Sole Proprietorship as a Business Structure: What It Is and When to Register

A sole proprietorship is the simplest and most common form of business registration in Albania. According to the National Business Center, over 196,000 active businesses operate as sole proprietorships, nearly four times more than LLCs (sh.p.k.).

It is the preferred structure for independent professionals, freelancers, and single-owner businesses.

Who Must Register as a Sole Proprietorship?

Any individual engaging in commercial economic activity is legally required to register as a sole proprietorship with the National Business Center (QKB), pursuant to Article 22 of Law No. 9723/2007.

This obligation applies to:

Standard Traders. Individuals who sell goods or provide services for profit, where the scale of the activity requires a commercial organization.

Independent Professionals. Lawyers, notaries, accountants, physicians, engineers, and artists, provided a specific law grants them the status of a trader.

Agro-Business Operations. When the activity focuses primarily on the processing and sale of agricultural or livestock products.

A natural person whose activity is of a very small volume (small trader) is not required to register, subject to the thresholds approved by order of the Minister of Finance.

What the Law States

The sole proprietorship structure is regulated by the Civil Code and Law No. 9723, dated May 3, 2007, "On Business Registration" (as amended), which remains in force.

According to the Civil Code, a trader is a natural person who exercises an independent economic activity that requires a standard commercial organization.

Three Essential Rules:

1. The sole proprietor is personally liable for all business obligations with their personal assets, including movable and immovable property, as well as any other rights of economic value.
2. A sole proprietor loses their status as a trader upon ceasing operations or being legally forced to do so. This results in deregulation from the commercial register.
3. If the sole proprietorship maintains a website, all information reported to the QKB must be published there as well.

Advantages and Disadvantages

Advantages

• Free, online registration within 24 hours
• 0% corporate income tax for an annual turnover of up to 14,000,000 Lek (until 2029, under Law No. 29/2023)
• Simplified accounting using a ledger of turnover
• Direct management, with no requirement for general meetings or collective decisions
• No initial capital required

Disadvantages

• Unlimited personal liability: business debts are also personal debts
• No partners allowed—limited to a single owner
• Difficulty obtaining bank loans
• Less corporate or formal perception among large business partners

What Taxes Does a Sole Proprietorship Pay?

Businesses with an annual turnover under 14,000,000 Lek enjoy a 0% profit tax rate until 2029, pursuant to Law No. 29/2023. Above this threshold, the standard rate applies.

Depending on the category and annual turnover, a sole proprietorship may be subject to VAT, simplified turnover tax, or standard corporate tax. Detailed regulations can be found in the tax legislation.

Important: new regulation for 2026

Pursuant to Instruction No. 9/2026 (issued in March 2026), if 80% or more of your income as a sole proprietor is derived from a single client, the tax administration may reclassify the relationship as disguised employment rather than independent activity.

If this applies to you, you must complete and submit the Declaration of Self-Employed Status to your regional tax office.

Frequently Asked Questions

Can I hire employees as a sole proprietor?

Yes. A sole proprietor can hire staff. You must register employees for social security and health insurance contributions and comply with the Labor Code.

Can I transition from a sole proprietorship to an LLC (sh.p.k.)?

Yes. This process is known as a legal structure transformation and is completed through the QKB. It does not require deregulation and re-registration; instead, specific conversion procedures apply.

Do I need an accountant from day one?

While not legally mandated, it is highly recommended in practice. Although the owner can maintain the ledger of turnover, filing tax returns and managing payroll contributions require specialized expertise.

What kind of NIPT (Tax ID) do I receive as a sole proprietor?

A sole proprietor receives an individual NIPT. This unique number identifies the business in all communications with the tax administration and the QKB, and it remains unchanged throughout the life of the activity.

Read also: How to Register as a Sole Proprietor on e-Albania