If you’re considering starting your own business, a sole proprietorship can be a great starting point. Whether you want to follow your passion or create a new source of income, this business structure offers a flexible, simple, and fast way to get started. However, success requires more than just a great idea and enthusiasm—it also depends on laying the right foundations. In this post, we’ll guide you through the process of starting a sole proprietorship and highlight the key factors you need to consider to build a solid foundation for your future.
1. Sole entrepreneurship or contract for dependent services
Those who start their own business, often consider whether to operate as a sole entrepreneur or work under a contract for services. Both options have their own advantages and disadvantages, and the choice largely depends on personal goals, the nature of the work, and financial circumstances. In the following section, we will compare these two work arrangements.
2. Starting a sole entrepreneurship
2.1 Tax regimes
One of the most crucial decisions you’ll need to make as a sole proprietor is selecting the appropriate taxation system. The available options—KATA, flat-rate taxation, and personal income tax for entrepreneurs (VSZJA)—each come with different rules, benefits, and obligations.
The table below outlines the key factors to help you compare these taxation methods. However, as you can see, the details of each system are complex, and the ideal choice depends largely on the nature of your business, your income level, and your cost structure. Consulting with an accountant can help ensure that you select the best option for your specific situation.
Since the optimal choice depends on individual circumstances, it is highly recommended to seek the assistance of an accountant to ensure you select the most advantageous taxation system. A professional can not only help minimize your tax burden but also provide guidance on administrative obligations and ensure compliance with legal regulations.
2.2 Preparing for registration
To start a sole proprietorship, you will need a few essential documents and pieces of information for registration. It’s advisable to gather these in advance to ensure a smooth and efficient process. The registration can be completed online, eliminating the need for in-person administration.
*TAJ number is only mandatory for registration if you choose the KATA taxation system. In other cases, it must be provided no later than the submission of periodic tax returns.
2.3 Registration process
THE ACCOUNTANT REGISTERS THE BUSINESS
THE ACCOUNTANT SETTLES THE INSURANCE RELATIONSHIP
THE ACCOUNTANT CREATES THE BILLING ACCOUNT WITH A NAV DATA CONNECTION
- PAYMENT OF THE HUNGARIAN CHAMBER OF COMMERCE AND INDUSTRY (MKIK) CONTRIBUTION (5,000 HUF)
2.4 Operating a sole entrepreneurship
Once you have launched your sole proprietorship, it’s essential to understand the administrative tasks required for smooth operation. If you work with an accountant, you can delegate some of these responsibilities, allowing you to focus on the professional aspects of your business.
Entrepreneur’s responsibilities when working with an accountant:
- Invoicing and Tax Payments
Accountant’s responsibilities:
- Maintaining Records – The accountant ensures that your business bookkeeping complies with applicable laws and regulations.
- Submitting Periodic Tax Declarations – This includes preparing and submitting VAT and contribution declarations, income tax (SZJA), and local business tax (HIPA) returns.
- Handling Situational Tasks – The accountant manages administrative tasks like processing sick leave applications, reporting data changes, and obtaining income and tax certificates.
A good accountant not only helps with fulfilling tax obligations but also ensures that your business operates in a financially transparent and legally compliant manner. If you’re uncertain, it’s worth seeking professional help right from the start!
The information provided in this post is for informational purposes only and does not replace personalized tax consultation. If you have any further questions, need individual advice, or require assistance with your business registration and accounting, feel free to contact us at the following contact details:
Would you like to know that your business is in safe hands? Do you need support in accounting?
Contact us in email – info@digitalconto.hu
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