What is a self-employed person
Zzp stands for independent without personnel. As a zzp you work for your own account and risk, without employing anyone. You provide services or products to clients and invoice them yourself. So you are an entrepreneur, but not employed by a client.
The term self-employed is not an official legal form. It is a description of how you work. Most self-employed people choose the legal form when registering in the Trade Register sole proprietorship. This makes you a formal entrepreneur for the tax authorities. Yet you can also be self-employed with another legal form, such as a private limited company.
What is a sole proprietorship
A sole proprietorship is an official legal form. You register it with the Chamber of Commerce and you are fully responsible for your business. There is no separation between your business and private assets. If things go wrong financially, you can also be held liable privately.
Despite the name, a sole proprietorship allows you to hire staff as normal. The term just means that there is one owner, not that you are obliged to work alone. You can use multiple trade names and carry out different activities within the same company.
What is a freelancer
Freelancer, like zzp'er, is not a legal term. The meaning is pretty much the same: someone who works independently, without employment. The difference is mainly in the use of language. In creative or journalistic sectors, you more often hear ‘freelancer’, in construction or business services more often ‘zzp'er’.
Both work on a project basis, have several clients per year and take care of administration and taxes themselves. The Inland Revenue treats both terms in the same way.
Difference between sole proprietorship and zzp
The difference between sole proprietorship and zzp is in the meaning. A sole proprietorship is a legal form, a zzp is the person who works independently without staff. So you can say that almost every sole trader has a sole proprietorship, but not every sole trader is a zzp. As soon as you take on staff, you are no longer self-employed without staff, but the sole proprietorship remains.
The Inland Revenue mainly looks at the actual situation: do you work independently, make a profit and run entrepreneurial risks? Then you are considered an entrepreneur, regardless of whether you call yourself self-employed or freelance.
Difference between self-employed and freelance
There is no substantive difference between zzp and freelance. Both words describe the same thing: working independently, without permanent employment. Only the sector and word usage differ. Legally and fiscally, it is exactly the same.
Sole proprietorship or self-employed, which is convenient?
You don't have to choose between sole proprietorship or self-employment, because they belong together. Zzp'er describes your way of working, sole proprietorship is the legal form in which you do so. A sole proprietorship is the most frequently chosen option for start-ups. Registration is simple, cheap and quickly arranged at the Chamber of Commerce.
With a sole proprietorship, you can use tax advantages, such as the self-employed deduction, start-up deduction and SME profit exemption, provided you meet the hour criterion. As a result, you pay less tax on your profits. For most self-employed people without staff, this is the most logical and advantageous way to start.
Overview of similarities and differences
The terms are very similar but mean something different. In brief:
- A zzp'er or freelancer works independently, without staff.
- A sole proprietorship is the official legal form in which this is usually done.
For the Tax Office and Chamber of Commerce, it makes no difference whether you call yourself a zzp'er or a freelancer. As long as you are registered as an entrepreneur and meet the conditions, you fall under the same rules.
Pros and cons of self-employment or sole proprietorship
A big advantage of working as a self-employed person with a sole proprietorship is freedom. You decide your own assignments, rates and working hours. You benefit from tax advantages and have few start-up costs. Moreover, the administration is clear and you can start quickly.
In return, there are risks. You are privately liable for any debts. If you fall ill or have no orders, you have no safety net as with salaried employment. You also have to take care of pension, insurance and a financial buffer yourself. Yet many entrepreneurs find freedom and independence more important than that security.
When to switch to a BV as a self-employed person
When your business grows, it may be interesting to switch from a sole proprietorship to a PLC. That moment usually comes when your profits rise or you are more at risk. A PLC limits your personal liability and can be fiscally advantageous at higher profits.
A private limited company does bring additional costs and obligations. You need a notary, have to file annual accounts and pay yourself a fixed salary. For most self-employed people, a PLC is only attractive from a profit of around EUR 100,000 per year. Always get good advice on this.
Frequently Asked Questions
What is the difference between self-employment and sole proprietorship?
A self-employed person is someone who works independently without staff. The sole proprietorship is the legal form by which this is usually done.
Is sole proprietorship the same as zzp?
No, but they overlap. You register as a sole trader and are automatically self-employed as long as you don't employ anyone.
Which is better, a self-employed person or a sole trader?
This is not a choice. Most self-employed people have a sole proprietorship. The term self-employed says how you work, the sole proprietorship says how you are legally set up.
