When launching a business, one of the first decisions you have to make is the choice of the legal form of operation.
In Montenegro you can operate as:
- A sole proprietor who performs an independent activity
- A company (LLC) — a limited liability company
The choice depends on the type of activity, expected income and administrative obligations you are ready to take on.
Operating as a sole proprietor
Sole proprietors can be taxed on actual income or on a lump-sum basis — depending on the type of activity and the income earned.
Taxation on actual income
You are required to keep business books and register for taxation on actual income if you perform:
- Professional and intellectual activities: attorney, notary, auditor, accounting, healthcare, consulting, design, surveyor, public enforcement officer
- Craft and service activities: hair salons, billiard clubs, entertainment games
- Trade, hospitality, hotel industry
- Financial intermediation and real estate-related activities
In that case:
- Expenses are recognised based on invoices and other appropriate documentation
- There is an obligation to prepare financial statements
Lump-sum taxation
Lump-sum taxation is available for certain activities provided annual income does not exceed EUR 30,000.
This regime can be used by persons engaged in:
- Artistic crafts
- Collecting medicinal herbs and forest fruits
- Growing fruit and vegetables
- Taxi transport
- Shellfish farming, beekeeping
- Tourist accommodation in household businesses (rural and mountain areas)
- Tailoring, mechanic, cosmetic services
- Sale of agricultural products at stalls
- Florist services, picture framing, photocopying
- Maintenance and repair of computers and mobile phones
- Photography services
- Baking, pastry making, coffee roasting
- And other similar activities
Under lump-sum taxation:
- No obligation to keep business books
- No obligation to prepare financial statements
- Expenses are recognised in fixed percentages from 30 % to 50 % — depending on the activity group
- There is an obligation to keep a Turnover Book
Establishing a company (LLC)
If you decide to establish a limited liability company (LLC), you need to be aware of additional obligations.
VAT and executive director
- If you plan turnover above EUR 30,000 per year — you need to register for VAT
- The company must have an appointed executive director — for whom salary, taxes and contributions are calculated and paid
Giro account and digital certificates
- Opening a business giro account — for conducting business transactions
- Two digital certificates:
- One for electronic submission of tax and other forms
- One for fiscalisation
Monthly obligations
On a monthly basis, the following obligations must be settled:
- Employee salaries
- Taxes and contributions
- VAT (if the company is in the VAT system)
Documentation
It is important to carefully keep all business documentation:
- Incoming and outgoing invoices
- Bank statements
- Contracts
- Other documentation
Smart equipment procurement — founder’s loan
If equipment or other assets need to be acquired for business — it is advisable that the procurement be carried out through the company.
If the company does not have sufficient funds at that moment, the founder can deposit money as a loan to the company. Once the company generates sufficient funds, the loaned amount is repaid without additional tax burden.
Advantages:
- Assets remain in the ownership of the company
- Increase its value
- Through depreciation calculation can reduce the corporate income tax base
Conclusion
The choice between sole proprietorship and establishing a company depends on:
- Type of business
- Planned scope of operations
- Long-term goals
Before registration, it is advisable to review all tax, administrative and financial obligations — so you can choose the business model that best suits your needs.
Planning to launch a business in Montenegro? Contact Finance Plus — we will help you choose the right form and register your company without complications.
