Trade or Ltd. in 2024. Which is worth more in Slovakia?

What is a trade?

A trade (in Slovak language: živnosť) is a legal form of business that allows natural persons (individuals) to do business in their own name and under their own responsibility on the basis of a trade licence.

What is the difference between a self-employed person and a sole trader? In addition to sole traders, the term „self-employed person“ also refers to all other self-employed persons who are self-employed as individuals. For example, financial advisers, psychologists or interpreters who do not need a trade licence to do business but are regulated by other legislation.

Learn more about how to open a business in Slovakia if you are a foreigner – individual.

What is an Ltd.?

A limited liability company, or Ltd., (In Slovak language: s. r. o.) is just one of several legal forms (corporations) in which you can do business in Slovakia. An Ltd is a separate legal person – an entity (company) that is distinct from its founders and directors. You can set it up either on your own, in which case we are talking about a one-person Ltd., or with several partners. We have clearly summarized the basics of how an Ltd. works in this video.

The shareholders have to put a certain amount of capital into the company (min. 5000 €) when setting up the Ltd. If you are interested in an Ltd. read more about it in our article.

Setting up a trade and an Ltd. – comparison

Setting up a trade is a bit easier and faster than with an Ltd. because you do not need to deal with filling out incorporation documents or paying down capital. You can set up a trade without any worries via Firmáreň. The advantage is that you can start your business the very next day, whereas when setting up an Ltd. you would have to wait for registration in the commercial register.

I WANT TO START A BUSINESS FOR € 1

Establishing a one-person Ltd. or a multi-person Ltd. is associated with obtaining trade and other licenses, determining the registered office, managing directors, shareholders or the amount of deposits, so the process takes longer – an average of 10 days. Read about the process of setting up an Ltd. However, an Ltd. offers the entrepreneur a broader range of uses and protections.

I WANT TO SET UP AN LTD. FOR € 1

Options for withdrawing money from the business

The thing about traders is they make their own money. This means that they can immediately use all the money they get from their business for their personal purposes.

On the contrary, in the case of an Ltd. it is not the private property of the founders, but the property of the company (we have mentioned that an Ltd. is a legal entity distinct from the person of the partners or managing directors). The money is received in a separate business account and its handling is subject to stricter regulations. Shareholders receive their money from the business account either in the form of a bonus or a dividend after the end of the accounting period, but then have to tax it as their personal income.

Accounting and business administration

The visible difference between running an Ltd. and a trade lies in the obligation to keep accounts. For sole traders, keeping tax records or simple accounting is sufficient. It is important that they keep a record of all invoices issued and health and social insurance contributions, or other business-related paperwork.

For an Ltd., the law requires mandatory double-entry bookkeeping. The best option is to find a reliable accountant who will take care of the company’s administration and keep abreast of changes in legislation. At účtovníci.sk you can choose from a list of accountants according to their specialization.

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Income tax on trade and an Ltd.

As a sole trader or limited company, you have to pay income tax on your profits and file tax returns. Read more about what taxes sole traders and Ltds. pay.

Paying levies in business

Paying levies may be one of the reasons why some people are hesitant about going into business as a sole trader. A sole trader’s payments to health and social insurance depend on the amount of income earned.

If you want to understand how the sole trader health levy works, watch this video. If you are not quite clear what it means that sole traders do not pay social security contributions for the first year, we recommend this video we produced. We have also discussed the topic of sole trader levies in more detail in this article.

One of the advantages of an Ltd. is the payment of levies, as it depends on how the managing director is remunerated. Read how to save hundreds of euros on levies in a limited company.

Liability in business

Another important difference between a sole trader and an Ltd. is the liabilities. Partners in an Ltd. are liable for liabilities only to the extent of their outstanding contribution to the share capital.

Sole traders, on the other hand, are liable and indemnified without limitation, which means that in the event of business failure, in addition to their business assets, their personal assets may also be at risk.

Termination of business

During the course of your business, you may decide to dissolve your trade or terminate your Ltd. When dissolving an Ltd. you will face longer termination processes. You can dissolve an Ltd. with or without liquidation (however, an Ltd.’s business cannot be temporarily interrupted or suspended). Read the procedure for terminating an Ltd. through liquidation.

Cancellation or suspension of a trade is much easier. If you do not want to cancel the whole business you can delete only some of the objects of the business or temporarily suspend the business. The processes between the Trade Licensing Office, the Health Insurance Office, the Social Insurance Office and the Tax Office are automated, so in most cases you do not have to inform the insurance companies in person about the termination, the office will do it for you.

I WANT TO SUSPEND MY TRADE

You can cancel your trade in person, electronically or online via Firmáreň. If you cancel in person, you must visit the trade licensing office in your place of residence. Electronic termination requires a new electronic ID card. At Firmáreň, we can relieve you of this process. For EUR 19 you can cancel your trade with us wherever you are, even from abroad and without an electronic ID card.

I WANT TO CANCEL MY TRADE

Advantages and disadvantages of trade

Advantages of trade	Disadvantages of trade
quick establishment and dissolution process	guarantee of private property
less administration	payment of levies
possibility of flat-rate expenses	dangers of the external environment
no obligation to disclose personal and economic information	all data is publicly available
freedom to pay out and use money	fewer opportunities for legal optimisation of taxes and levies
no required share capital	business environment perceives trade as a smaller business

Advantages and disadvantages of an Ltd.

Advantages of an Ltd.	Disadvantages of an Ltd.
limited liability for assets	disclosure of information
allocation of business risk	administrative costs
low start-up capital	double-entry bookkeeping
possibility to better optimize taxes and levies legally	more difficult process of setting up and closing a business
a business share is subject to inheritance	limited liquidity
a more prestigious and credible form of business	more complex organisational structure of the company
possibility of a one-person Ltd.	tax licence (introduced 2024)

When is it worth it to start a trade and when to set up an Ltd.

A trade licence is generally recommended for starting a business. If you just want to try out the business, a year is long enough to see if it’s worth it. During this period, sole traders do not have to pay social contributions. Later, when you start earning more, you can switch to a single-person or multi-person Ltd.

You can also consider switching from a sole trader to a Ltd. if you have a risky business where you trade in higher-value goods and are worried about possible losses and damages. As a reminder, in an Ltd. you do not have to be liable for the liabilities of the business with your personal assets.

Conclusion tips

Whether you decide to set up a trade or set up an Ltd., you definitely want to go through the whole process quickly, easily and for as little money as possible. With Firmáreň you can start your business without having to visit the authorities, and even cheaper than in the classic way. If you do not have your own property to register as a registered office, you can choose from a range of virtual offices directly on the form to set up a limited company or trade.