New Company vs Sole Trader
When launching a new business, it's important to know how we're going to develop it. The options are to establish a company or corporation, or to operate as a sole trader.
The decision should primarily consider factors like size, type of activity, need for human resources, target markets, and the envisioned growth level of the business.
Starting a business as a sole trader is simpler, using the individual tax number for registration. There are advantages for new entrepreneurs, such as reduced social security costs in the first year of operation and potential tax reduction of 50% in the first year and 25% in the second year.
A sole trader can choose between two tax regimes: general or simplified. The general regime taxes actual business profit, while the simplified regime taxes the sole trader based on a coefficient applied to the Turnover according to the activity.
There are certain activities that can only be carried out by establishing a company.
A company has a more complex constitution process, requiring the selection of a business name that can also serve as the brand. The process concludes with the company's commercial registration and registration of beneficial owners. Any changes necessitate a new registration process to update the company's information at the Commercial Registry Office.
In Portugal, a company must: