The sole proprietorship is the simplest business structure you can establish in Cyprus and refers to a single owner who exercises complete control over his business. This business structure under Cyprus law, is not perceived as a legal person, hence there is no distinction between the business and the owner who undertakes all rights and obligations of the sole proprietorship (profits, losses, assets and liabilities).

As specified in the Cyprus Partnership and Business Name Law Chapter 116, the sole trader has the option to use a trade name for his business by obtaining a trade name approval from the Registrar of Companies and Official Receiver, in accordance with the relevant law.

The most common examples of sole proprietorship are freelancers and doctors.

ADVANTAGES

  • Simple structure
  • Low set-up fees
  • Complete control
  • No statutory audit is required (if your turnover does not exceed €70,000 p.a.)
  • Low tax expense (in case your total personal taxable income is within the region of €60,000 p.a.)
 

DISADVANTAGES

  • The sole proprietor has personal responsibility over his business liabilities
  • Consequently if a legal claim is filed against your business, you are placing your personal assets at risk
  • Due to the lower professional status of this business structure you may face difficulties to obtain finance and attract investors
  • As a result you will have to depend on your own financial resources
  • The sole trader is obliged to register as self-employed and pay quarterly contributions in accordance to your income or business activity
  • Higher tax expense (in case you expect profits above the region of €60,000 per annum)
  • You are required to maintain proper accounting books and record your income in your personal tax return (IR1)
  • Prone to tax investigations and capital statements
  • It usually applies only to Cyprus Tax Resident Individuals (residing in Cyprus for over 183 days in a calendar year)
 

PROCEDURES

There are no formal procedures for establishing a sole proprietorship in Cyprus, however the business has to comply with all applicable regulations and statutory requirements such as registration to Inland Revenue Department, Social Insurances and VAT Service.
 
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