Sole Proprietor or LLC in Serbia 2026: What Pays Off, When to Switch
Almost everyone starting a business in Serbia asks the same question: sole proprietor or LLC. The short answer for 2026: a sole proprietor (preduzetnik) is cheaper and simpler while you work alone and stay under the thresholds, while an LLC (DOO) pays off when you need limited liability, a partner, an investor, or want to keep profit in the company. Below we compare the two forms, show an example at three profit levels and list the signs it is time to switch.
Setup and running costs
Both forms are registered with the Serbian Business Registers Agency. From January 1, 2026 the registration fee is 2,500 RSD for a sole proprietor and 8,000 RSD for an LLC. Minimum share capital for an LLC is a symbolic 100 RSD, so capital is not a barrier.
The difference is in what follows. A flat-rate sole proprietor keeps only a simple invoice register and pays a fixed monthly amount set by the Tax Administration. A sole proprietor keeping books and an LLC both run double-entry accounting, file annual financial statements and a tax return, so accounting costs are higher. Indicative package prices are on our pricing page.
Liability: the difference people underestimate
A sole proprietor is liable for business debts with all personal assets, including a home, car and savings. An LLC is a separate legal entity. The company answers for its debts with its own assets, and the owner risks only the invested capital, unless the corporate form is abused.
Taxes: three sole proprietor regimes versus an LLC
Flat-rate taxation (pausal)
Flat-rate taxation is available to sole proprietors with annual revenue up to 6,000,000 RSD. Tax and contributions are paid on a base set by the Tax Administration regardless of actual income, and new flat-rate taxpayers get a 50% base reduction in the first year. Details are in our flat-rate tax guide.
Sole proprietor keeping books
With books, income tax on self-employment profit is 10%. Contributions are paid on profit or, if you opt for a personal salary, on the salary amount you set. In 2026 the minimum monthly contribution base is 51,297 RSD, the combined contribution rate is 35.05% and the non-taxable salary amount is 34,221 RSD. At the minimum base that is roughly 17,980 RSD of contributions and 1,708 RSD of tax per month. The personal salary option is the most favorable for most sole proprietors with higher profit.
LLC
The company pays corporate income tax at 15%. When profit is paid to you as a dividend, another 15% dividend tax applies. The effective burden on distributed profit is about 27.75%. The upside is that profit you keep in the company is taxed only at 15%, so an LLC is efficient when you reinvest.
Taking money out
A sole proprietor freely uses the money on the business account, because it is personal money. In an LLC the money belongs to the company. The owner reaches it through a salary or director fee, a dividend, or a loan that must be repaid. We covered when salary beats dividend in salary or dividend for a Serbian company owner.
Comparison table
| Criterion | Sole proprietor | LLC (DOO) |
|---|---|---|
| Registration fee (2026) | 2,500 RSD | 8,000 RSD |
| Share capital | none | min. 100 RSD |
| Liability | all personal assets | company assets |
| Profit tax | 10% (or flat rate up to 6M revenue) | 15% |
| Paying profit to owner | no extra tax | 15% dividend tax |
| Owner contributions | on profit or personal salary, min. base 51,297 RSD | via salary or director contract |
| Accounting | invoice register (flat rate) or double entry | double entry, financial statements |
| Multiple owners | not possible | yes, shares |
| VAT threshold | 8,000,000 RSD / 12 months | 8,000,000 RSD / 12 months |
Example at three levels of annual profit
The example is illustrative and rounded. We assume the sole proprietor keeping books pays a personal salary at the minimum base, the LLC distributes all profit as dividend, and other costs are equal. Director contributions in the LLC are left out, and for the flat-rate case we use an indicative 45,000 RSD per month, since the real amount depends on activity and municipality.
| Annual profit | Flat rate (indicative) | Sole proprietor with personal salary | LLC, profit paid as dividend |
|---|---|---|---|
| 3,000,000 RSD | about 540,000 RSD (18%) | about 475,000 RSD (16%) | about 833,000 RSD (27.75%) |
| 6,000,000 RSD | about 540,000 RSD (9%), at the limit | about 775,000 RSD (13%) | about 1,665,000 RSD (27.75%) |
| 12,000,000 RSD | not available | about 1,375,000 RSD (11.5%) plus possible annual income tax | about 3,330,000 RSD (27.75%), or 1,800,000 RSD if profit is retained |
The takeaway is clear. Looking only at tax on distributed profit, the sole proprietor is cheaper at every level. The LLC becomes competitive when you do not distribute profit right away, when you are above the annual income tax threshold, or when limited liability is worth more to you than the tax gap.
Credibility, hiring and VAT
Large customers, tenders and foreign partners often want a contract with a legal entity. A newly founded company or sole proprietor may use the exemption from salary tax for the founder up to 37,000 RSD net during the first 12 months. VAT registration becomes mandatory when turnover in the previous 12 months exceeds 8,000,000 RSD, regardless of legal form. Foreign founders can read more in our guide on how to open a DOO in Serbia as a foreigner.
When it is time to switch to an LLC
- You are approaching the 6,000,000 RSD limit. The flat rate ends, so you choose between books as a sole proprietor and an LLC.
- You work mostly for one client. The independence test has nine criteria, and meeting five means income is taxed as other income at 20% plus a 25.5% pension contribution. An LLC with employees changes the picture.
- A partner or investor is coming in. A sole proprietor cannot have co-owners. An LLC has shares, a shareholders agreement and clear rules.
- Risk is growing. Bigger contracts, inventory, loans and staff mean personal assets should not be exposed.
- You want to reinvest. Profit kept in the LLC carries only 15% tax.
Common mistakes
- Opening an LLC for the impression of seriousness, then paying out all profit as dividend at a 27.75% burden.
- Staying on the flat rate while quietly crossing the 6,000,000 RSD limit mid-year, with no plan for moving to books.
- Ignoring the 8,000,000 RSD VAT threshold measured over a rolling 12 months, not a calendar year.
- Working for one client under employment-like conditions without checking the independence test.
- Withdrawing cash from the LLC account without a legal basis, which is treated as owner income or a loan.
Frequently asked questions
Can I be a sole proprietor and an LLC owner at the same time?
Yes. The same person can be registered as a sole proprietor and simultaneously be a member and director of an LLC. The businesses and their income must be clearly separated, each with its own books.
What happens to the flat rate when I exceed 6,000,000 RSD?
You lose the right to flat-rate taxation and move to bookkeeping. If you cross the limit by June 30, you keep books from July 1 of the same year.
How much does it cost to take money out of an LLC?
A dividend carries 15% tax after the company has already paid 15% profit tax. A director salary carries 10% tax plus contributions, but it is a deductible expense.
How NOTA GROUP can help
Before you register or change legal form, we run the numbers on your case: expected revenue, costs, number of clients and how you want to use the profit. Based on that we recommend a regime and handle registration, bookkeeping and tax filings. Book a consultation and you will get a concrete proposal for 2026.
