Starting Your Own Business: Limited Liability Company vs Self-Employed

The time has come to finally embark on that project that you’ve been dreaming of – but there’s one big question mark ahead of you. How should you register your business?

The two most common options are to operate through a limited liability company or as a self-employed individual.

Each of these options come with their own pros and cons, some of which really depend on your business model and the level of risk you’re willing to take.

Let’s start by looking at Limited Liability Company registration:

Pros

  • In the eyes of the law, a company is a separate legal person. As such, the company shall carry out its trading activity in its own name by providing the company director with full powers and responsibilities in relation to company operations. This implies that if anything had to go wrong with a company stakeholder (employee, supplier, customer), such stakeholder would have to resolve the issue (whether in Court or otherwise) with the company – and not its shareholders, personally.
  • The liability of a company is limited to the amount of authorised share capital. As such, if the company had to be sued and its assets do not suffice, the liability imposed on the company shareholders is capped / limited to the amount of authorised share capital. This does not imply that the company can be used to carry out fraud or any other criminal activity. In such cases the court can decide to lift the corporate veil.
  • It is considered to be more professional to trade under the name of a company because it implies a structured set-up. The company is also subject to an annual audit that is considered to be a plus when it comes to securing bigger clients/suppliers, dealing with banks, and tendering for work.

Cons

  • A Maltese-registered company has mandatory statutory reporting obligations.

    Any company registered in Malta must submit 3 annual reports;
    (1) Annual Audited Financial Statement (Malta Business Registry)
    (2) Annual Corporate Tax Return (Commissioner For Revenue)
    (3) Annual Return (Malta Business Registry).


    These reports must be submitted regardless of whether the company is in operation or not. In the case of a trading company, there also is the obligation of registering for VAT purposes and submitting quarterly VAT returns.
  • The formal closure of a limited liability company entails the formal process of a liquidation, which also would trigger additional costs.

Moving on to Self-Employed Registration

Pros

  • The reporting obligations of a self-employed individual are far less stringent and frequent than that of a company. Nonetheless, a self-employed individual still has its own reporting obligations as follows;
    (1) Preparation of an annual Profit & Loss statement
    (2) Filing of an annual personal tax return
    (3) Payment of National Insurance Contributions in 3 instalments (Apr / Aug / Dec)

Cons

  • A self-employed individual operates under his/her personal name, meaning that they will carry unlimited liability. Any issues with business stakeholders are to be resolved with the self-employed individual on a personal level. Furthermore, there is no limitation to the liability that can be brought against the self-employed individual.

Here are some other considerations worth weighing up

  • Corporate / Personal Taxes: Companies are subject to a flat income tax rate of 35% on profits. On the other hand, self-employed individuals are subject to progressive tax rates starting at 0% and gradually increasing to 15% then to 25% and finally to 35% (beyond €60,000 in profits). Overall income would probably be your deciding factor here, as in terms of taxation, this can be managed very easily with the help of a good accountant.
  • Grants / Tax Credits: Generally, grants and tax credits are normally equally available to all registered businesses regardless of whether they operate as a company or self-employed business.
  • Set-Up Procedures / Costs: The incorporation of a company requires one to draft the companies Memorandum and Articles of Association. Such documents will regulate the governance of the company in line with Malta’s legislation (The Companies Act). Furthermore, such a process would also require the submission of additional applications/disclosures and the registration of the company for VAT and Tax purposes. The set-up process of a self-employment is less bureaucratic and thus less costly. In terms of timelines, both set-ups can be managed within one week.
  • Malta Tax Refund System: Malta’s tax refund system for international investors can only be availed of by corporate structures and thus not by self-employed individuals. 

If you’re looking to start up a new business and require assistance for anything ranging from company incorporation, VAT registration, government funding, tax refunds and much more contact NM Group today!

Malta: The entrepreneur’s paradise

You’ve probably already heard a little (or a lot) about this small island with a very big personality. If you haven’t, then even the quickest of Google searches will tell you exactly why it’s such an attractive place to be: three hundred or so days of golden sunshine, endless waves of blue sea, vivid cerulean skies and a quintessentially-mediterranean lifestyle that helps you get through the working week feeling laid-back and ready for an ice-cold cocktail.

All that sounds fabulous – but what exactly does Malta have to offer entrepreneurs? The EU country has undoubtedly become home to some of the brightest minds in business, gaming, hospitality, technology and beyond. While the island lifestyle is tempting in itself, it’s not the only reason why business-minded people from all over the world have made Malta their home. Thanks to the island’s top thriving industries like gaming, financial services and tourism, the economy is positively booming and the local market is rife with opportunity. With its flexible and comprehensive legislative and regulatory framework, Malta is indeed emerging as one of the fastest growing business and start-up hubs for financial and corporate services in Europe.

The question is this: what should you do if you’re an entrepreneur looking to bring your business to Malta?

Invest in Malta

Standing at the very forefront of European economy, Malta is a great place to set up your business, whether you’re already established or a start-up about to launch into success. Among its many positive qualities, Malta offers an advantageous tax system which makes setting up shop a lot more straightforward and cost-effective.

Oh, and let’s not forget the fact that Malta is quickly becoming a hub for cryptocurrency, with the expert team at NM Group ready to educate and guide you every step of the way. If investing in cryptocurrency is something you’re interested in, you can talk to one of our awesome advisors.

Make the big bucks

We’ve already touched on how the cost of setting up and running a company in Malta is quite low compared to other European jurisdictions. More specifically, the island operates on a system of tax refunds that lowers the effective tax rate to a fantastic 5% – currently the lowest in the EU!

Prominent companies from the tech, gaming and corporate sectors (to name just a few) have flocked to Malta to make the most of these financial benefits – and the sunshine, of course. Strategically located in the middle of the med, the country boast prime real estate and a well-connected airport, a highly-educated, English speaking workforce and an exceptional communications structure, making it the perfect place to run a successful business.

In short: Malta helps you get more bang for your buck.

Bring the family along

One of the biggest challenges of any entrepreneurial endeavour comes with a little thing called relocation. When it comes to moving your business (and your life) to this slice of the mediterranean, NM Group can help you with all things related to citizenship and residency. From visa applications and Maltese citizenship to company redomiciliation and residence and work permits, you can trust this expert team guide you through it all.

Malta’s Citizenship and Residency Programme has loads of benefits to offer, including:

  • Schengen Residence status for 1 year prior to issue of passport
  • Malta is a EU member state
  • 160 visa-free destinations (including the US and UK)
  • Maltese passport issued within 1 year
  • Clear rules for eligibility

And if that isn’t enough to have you booking tickets already, there’s the fact that you can bring your family along too! The island is hailed as the perfect place for families, with low crime rates, good private and state schools, and a healthy mediterranean lifestyle to boot.

Save on tax

Malta’s unique tax refund system allows non-resident shareholders of companies registered in the country to benefit from an effective tax rate of 5%, or maybe even be tax exempt! Malta offers by far one of the lowest tax rates within the EU, legally and fully compliant with EU and international regulations.

Throughout the financial year, your Malta trading company will trade, issue invoices and generate a profit. Corporate tax has to be paid on that profit at 35% (Malta’s corporate tax rate).

Once the tax is paid, the non-resident shareholders will receive a dividend from the trading company and can claim back a refund equal to 6/7ths of the tax paid by the company. The end result is an effective tax rate of 5%.

Incorporate your company

Any entrepreneur worth their salt will tell you that company incorporation can be a bit of a headache. That’s precisely where an expert service like NM Corporate comes in – our team is your go-to for advice on anything from which bank to open accounts with and processing annual returns right up to helping you register under the Malta Tax Refund System.

NM Group offers the perfect mix of services to help you start running your business from Malta – get in touch today to learn more.