Choosing Between S.R.O. and Sole Proprietorship (Živnosť) in Slovakia
The first step in setting up a company is choosing between an S.R.O. (limited liability company) and a sole proprietorship (živnosť). This decision affects personal liability, accounting structure, and the company’s tax burden. Read on to learn the key details.
S.R.O. and Živnost - Key Differences
The difference between these forms lies in their legal status and the protection of assets. An entrepreneur operating under a živnosť conducts business in their own name, whereas an S.R.O. is an independent legal entity with its own assets and contracts.
Separating personal and corporate finances is especially important if you are starting a business in Slovakia with investors or partners.
| Criterion | Sole Proprietorship (Živnosť) | S.R.O. (LLC) |
| Legal Entity | Individual | Independent Legal Entity |
| Financial Risk | Full liability with personal assets | Limited to the company's capital and assets |
| Scalability | Limited to the scope of the individual's activities | Easy to attract partners and investment |
The owner of a sole proprietorship risks their own savings. In an S.R.O., a member is liable only for the portion of capital that has not been contributed. At the same time, the company’s director bears personal liability for intentional violations, and personal guarantees create additional obligations.
Registration, Initial Costs, and Accounting
Starting a sole proprietorship is simpler and less expensive than forming a company. An entrepreneur simply needs to notify the licensing authority and select their areas of business. Documents can be submitted directly or through the government web portal. This format is ideal for self-employment with minimal startup costs.
Registering an S.R.O. requires more legal steps. You’ll need to choose a name, find a registered address, prepare the incorporation documents, and submit the company’s details to the Commercial Register. An S.R.O. can be established by a single owner or a group of partners. A simplified electronic procedure is available for standard cases.
There is also a difference in accounting. Legal entities always maintain full double-entry bookkeeping and submit complete financial statements. The rules are more lenient for sole proprietors: simplified tax accounting is available, and at a certain income level, it is permitted to use a fixed percentage for deducting expenses without collecting receipts.
