With this article, we aim to support you by providing clear and useful information to help you make an informed and confident decision. Your success matters to us, and we are here to assist you every step of the way.
Freelancing
What is Freelancing?
Freelancing involves activities performed independently by individuals who are not subordinated to an employer. These professions offer great flexibility and independence.
Which Professions Fall Under Freelancing?
Freelancing can include various specialisations and professions, such as:
- Consultants
- Artists
- Writers
- Craftsmen
- IT Specialists
- Other self-employed professionals
Interesting Fact: Bulgaria has no official comprehensive list of freelance professions. The possibilities are virtually endless! For your convenience, we have compiled the most extensive list available for download as a PDF.
Key Organizational Aspects
- Registration: Freelance registration is relatively simple and requires applying to the Registry Agency.
- Taxes: Freelance income is subject to a 10% personal income tax. Depending on the profession, standardized 25% or 40% expenses can be deducted.
- Social Security: Freelancers must pay social and health insurance contributions, which depend on their monthly earnings.
EOOD (Sole-Owned Limited Liability Company)
What is an EOOD?
An EOOD is a commercial entity managed by a single owner with limited liability for the company’s debts.
For Which Activities Is an EOOD Suitable?
An EOOD is ideal for businesses that require more significant investments and have a higher volume of work, such as:
- Trade
- Manufacturing
- Services with high financial turnover
- Projects requiring external funding
Key Organizational Aspects
- Registration: Establishing an EOOD requires submitting documents to the Commercial Register and involves higher fees than freelance registration.
- Taxes: EOODs are subject to 10% corporate tax and 5% dividend tax.
- Social Security: The owner of an EOOD must register as a self-insured individual.
Advantages and Disadvantages of Freelancing
Advantages
- Easy Registration: The registration process is simple and quick.
- Lower Costs: Accounting is easier and can result in lower expenses.
- Flexibility: Freelancers have more control over their schedules and business operations.
Disadvantages
- Personal Liability: Freelancers bear full personal responsibility for their obligations.
- Limited Access to Funding: External financing options are more restricted.
- Expansion Challenges: Expanding the business or hiring employees can be difficult.
Advantages and Disadvantages of an EOOD
Advantages
- Limited Liability: Only the company’s assets can be used to cover debts.
- Easier Access to Financing: EOODs have better access to bank loans and other funding sources.
- Better Business Image: An EOOD is perceived as a more reliable and professional structure.
- More Beneficial for High Expenses: An EOOD might be the more advantageous choice if the business has significant costs.
Disadvantages
- More Administrative Procedures: The legal and accounting processes are more complex.
- Higher Fees: There are higher administrative fees and tax obligations.
- Challenging to Close: Dissolving an EOOD is a longer and more complicated process.
Free 30-minute consultation for new clients.
EOOD or Freelancing – How to Choose?
Planning
Before making a decision, it is essential to analyze income potential, costs, business expansion opportunities, and the possibility of attracting investors.
Key Questions to Consider:
- Will this be your main activity, or just a side business?
- Will you need special equipment or startup capital?
- Will you be working alone, or will you need business partners or employees?
Taxes and Administration
Carefully evaluate both options’ tax implications, administrative requirements, and costs.
The choice between freelancing or a company depends on your specific needs and development plan activity. The right decision can help you optimise costs, better manage your finances and achieve business success.
Expert Tip
If you expect rapid business growth or plan to seek external financing, an EOOD may be a better option. However, if you work on small or individual projects, freelancing might be the most suitable choice.
Common Mistakes and How to Avoid Them
- Incorrect Registration
- Mistake: Submitting incorrect registration documents.
- Solution: Consult an accountant or legal expert before applying.
- Tax Obligations Overlooked
- Mistake: Failing to file declarations or pay taxes on time.
- Solution: Keep track of deadlines and work with a professional accountant.
- Irregular Social Security Payments
- Mistake: Missing or delaying social security contributions.
- Solution: Properly register and monitor monthly obligations.
Latest Legislative Updates
- Tax Rate Adjustments:
- New tax incentives have been introduced for small businesses and self-employed individuals.
- EOOD Registration Updates:
- Procedures have been optimized, and administrative fees have been reduced.
Frequently Asked Questions
- How do I register as a freelancer?
- registration is done at the Registry Agency. Required documents include an application form and personal details.
- What are my tax obligations as a freelancer?
- You must declare and pay social security contributions monthly, and report your income quarterly. A yearly tax declaration is also required.
- What are the tax obligations for an EOOD?
- EOODs pay a 10% corporate tax and a 5% dividend tax.
- Which is better for me – freelancing or an EOOD?
- The choice depends on your business size, expected revenue, and growth plans. Consulting with an expert can help you decide.
Final Thoughts
The decision between freelancing and an EOOD is crucial for your business strategy. The right choice can help you optimize expenses, manage finances better, and achieve long-term success. Always consider consulting a professional before making your final decision.
If you need even more detailed information, we remind you that you can always visit the NRA website, section “Freelance“.
Free 30-minute consultation for new clients.
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