Independent or SRL: from what profit should you set up a company?

Should you remain self-employed as an individual or incorporate as an SRL? There is no legal threshold requiring you to form a corporation. In practice, the decision depends on your profit level, the portion of your income you need to set aside for living expenses, your investments, your business expenses, and the level of asset protection you seek.

In 2026, the comparison must also take into account the tax treatment of both structures, the additional costs associated with a corporation, and the ability to retain a portion of the profits within the LLC to fund its growth.

Self-Employed or LLC: Two Different Tax Approaches

Self-employed individual: Profit is taxed under the individual income tax (IPP)

When you operate as an individual, your business profits are subject to individual income tax (IPP) according to a progressive tax scale.

As profits increase, the tax burden can therefore become significant. Added to this are self-employed social security contributions as well as any additional municipal surcharges.

One of the advantages of operating as an individual, however, is its simplicity: there is no need to incorporate a company, no notarized deed is required, and administrative and accounting tasks are generally less burdensome.

The deduction of business expenses also plays an important role in calculating taxable income.

In particular, a business expense must have been incurred to generate or maintain taxable business income, be supported by documentary evidence, and not constitute a personal expense. For mixed-use expenses, only the business portion may be deducted.

Expenses that are generally deductible when they are exclusively business-related include rent for business premises, certain supplies, accountant or attorney fees, business insurance, and training directly related to the business.

The SRL: A Two-Tier Tax System

With an SRL, profits belong to the company and are subject to corporate income tax (ISOC).

The executive may then receive compensation, which is taxed under the individual income tax (IPP). A portion of the profit may also remain in the company to finance investments, strengthen cash flow, or prepare for future growth.

The tax treatment of an SRL must therefore be analyzed holistically: it is not enough to simply compare the corporate income tax (ISOC) rate with the personal income tax (IPP) rate.

Under the system described in this article, the standard corporate income tax (ISOC) rate is 25%, while a reduced rate of 20% on the first €100,000 of taxable profit may apply to SMEs that meet the specified conditions.

In particular, the condition regarding the director’s compensation—which takes effect starting with the 2026 tax year—must be taken into account. A customized simulation remains essential to determine which tax regime actually applies to your situation.

At what profit level does an SRL become a viable option?

There is no universal threshold at which an SRL automatically becomes more advantageous than operating as a sole proprietorship.

However, we can use rough estimates to guide our thinking.

Up to approximately €40,000 in profit

When profits remain relatively modest, a sole proprietorship generally retains an advantage in terms of simplicity.

In particular, you avoid:

• the costs of incorporating a company;
• the mandatory involvement of a notary to form an LLC;
• the generally more burdensome corporate accounting requirements;
• annual corporate fees;
• additional administrative obligations.

At this profit level, the tax savings may not necessarily be enough to offset these costs and this complexity.

Between €40,000 and €60,000: a true gray area

It is often within this range that the comparison becomes worthwhile.

Switching to an SRL may be justified if your profit is stable, if you do not need to immediately withdraw all of your income from the business, or if you wish to invest in equipment, build up cash reserves, or grow the business.

Asset protection may also factor into the decision, regardless of the profit generated.

Beyond approximately €60,000 in profit

At this level and above, an SRL often becomes more advantageous from a tax perspective, but this is not automatic.

The advantage stems in particular from the fact that profits retained within the company are not directly subject to the progressive personal income tax (IPP) scale in the same way as the profits of a self-employed individual.

The higher the profit, the more attractive it can become to leave a portion of the profits in the company.

However, these thresholds of €40,000 and €60,000 are merely guidelines and not tax rules.

Profit level is not the only criterion

Focusing solely on profit can lead to a poor decision.

1. Do you need all of your profit to live on?

This is one of the first questions you should ask yourself.

If you have to withdraw virtually all of your profit each year to cover your personal expenses, the potential advantage of forming a corporation may be diminished.

Conversely, if your business generates €80,000 or €100,000 in profit but you only need a portion of it for your personal expenses, an SRL allows you to keep the remainder in the company and use it to fund its growth.

2. Do you have significant investments?

The purchase of a computer, furniture, machinery, or a vehicle is not necessarily treated as a current expense.

When an asset is used for several years, it is generally classified as a fixed asset, and its cost is gradually deducted through depreciation.

For this reason, a business that regularly requires equipment or investments must be analyzed differently from a service-based business with few expenses.

3. What are your business expenses?

Business expenses have a direct impact on taxable income and, therefore, on the comparison between an individual and a corporation.

However, one should avoid assuming that an expense is automatically 100% deductible. Certain categories are subject to specific limitations.

In 2026, the Profiscal document specifies, among other things, a general deductibility rate of 69% for restaurant expenses, 50% for entertainment expenses, and 50% for business gifts. Car expenses, on the other hand, depend in particular on the engine type, CO₂ emissions, the date of purchase or lease, and the applicable tax regime.

The right question, therefore, is not just “how much can I deduct?” but rather: Is the expense business-related, to what extent is it deductible, and how can I document it?

Asset protection can justify forming an LLC

Taxation is not the only argument in favor of forming a company.

An LLC has a legal personality distinct from that of its owners. This separation generally allows for a distinction between the company’s assets and the owner’s personal assets.

For an entrepreneur exposed to significant risks—high-value contracts, employees, inventory, investments, and risks related to customers or suppliers—this protection can be of considerable importance.

However, it should not be viewed as absolute protection: the manager may still be held personally liable under certain circumstances.

The Additional Costs of an SRL

An SRL offers more options, but it also involves more formalities.

When incorporating, you must, in particular:

1. preparing information about the business plan;
2. opening a bank account;
3. drafting the articles of incorporation;
4. contributing capital;
5. drawing up the financial plan;
6. signing the deed at the notary’s office;
7. registration with the BCE and other administrative formalities.

The procedure outlined in the previous document provides for an estimated budget of approximately €2,700 for incorporation, including approximately €1,650 for the notarial deed, €750 for consulting services and the financial plan, and approximately €300 for the business registration office and publications.

Added to this are the company’s recurring operating costs: accounting, administrative obligations, filing of annual financial statements, and other expenses related to managing the legal entity.

An example: €100,000 in profit

Let’s consider an entrepreneur who generates €100,000 in profit before taxes and the owner’s compensation.

As an individual, a significant portion of the profit may fall into the higher brackets of the individual income tax (IPP). The profit is also taken into account when calculating social security contributions.

In an SRL, the profit belongs first and foremost to the company. The executive can receive compensation and leave a portion of the profit in the company, where it is subject to corporate income tax (ISOC).

This difference in how the two structures operate can create a tax advantage, particularly when the executive does not need to withdraw the entire profit immediately.

However, it would be misleading to conclude that an SRL automatically results in savings of a specific amount. The final outcome depends, in particular, on the director’s compensation, social security contributions, business expenses, family situation, municipality, and how the profits are subsequently distributed.

What about dividends?

Profits retained by the company may later be distributed as dividends.

In such cases, one must take into account withholding tax and the applicable tax regime at the time of distribution.

The benefit of a corporation is therefore not necessarily to “pay less tax” immediately. It may also lie in the ability to defer a portion of personal taxation and retain financial resources within the company for investment or business development.

The compensation and distribution strategy must therefore be considered over several years rather than just a single fiscal year.

Another significant change in 2026: B2B electronic invoicing

The choice between self-employment and an SRL also takes place within an evolving administrative landscape.

As of January 1, 2026, structured electronic invoicing is mandatory for most B2B transactions between Belgian companies subject to VAT. The Peppol network is the standard channel, subject to the provided exceptions.

This requirement alone is not a reason to form an SRL, but it is one of the new administrative constraints that self-employed individuals and companies must incorporate into their operations.

Self-Employed or SRL: Which Option Is Right for Your Situation?

SituationOption Generally Worth ConsideringProfit less than ± 40,000 €Self-employment is often simplerProfit between ± 40,000 and 60,000 €A personalized comparison is essentialProfit greater than ± 60,000 €An LLC is often worth consideringYou need all of the profit to live onThe advantage of an LLC may be reducedYou can leave part of the profit in thecompany; an SRL may be a more attractive option; Business involving significant occupational risk; Consider an SRL for asset protection; Business requiring significant investments; Comparison based on financing and depreciation; Very simple business with few expenses; Operating as an individual is often easier to manage

These categories are guidelines, not official tax thresholds.

FAQ

Is there a minimum profit threshold above which I am required to form an LLC?

No. There is no profit threshold that legally requires you to transition from self-employment as an individual to a corporation.

At what profit level does an LLC become a viable option?

As a rough guide, the comparison becomes particularly relevant for profits ranging from €40,000 to €60,000, and forming an SRL can become clearly advantageous for profits exceeding €60,000. However, these figures are no substitute for a personalized financial analysis.

Is it always more advantageous to form an SRL when profits exceed €60,000?

No. The outcome depends, in particular, on the executive’s compensation, business expenses, social security contributions, the portion of profits retained by the company, and your personal circumstances.

Do business expenses change the comparison?

Yes. Business expenses reduce taxable income when they meet the conditions for deductibility. However, certain expenses are subject to limitations, and mixed-use expenses must be allocated between their business and personal portions.

Is a car fully deductible?

Not necessarily. Deductibility depends, in particular, on the engine type, CO₂ emissions, the date of purchase or lease, and the applicable tax regime. It is therefore necessary to analyze the specific vehicle in question rather than applying a general percentage.

How much does it cost to form an SRL?

Using the Profiscal procedure as an example, the estimated cost of incorporation is approximately €2,700, excluding any financial requirements specific to the business.

Is this solely a matter of tax optimization?

No. Asset protection, the ability to retain profits within the company, planned investments, the potential addition of partners, and the level of risk associated with the business are also key factors.

In summary

There is no magic number at which a self-employed individual should form an SRL.

As a general guideline, a business generating less than €40,000 in profit is often easier to operate as a sole proprietorship. Between €40,000 and €60,000, a cost-benefit analysis becomes particularly relevant. Above approximately €60,000, forming an SRL generally warrants a thorough analysis, especially if you can leave a portion of the profits in the company.

But profit is only part of the equation.

You must also consider your compensation, business expenses, investments, personal needs, risk tolerance, and medium-term strategy. In particular, the rules governing the deductibility of expenses must be factored into the calculation: only expenses that are genuinely business-related and properly documented are taken into account, with limitations for certain categories.

Finally, forming an SRL involves costs and entails additional obligations. The procedure outlined above estimates formation costs at approximately €2,700, with steps including setting up a bank account, drafting the articles of incorporation, preparing a financial plan, consulting a notary, and completing formalities at the business registration office.

The best decision, therefore, is not necessarily to choose the structure with the lowest tax rate, but the one that best aligns with your profit level, personal needs, and growth strategy. A personalized simulation with a certified public accountant allows you to accurately assess the difference before changing your business status.