When you know you are eligible to start a business in Gent, the next step is to chose what kind of company form you use for trading your products or services… This post is about choosing your company form and it compares mainly freelancing with starting a company with limited liability. It shows the requirements for and pros and cons about that specific company form. The post also contains a list of other company forms available when starting a business in Belgium.
Start out as a freelancer on the side
If you want to do some freelance work on the side you can apply for the status of zelfstandige in bijberoep. You only pay social contributions on what you earn – there is no minimum amount. You’ll still need to pay income tax, though, which will be calculated by adding your freelance earnings to your salary.
As a freelancer, self employed, or ‘zelfstandige’ in Dutch. You are personally liable for any debts and for paying personal income tax, which is higher than company tax. This means if you go bankrupt and have debts, creditors have the right to use your personal assets (such as your house) to make up for your debts.
Compared to an employee, a self employed person does not have the right to the same national insurance cover. The family allowance is much less, there is no insurance for occupational illnesses and you get no unemployment benefit. Furthermore the national retirement pension will be much less compared to an employee’s pension. So the solution is to get extra insurances yourself!
Another big pitfall to working as a freelancer in Belgium is that you need to pay social contributions every 3 months, no matter if you earned a cent or not. The minimum amount for 3 months is just under 700€. The social contributions are usually around 22% of your annual income, meaning, the more you earn, the more you pay!
Accounting & VAT
Freelancers also need to keep detailed accounting records of their activities, such as a sales and expenses ledger. In Belgium, due to its bureaucracy an accountant is needed in most cases.
If you have a turnover of more than 25 000€ a year, you need to charge your clients VAT (standard is 21%) on top of your fees. But as a VAT contributor, you may also recover the VAT that you paid on your professional expenses. With VAT comes quite a lot of administrative work as you need to report it several times a year.
Some professions and products/services are exceptions (like artists, lawyers, doctors and teachers), so it is best to check with the tax authorities (Ghent office) for the most up to date information. You can read some guidelines in English on Kunstenloket’s website.
The positive sides
Compared to being an employee you have:
- the freedom to choose where, when, with whom and how you work (obviously this comes with risks and responsibilities)
- an opportunity to earn more money faster
- no risk of getting fired
Compared to starting a company (with less personal risk)
- the accounting is easier
- starting out is almost free, and you don’t need a certain amount of start capital
- you can do it alone, and you don’t need lawyers, notaries, partners etc.
If you are a freelancer who prefers to avoid paperwork, then payrolling can be an option for you. Using a payrolling service makes your status employee, not self-employed. This ensures you benefit from the social protection of an employee (the right to unemployment allowances, holidays and sick days, holiday allowances, end-of-year bonus, etc…). Of course payrolling comes at a cost, as the payrolling company charge a percentage of your income. You also can’t deduct expenses the same way as a self employed.
How it works
Basically the invoices of your clients are sent to the payrolling company, who deducts social contribution and their own fee and pays you. This way you also duck out of the hefty social contributions when you have a month with low incomes. You can find more information on websites of payrolling companies like SMart or Tentoo.
Setting up a company with limited liability
To set up a Limited Liability Company (Besloten Vennootschap met Beperkte Aansprakelijkheid, BVBA) you need to be at least two people (private and legal persons may be shareholders) and have a minimum amount of capital; 18,500€. The shareholders each pay a fixed amount of money to the business in return for shares in the company and its liability is limited to the amount contributed.
With this company form it is difficult for founding members to pass on their ownership to someone else, therefore be sure who you start this kind of business with!
You also need to appoint one or more general managers to run the business, officially through the publication of Appendices to the Belgian Official Gazette (Staatsblatt).
The positive sides:
The company tax is less than income tax and the risk is smaller compared to being a freelancer, as your personal assets cannot be used to clear any debts the company has.
Other company forms available in Belgium
Above are the 2 most common company forms people choose when setting up a business in Gent. Beyond these there are other versions and variations of business setups, as you can see in this this link (in Dutch).
If you have further questions you can always contact OOG (Ondersteuningspunt Ondernemers Gent), an organisation set up by the city of Ghent to answer all questions about entrepreneurship.
They might not be able to answer all questions – but if they can’t they will point you in the direction of someone who can. They also have quite a lot of information available in English.
- visit them at Keizer Karelstraat 1 – AC Portus, Gent
- call them on 09 210 10 60
- mail them at email@example.com
- contact them via their website https://oog.stad.gent
Other helpful posts
Check our other posts about entrepreneurship in Gent here.
Note: the information on this page is based on the information found on official government and local websites, and on the experience of the authors. While we have done our best to make sure it is accurate, rules and regulations change and each individual situation might be different. Therefore it is always a good idea to check with appropriate authorities for the latest information. Consequently, the authors do not assume any responsibility or liability for any issues or damages stemming from the use of the information on this website.
Updated August 2018