPO book. A sole proprietor keeping ledgers and an LLC both maintain full business ledgers; there is a difference in accounting fees, but it is smaller than people assume. An LLC additionally files annual financial statements with the APR. How we build a price in each case is set out on the pricing page.
Frequently asked questions
What is the minimum share capital for an LLC in Serbia?
From RSD 100 — capital is not an obstacle to founding an LLC. Registration and running costs are what actually get compared.
Does an LLC pay more tax than a sole proprietor?
On distributing profit to the owner — yes: an LLC pays 15% profit tax plus 15% dividend tax, while a sole proprietor on a personal salary pays 10% on profit and withdraws the money with no further tax. But an LLC is not subject to the independence test and protects personal assets, so the decision is not purely a tax one.
Does the independence test apply to an LLC?
No — an LLC is not subject to the independence test. The test applies to all sole proprietors: both flat-rate and personal salary.
Can I convert from a sole proprietorship to an LLC later?
Yes — this is a common move and it is done to a plan: the LLC is founded, the business and contracts are transferred, and the sole proprietorship is closed or made dormant. We manage the whole procedure.
Still weighing it up?
This is a decision made once, and with numbers — not on forums. Tell us your activity, expected revenue and plans, and we will tell you what pays off and why. We then handle the entire registration.
Book a consultation +381 21 422-690Note: this content is informational and does not constitute legal or tax advice.