Difference Between a Sole Proprietor and an LLC in Montenegro

 When starting a business, one of the first decisions you need to make is whether to register as a sole proprietor or to establish an LLC (limited liability company).

Both forms have their advantages and limitations, and the choice depends on your business goals, the scale of your planned operations, and the level of risk you are willing to take.

LIMITED LIABILITY COMPANY (LLC)

• NUMBER OF OWNERS: An LLC can have from one to a maximum of 30 owners.
• EXECUTIVE DIRECTOR: An LLC must have an executive director, who is legally responsible for the company’s operations and representation.
• OWNER’S LIABILITY: Owners are liable for the company’s obligations only up to the amount of their founding capital. Their personal property cannot be used to settle company debts.
• BUSINESS ACTIVITIES: The main activity and secondary activities are defined in the Articles of Association. Only the main activity is stated in the Company Registration Decision, while secondary activities are listed exclusively in the Articles.
• SALARY CONTRIBUTIONS: Calculated based on the agreed salary of the executive director, under the same rules as for other employees.
• LEGAL STATUS: An LLC is a legal entity.

SOLE PROPRIETOR

• NUMBER OF OWNERS: Can only have one owner.
• RESPONSIBLE PERSON: The owner is both the authorized and responsible person, without limitations.
• LIABILITY: A sole proprietor is personally liable for all obligations of the business with their entire personal property (cash, vehicles, real estate).
• BUSINESS ACTIVITIES: A sole proprietor can only perform the activity for which they are registered.
• SALARY CONTRIBUTIONS: Calculated based on turnover, income, and the average salary in Montenegro from the previous year.
• LEGAL STATUS: A sole proprietor is a natural person.

WHICH OPTION TO CHOOSE?

• If you are planning a larger business, with multiple owners and higher risk, an LLC is the better option because it limits your personal liability.
• If you are starting a small business with a single owner and are prepared to take on personal liability, sole proprietorship may be the simpler choice.

Regardless of your choice, having reliable accounting from the very beginning is crucial. This ensures that all your financial and tax aspects are fully compliant with the law.

Perfectum Agency provides support with company formation and closure, bookkeeping, and tax advisory.
Our goal is for you to focus on business growth, while we ensure your security and stability.