Freelance or company is more profitable

Freelance or company is more profitable

Question:
Hello!
In the future, I want to sell my products online. For a start-up business, when I don't know how many orders there will be per month, which is the best option: with a company or as a freelancer? What documents must be submitted to the National Revenue Agency every month and annually? Where do these documents come from? Also, for a company or a freelancer, what insurance and taxes are paid every month, is there a fixed amount? Is it mandatory at the initial stage, if I don't have a company, but I am a freelancer, to have an accountant or can I submit all the documents myself every month?
Thanks in advance!

Answer:
Hello,
For lower incomes, the better option is freelance.
From a tax point of view, things look like this:
- with a freelancer, you declare the amount of income for the year. From the amount thus obtained, you deduct 25% of legally recognized expenses and the social security contributions paid during the year, and you owe 10% tax on the amount thus obtained.
- with an EOOD, you declare the amount of income and expenses related to your activity. If the income is more than the expenses, then you make a profit and this profit is taxed with 10% tax.

From an insurance point of view, things are as follows:
- with a freelance profession, you are insured monthly, and accordingly you must declare and pay social security contributions every month, with the minimum social security income currently being 1077.00 BGN, which means minimum social security contributions of 340.00 BGN per month, and the maximum 4130 or social security contributions of 1300 BGN. At the end of the year, when submitting the annual tax return, an equalization is made. This equalization takes into account the income earned during the year and if its amount exceeds the amount on which you have insured yourself, you must pay insurance contributions on the difference. The amount on which insurance contributions are paid on an annual basis cannot be higher than 48,447 leva for 2025.

- for EOOD, insurance contributions can be paid on an amount between the minimum insurance income for the year - 1,077.00 leva and the maximum - 4,130.00 leva, the difference being that there is no annual equalization of insurance contributions and you actually choose what amount to insure yourself on, which means that you can insure yourself on the minimum insurance income every month and owe 340 leva in insurance contributions every month, regardless of the company's income.

I.e. From a tax and social security perspective, you will need to assess and make a plan regarding what income you expect to receive and what expenses you would have. Only in this way could you determine which form of activity is more economically advantageous (i.e. you would pay less tax and social security contributions).

Apart from the differences from a tax and social security tax perspective, there are also several purely functional differences:
- the money you earn as a freelancer is actually your money and you can "spend" it whenever and for whatever you want. With an EOOD, the money the company earns remains with the company. If you want, as the owner, to dispose of this money, there are several options - to give yourself a salary, to give yourself a loan or after the financial year has ended and the company has made a profit, you will be able to distribute the profit as a dividend (but you will have to pay an additional 5% dividend tax on this amount).
- if you practice your activity as a freelancer, you will not be obliged to issue a cash receipt when receiving cash. For an LLC, this requirement does not apply and if you receive cash, you will need to have a pre-purchased cash register from which to issue cash receipts.
- in order to register as a freelancer, you need to provide a diploma or some other certificate in addition to the set of documents (application and declaration) that certifies your competence to provide the services you will perform. The registration itself is carried out by the Bulstat Register within 24 hours, and there is also a state fee of 10.00 BGN. To register an LLC, the procedure is a little longer and more complicated. First, a set of documents is prepared (constituent act, minutes of the constituent meeting, management agreement, several declarations and a sample signature). Some of the documents are certified by a notary. Then you need to open a savings account in a bank of your choice, into which you can deposit the initial capital. The minimum is 2.00 BGN. The import note for the paid-in capital, together with the other prepared documents, is submitted to the Commercial Register no later than 7 calendar days from the date of the founding act, and the registration is carried out within 7 working days. The state fee is 110.00 BGN. The notary fee will be 8.00 BGN, and the bank fee will depend on the bank you choose, and it will vary from 20.00 - 50.00 BGN.

In terms of administrative commitments in both cases, you will have them on a monthly, quarterly and annual basis, related to filing various declarations related to your social security and taxes.
We hope we have been useful to you!
Greetings!