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

A sole proprietor is the simplest and most common form of business registration in Albania. Here you will find who is required to register as a sole proprietor, what the law says, the advantages and disadvantages, and the taxes it pays.

By the end of 2024, there were 193,466 businesses registered as sole proprietorships and 52,881 LLCs active, about 3.7 times more, according to of the data published in May 2025.

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 carrying out very small-scale activity, a small trader, is not required to register, in accordance with the thresholds approved by order of the Minister of Finance.

Read also: Should I register as an individual or as a company?

What the Law States

A natural person as a merchant is governed by the Civil Code and Law No. 9723, dated May 3, 2007, For Business Registration, as amended, still in effect.

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
• Profit tax of 0.3% on turnover up to 14,000,000 lek per year, until 2029, 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

• Personal responsibility, because the business's debts are also your 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 annual revenue of up to 14,000,000 lek pay 0.3% tax on profit until December 31, 2029, according to Law 29/2023. Above this threshold, an individual's taxable profit is taxed at 15% up to 1,400,000 lek and at 23% on the amount above that. We explain the rates in the section on Profit tax rates and thresholds.

A natural person becomes subject to VAT when annual turnover exceeds 10,000,000 lek. The simplified profit tax under the old law no longer applies since the entry into force of Law No. 29/2023. You can find the details at tax legislation.

Caution: rule of 2026

Pursuant to Instruction No. 9/2026 (March 2026), if 80% or more of your income as an individual comes from a single client, or 90% or more from fewer than three clients, the tax administration may treat the relationship as disguised employment rather than as independent activity.

If you are in this situation, complete and file the Self-Employed Status Declaration with the regional tax office by March of the following tax year.

Read also: Why Freelancers Should Register as Sole Proprietors (NIPT): Tax Implications, Risks, and the 2029 Deadline

Frequently Asked Questions for Individuals

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.)?

Not directly. Albanian law does not recognize a direct conversion from a sole proprietorship to an LLC. You must deregister as a sole proprietor and register an LLC as a new entity, following the applicable deregistration and initial registration procedures.

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 natural person on e-Albania.