SELF EMPLOYED VS COMPANY
Overview
One of the most common questions once you have decide to start your own business is whether you should start your business as a self employed or Company. In this article we will analyze the differences, the similarities, the advantage and the disadvantages.
Quickest
For the incorporation of the Company, you need on average 10 business days in. For self-employed you can register within 1 day.
Result: Self-Employed is mor quick
Cost of incorporation
For the incorporation of company, the prices are within the range of EUR700-EUR1,500. Self-employed can registered without any charge. If a self-employed wish to register a business name, then there is cost of around EUR100-170.
Result: Self-employed is less costly
Anonymity
In case of a company, the owner of company is not available on the public. On the other hand, self-employed or business name does not offer anonymity.
Result: If you are looking for anonymity, it is better to register a company. You should consider that anonymity is offered up to a specific point.
Tax
A self-employed pays tax on its taxable income above EUR19,500 on the rate between 20%-35%. Companies pays tax on its net profits of 12,5% and 17% when the profits are distributed in the form of dividends. Cyprus offers a lot of tax benefits to non-Cyprus Tax Residents and Non-Domicile Cyprus Tax Residents. One of the main benefits is the exemption of 17% on the payment of dividends.
Result: If you are planning to have revenue more than EUR80,000, the best solution is the Company.
Other statutory payments and contributions
Both types need to pay (i) Social Insurance and (ii) General Health System (GHS). If you register a Company you need to register yourself also as employee and pay Social Insurance and GHS based on your gross salary.
GHS: Companies pays 2,65% on dividends and the total of 5,55% on the gross salary. Self-employed pays 4% on the net profits.
Social Insurance: Companies pay 20,3% on gross salaries and self-employed around 15,6% on the profit. For self-employed, the amount should be agreed by the Social Authorities department.
Despite the fact that the rates for companies are higher, the final cost benefit for companies may be higher than self-employed since you can declare a low salary.
Result: If you are planning to have revenue more than EUR80,000, the best solution is the Company.
Can you hire employees
In both cases, you can hire employees.
Vat
No differences exist.
Sale of business
With the company you have 2 options, to sell the assets or the shares. With self-employed, you can only sell the assets.
Expansion
With Company you can add more shareholders by issuing new shares.
Liability
Your liability is limited with a Company with some exemptions (i.e fraud). On the other hand, your liability as a self-employed is unlimited.
Validity
Both types are valid. However, most business prefer to enter into various agreements and have business operations with companies than self-employed.
Extra Cost
Companies, have extra cost, like accounting, annual levy, audit etc.
Management
Companies can be managed more easily than self-employed. Most of the time self-employed persons mixed up business transactions with personal transactions.
Our opinion
If you are planning from the beginning to earn more than EUR80,000, then is better to incorporate a company. Otherwise, you can start your business as a self-employed and you incorporate a company when your operations will be increased.
Disclaimer: The information provided in this article is for general awareness and is not intended to be and do not constitute a professional advice.