Trade or LLC in 2025?
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Published
July 16, 2025
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Why is it important to compare a sole proprietorship and a limited liability company?.
When starting a business in Slovakia (and often later, when the business is taking off), many people ask themselves a basic question: should they remain in business as a natural person, or should they separate the business into an LLC and thus personal and corporate assets? The differences affect taxes, levies, administration, and the level of personal risk, so it makes sense to compare the key parameters together.
Establishment: obligations for limited liability companies and trades
Ltd. – basic steps
Business name, registered office, business objects.
Appointment of the manager/managers and preparation of founding documents with verified signatures.
Composition of the registered capital at least €5,000.
Consent to establish a registered office and obtain trade licenses for the company.
If the founder is on the list of tax debtors or has tax arrears, he/she needs the consent of the tax administrator (in the case of arrears in social insurance premiums, their payment is required before the establishment; consent does not apply to social arrears). If there are no arrears, consent is not needed.
Pay the court fee for registration in the Commercial Register (electronic filing is cheaper).
Mandatory activated electronic mailbox; the executive should have access via eID.
After registration, automatic registration with the tax office will take place (all taxes except VAT); the TIN and information about the taxpayer's personal account (PPA) will be sent to the e-mail box. Access to electronic communication with the Financial Administration must be set up.
Business – faster start
A simpler, more flexible form for individuals; the entrepreneur acts under his own name and is liable with all assets.
Establishment electronically via slovensko.sk or in person at a single point of contact (trade license office).
An ID card is required, the subject of the business is selected and the administrative fee is paid (it is free when registering a free trade online).
The tax office and health insurance company are automatically informed by the declaration; the sole proprietor receives the VAT number and personal account details of the taxpayer without having to go to the offices again.
Health contributions: sole proprietor vs. sro.
Self-employed:
If you have a job in addition to your business or are insured by the state (e.g. a student), you do not have to pay monthly advances at the beginning; the annual settlement of the health insurance company will make up the difference based on your total income.
If you are doing business "on a main basis" without another insurance premium payer, you pay minimum monthly advances from the beginning.
Minimum advances for 2025: €107.25 per month; for persons with disabilities (ZŤP) €53.62 per month.
The amount of advances in subsequent years is derived from income (the assessment base is usually two years ago; e.g., data for 2025 determines payments from January 1, 2027 after the annual settlement in 2026).
Ltd.:
The company, as a legal entity, does not pay health insurance contributions itself.
A partner/manager without an employment relationship must secure health insurance as a self-payer (same minimums: €107.25 / €53.62 for disabled people), which does not burden the company itself with costs.
If a partner/manager is remunerated in relation to the company (employment contract, contract for the performance of a function with regular or irregular remuneration), health contributions from his income are paid by the company as the employer.
When paying dividends from profits in 2011–2016, the obligation to pay health contributions arises; for profits from 2017 onwards, health contributions from dividends are no longer paid (they are replaced by withholding tax - see the Dividends section). When paying dividends from 2013–2016 in 2025, the health contribution would be 14 % (capped at 60 times the average wage).
Social contributions: sole proprietorship vs. sro.
Self-employed:
In the first year of business, you do not automatically pay social security contributions.
The obligation arises only after filing a tax return for the previous year and only if taxable income (not profit) exceeds the legal limit.
The limit for assessing the emergence of mandatory social insurance for 2025: €9,144 (for comparison: for 2024 it was €8,580).
If you exceed the limit, you will start paying compulsory social insurance from 1 July or 1 October of the following year (depending on the deadline for filing the return); minimum social contributions for 2025: €237.02 per month. The amount is reassessed each year based on the next tax return.
Ltd.:
A company as such does not pay social security contributions unless it employs people and executives receive remuneration.
Obligations towards the Social Insurance Institution arise:
if the company has employees (employment contracts, agreements),
if it pays remuneration to executives for the performance of their duties.
Indicative rates that the company deducts from the income of the following persons:
regularly paid remuneration of the executive: social insurance 24.15 %,
irregularly paid executive remuneration: 21.75 %,
Employee salary: approximately 25.2 % (employer's part).
If the manager does not receive remuneration and the company has no employees or contractual partners, the sro has no social security contribution obligations.
Income tax: self-employed person
The following personal income tax rates apply to sole proprietors in 2025:
15 % for taxable income up to €100,000 per year.
If income exceeds €100,000, standard progressive taxation on the tax base applies:
19 % from that part of the tax base up to and including €48,441.43.
25 % from the part of the tax base above €48,441.43.
The tax base includes business income after deducting expenses: actual (billed) or lump sum.
Flat-rate expenses: 60 % from income (after meeting legal conditions), maximum €20,000 per year; you do not apply real costs when using them.
The tax base can be further reduced by non-taxable portion per taxpayer (€5,753.79 in 2025) and possible other benefits, e.g. child tax bonus.
Income tax: sro.
Corporate income tax rates in 2025 are tied to annual turnover (usually class 6 accounting revenues):
10 % with a turnover of up to €100,000.
21 % with a turnover from €100,000 to €5,000,000.
24 % with a turnover of over €5,000,000.
Taxation of dividends (Ltd.)
When distributing profits to shareholders, a withholding tax on dividends is applied; its rate depends on the period from which the profit originates:
Profits over the years 2017 – 2023: 7 %.
Profit for the year 2024: temporarily increased to 10 %.
Profits from January 1, 2025: the rate returns to 7 %. Withholding tax is deducted upon payment. In addition, let's recall the health contributions from dividends for older profits 2011–2016
Administration, accounting and access to money
Trade: administratively simpler; from the accounting regimes it is possible to keep tax records, simple accounting or (if the sole proprietor decides) double-entry accounting. Money from the business is available to the entrepreneur continuously throughout the year without formal restrictions.
Ltd.: more formal environment; mandatory double-entry bookkeeping; the partner usually only receives profits after the accounting period is closed, financial statements are prepared and approved, tax returns are filed, and decisions on dividend payments are made.
Quick comparison (selected items)
| Area | Trade (SZČO) | Ltd. |
|---|---|---|
| Establishment | from ~5 € (online/paper; free trade online free of charge) | from ~300 € (notary, court, services; more formal process) |
| Responsibility | Unlimited – liable with all assets | Limited – up to the amount of the outstanding deposit |
| Health contributions | Min. €107.25/month; ZŤP €53.62/month. | Typically €0 if the company has no employees and does not pay dividends from profits 2011–2016; otherwise, according to the employee/manager's income |
| Social contributions | Optional at the beginning; mandatory after exceeding the limit (€9,144 for 2025; €8,580 for 2024); min. €237.02/month when incurred | Only if it employs or pays remuneration to an executive (24.15 % regular; 21.75 % irregular; employees ~25.2 %) |
| Income tax | 15 % up to €100,000 in income; then 19 %/25 % depending on the basis | 10 % up to €100,000 turnover; 21 % up to 5 mil. €; 24 % over 5 mil. € |
| Tax-free portions/bonuses | Yes (e.g. NČZD €5,753.79; child bonus) | No |
| Lump sum expenses | Yes – 60 % income, max. €20,000 | No |
| Dividend tax | Not applicable | 7 % (2017–2023 and from 2025), 10 % for 2024; + health contributions on profits 2011–2016 |
| Administration | Simpler | More challenging |
| Accounting | Selection: records / JÚ / PU | Mandatory double-entry accounting |
Summary and general recommendation
Short-term / smaller scale, low costs, need to have money quickly - a trade tends to be cheaper to start and administratively simpler; no social security contributions in the first year (if you don't exceed the limit).
Higher turnovers, need for limited liability, planned employment or investor - sro will bring separation of liability and progressive income tax rates tied to turnover (including 10 % for small companies up to €100,000). Do not forget about formal administration and availability of profit only through dividends.
Always consider at least a two-year or multi-year horizon, because mandatory social contributions for a self-employed person are triggered with a lag based on income and can significantly change the result compared to the first year.
Summary and general recommendation
Short-term / smaller scale, low costs, need to have money quickly - a trade tends to be cheaper to start and administratively simpler; no social security contributions in the first year (if you don't exceed the limit).
Higher turnovers, need for limited liability, planned employment or investor - sro will bring separation of liability and progressive income tax rates tied to turnover (including 10 % for small companies up to €100,000). Do not forget about formal administration and availability of profit only through dividends.
Always consider at least a two-year or multi-year horizon, because mandatory social contributions for a self-employed person are triggered with a lag based on income and can significantly change the result compared to the first year.