Transformation of a Sole Trader into a Limited Liability Company Based on Case Study X

The diploma thesis entitled 'Transformation of a Sole Trader into a Limited Liability Company Based on Case Study X' addresses the legislation, general facts and findings regarding the legal-organisational forms of sole trader and limited liability company. The differences between both forms of enterprise are clearly presented, on the basis of which the entrepreneur decides which form is more favourable for them. When a company decides to transform, whether due to increasing business volume, tax benefits, retirement, the aspiration to acquire funds for investments or other reasons, it is sensible to examine all options and determine on the basis of calculations what is the better option for the company. In the diploma thesis, a simulation of the balance sheet and income statement for the selected company for the previous year has been carried out both for the sole trader and for the limited liability company.

Problem

The diploma thesis entitled 'Transformation of a Sole Trader into a Limited Liability Company Based on Case Study X' addresses the legislation, general facts and findings regarding the legal-organisational forms of sole trader and limited liability company. The differences between both forms of enterprise are clearly presented, on the basis of which the entrepreneur decides which form is more favourable for them. The legal-organisational form of sole trader is the one chosen by the majority of entrepreneurs at the beginning of their career path, as it brings advantages such as the fact that founding capital is not required and that lower profit is taxed at a lower rate according to the income tax scale, which is more beneficial for the entrepreneur with a smaller business volume.

For entrepreneurs whose revenues do not exceed 50 thousand euros (or 100 thousand in exceptional cases) annually, it applies that they can keep only a record of revenues, on the basis of which a standardised amount of expenses at the rate of 20 per cent is assessed for them, and on this amount they pay 20 per cent tax on profit. The form of limited liability company also has its advantages, such as the fact that the shareholder is not liable for the company's obligations with personal assets and the lower tax rate on high profits. Likewise, the limited liability company has greater credibility in the market.

Results

When a company decides to transform, whether due to increasing business volume, tax benefits, retirement, the aspiration to acquire funds for investments or other reasons, it is sensible to examine all options and determine on the basis of calculations what is the better option for the company. In the diploma thesis, a simulation of the balance sheet and income statement for the selected company for the previous year has been carried out both for the sole trader and for the limited liability company. They have critically presented their proposal and substantiated it with findings based on theoretical foundations.

They have described the company transformation procedure and the legislation that must be taken into account in this process. In connection with the company's operations, they have also highlighted the current issues of unforeseen events, such as the pandemic and war events, which affect the economy. In connection with the overarching theme, they have proposed the manner in which the company would best adapt to rapid changes in the market and respond most flexibly to the events themselves.