LLC or Sole Proprietorship in Moldova: Which Is More Profitable for Your Business — A Detailed Breakdown

Why Choose Between LLC and Sole Proprietorship

Choosing the legal form of your business is one of the first and most important steps for an entrepreneur in Moldova. It affects not only your tax obligations and financial liability but also how flexibly you can scale, attract investors, and cooperate with other companies.

Many aspiring entrepreneurs ask themselves: is it better to register a Limited Liability Company (LLC) or start as a Sole Proprietor? Each option has its own features, advantages, and limitations. To make the right decision, it's important to understand the differences between them and how they can impact your business.

In this article, we’ll explore which registration form to choose in Moldova, when it's better to open an LLC, and when a sole proprietorship is more suitable. You’ll get a clear overview of the legal, tax, and organizational aspects of each option, along with recommendations based on real-world cases and practical experience.

What Is a Sole Proprietor

Definition and Legal Basis

A sole proprietor is an individual officially registered to conduct business activities. In Moldova, sole proprietors are recorded in the national registry, receive an IDNO (identification number), and are legally allowed to provide services, sell goods, or produce products.

This form is the simplest and most accessible — especially for freelancers, craftsmen, consultants, or those just starting a business. Registration takes minimal time and involves fewer costs compared to a legal entity.

Advantages of Sole Proprietorship

• Quick and easy registration. Usually takes 1–2 days.
• Minimal accounting costs. Often possible to operate without an accountant under simplified taxation.
• Full control over profits. All post-tax income belongs to the entrepreneur.
• Flexibility in operations. Easier to adapt to market or demand changes.
• Ability to use simplified tax regimes, including 1% turnover tax in certain cases.

Disadvantages and Risks

• Unlimited liability. The entrepreneur is personally liable for business debts with all personal assets.
• Limited scalability. Attracting partners, investors, or building a large team is difficult.
• Lower image perception. Large clients or banks may view sole proprietors with less trust.
• Cannot raise investment through share capital or equity sales.

What Is a Limited Liability Company (LLC / SRL)

Legal Status and Structure

A Limited Liability Company (SRL in Moldova) is a legal entity established by one or more founders. It has its own legal capacity, can sign contracts, hire employees, own property, and bears responsibility within the limits of its share capital.

Registering an SRL allows for clear separation between personal and business assets. The company operates under its own name, has a legal address, and follows a statute that defines how it is managed and how decisions are made.

Advantages of LLC

• Limited liability. Founders are liable only up to their share in the capital — personal assets are protected.
• Higher credibility. SRLs are seen as more professional by partners, clients, and financial institutions.
• Investment opportunities. Shares can be distributed, transferred, or issued to investors.
• Flexible management. You can define a management structure, assign responsibilities, and appoint a director.
• Ideal for business growth. LLCs are preferred for hiring, exports, and participation in tenders.

Disadvantages and Limitations

• More complex registration and paperwork. Requires drafting a statute, founding agreement, appointing a director, opening a bank account, etc.
• Share capital required. Minimum — 5400 MDL, which can be paid after registration.
• Mandatory accounting and reporting. Even with minimal activity, full accounting and reporting are required.
• Additional operational costs. Accounting, reporting, and legal support all require budget allocation.

Tax and Financial Comparison Details

Liability and Risks

The key difference between a sole proprietorship and an LLC is the level of personal liability:

• A sole proprietor is liable with all personal assets, including apartment, car, and savings. In case of debt, personal property can be seized.
• An LLC is liable only up to the amount of its share capital. This reduces risk for the owners’ personal assets and is safer for large-scale operations.

Tax Rates and Regimes

Several tax regimes exist in Moldova, depending on the legal form:

• Sole proprietors may work under a patent (rarely), use a 1% turnover tax (under certain conditions), or pay 12% on profit.
• LLCs typically operate under the standard regime — 12% profit tax, and must register for VAT if annual revenue exceeds 1.2 million MDL.
• Under IT Park, a special tax of 7% on turnover may apply (only for specific activities).

Accounting and Reporting

• Sole proprietors may use simplified accounting (if there are no employees or complex operations).
• LLCs must maintain full accounting and submit tax, statistical, and HR reports.
• LLCs must open a bank account upon registration. For sole proprietors, it’s optional (but recommended).

When to Choose Sole Proprietorship

A sole proprietorship is a great choice for those starting a business with low risks, no employees, and minimal investment. It's suitable if you:

• Work independently — as a freelancer, consultant, tutor, or craftsman;
• Offer services to individuals or small companies;
• Want to start quickly with minimal costs and formalities;
• Don't plan to attract investors or partners;
• Prefer a simplified tax regime (e.g., 1% on turnover).

Suitable fields:

• Design, programming, copywriting;
• Services: repairs, cleaning, delivery;
• Online teaching and consulting;
• Made-to-order products (e.g., hand-made items);
• Small-scale trade without employees.

If your activity does not involve significant financial obligations, a sole proprietorship is an ideal starting point. You can quickly validate your idea and later scale up — switching to an LLC if needed.

When It’s Better to Open an LLC

Registering an LLC in Moldova is a wise decision if you plan to grow a business with higher responsibilities, turnover, and growth potential. It’s especially relevant if you:

• Want to separate personal and business risks;
• Plan to hire employees and build a team;
• Seek to attract investors or have multiple founders;
• Are engaged in international trade (import/export);
• Work with large clients who require a legal entity;
• Apply for government tenders or grants.

Examples where LLC is preferable:

• IT companies, especially under IT Park (7% tax rate);
• Manufacturing businesses with facilities and staff;
• Startups aiming to raise venture capital;
• B2B service providers requiring legal contracts;
• Online stores with logistics and supplier networks.

LLC offers more flexibility, protects the founders' personal assets, and increases trust among partners and clients. Though more complex to manage, SRL is often the foundation of stable businesses in Moldova.

Comparison Table: Sole Proprietor vs LLC

Here’s a comparative table to quickly highlight the key differences between a Sole Proprietor and a Limited Liability Company in Moldova:

Practical Tips and Checklist

If you’re deciding between a sole proprietorship and an LLC, use this short checklist to make an informed decision. Answer the following questions:

🔍 Key questions for choosing a business form:

1. Do you plan to work alone or with a team?

   • Alone — Sole Proprietor is suitable.
   • With partners or employees — better to choose LLC.

2. What level of financial risk are you willing to take?

   • Willing to risk personal assets — Sole Proprietor.
   • Prefer limited liability — LLC.

3. Do you plan to seek investment, loans, or participate in tenders?

   • No — you can stay a Sole Proprietor.
   • Yes — only an LLC provides the right legal standing.

4. Which tax regime is more advantageous for you?

   • Low turnover — possibly 1% as a Sole Proprietor.
   • Profitable model or IT sector — 7% for LLC in IT Park.

5. How much time and resources can you dedicate to accounting?

   • Minimal — suitable for Sole Proprietor.
   • Have budget for accounting — LLC is viable.

📌 Tip from Intelcont:

• Start with Sole Proprietorship to test your business idea.
• Switch to LLC once you see growth and stability.

Choosing the right legal form not only simplifies business operations but also builds trust with clients, banks, and partners. If you're uncertain, consult professionals to avoid early mistakes.

How to Register a Sole Proprietor or LLC in Moldova

Registering a business in Moldova is a relatively quick and straightforward process, especially with expert support. Here’s a brief overview of the steps for registering a sole proprietorship and an LLC.

🧾 Registering a Sole Proprietor

Steps:

1. Select your business activity (CAEM code).
2. Prepare a copy of your passport and application form.
3. Visit the Public Services Agency (ASP).
4. Receive the registration certificate and IDNO.

Timeline: 1 business day (sometimes same-day processing).

Cost: from 140 MDL state fee (depending on urgency).

Taxes: May qualify for simplified taxation (e.g., 1% of turnover under certain conditions).

🧾 Registering an LLC (SRL)

Steps:

1. Prepare the company charter, founding resolution, and application.
2. Determine the legal address.
3. Appoint a director.
4. Pay the state fee.
5. Register with ASP.
6. Open a bank account and deposit the share capital (within 6 months).

Timeline: 2–5 business days.

Cost: from 220 MDL state fee + notary fees + accountant services.

Taxes: Typically 12% on profit; IT companies may benefit from IT Park’s 7% turnover tax.

Conclusion and Recommendations

Choosing between a sole proprietorship and an LLC is a strategic decision based on your goals, business size, risk level, and financial capacity.

If you’re just starting, working alone, and want minimal bureaucracy — a Sole Proprietor is a great option. But if you aim to grow, hire staff, attract investment, or work with large clients — a LLC (SRL) offers more potential and legal protection.

🔑 Quick Summary:

• Sole Proprietor — simpler, cheaper, faster. Ideal for freelancers, beginners, and small businesses.
• LLC — more solid, secure, flexible. Best for growing teams and professional partnerships.

📣 Intelcont’s Recommendation:

Not sure what to choose? The Intelcont team will help you find the optimal registration form, prepare documents, and advise on taxes. We support businesses from idea to sustainable growth.