The entrepreneur’s obligations – six things an entrepreneur must always see to
An entrepreneur has certain obligations, but despite common misconceptions, only a few things are compulsory. Developing a good relationship with the tax authorities is worthwhile.
When considering becoming an entrepreneur the most important thing is to make the decision – everything else will follow. When you have registered your company and obtained the necessary permits, the practical side begins. Running a business is not rocket science, and people of all backgrounds, qualifications and ages have managed to do it. You too can do it, as long as you remember these obligations.
Entrepreneur’s obligation no 1: have a good relationship with the tax authorities – your most important duty is paying tax.
Generally, advance tax is determined on the basis of the previous year’s income data, or, for a new entrepreneur, on the basis of estimated turnover. Advance tax must be paid in time and you should keep an eye on it to make sure they are in the correct proportion to your income. If your tax is too high or too low, contact the tax office in good time to adjust it to the right level. If you have paid too little tax in advance, it is worth applying for an adjustment to your advance tax level. This prevents any possible back tax and interest.
In addition to advance tax, an entrepreneur should file and pay VAT and any employer’s contributions.
If it begins to look like you may have problems in paying your tax, contact the tax office in good time to agree on payment terms or a new breakdown of payments. Sometimes it is possible to negotiate with the tax authorities, and they can give you good assistance and tips.
Entrepreneur’s obligation no 2: ensure you have social security
As an entrpreneur, you are responsible for your own social security. Your entire statutory social security, including all payments and benefits, is based on the annual income you set for your entrepreneur’s pension insurance, or YEL. You should not estimate this annual income at too low a level. The YEL annual income determines the size of your pension, sick pay, parental benefits and unemployment benefit. An entrepreneur is covered by unemployment insurance if the YEL annual income is set no lower than €12,564 (as of 2017).
YEL insurance is compulsory when your personal work input to the business – usually the same as your income – exceeds the value of €7,645.
Entrepeneur’s obligation no 3: manage your accounts carefully.
You can do as many others do: rely on professional help and outsource your bookkeeping to an accounting firm. A professional will do it right the first time and also give you assistance and valuable practical tips for managing your company’s finances.
Entrepreneur’s obligation no 4: always keep enough in your business account to at least pay your tax.
Entrepreneur’s obligation no 5: act in time, react in time.
If you know there are challenges ahead, it’s better to act sooner rather than later, as you can negotiate with banks, senders of invoices and the Tax Administration. It’s not worth stubbornly driving yourself into a dead end.
Entrepreneur’s obligation no 6: Look after yourself and spend time with people close to you.
Being an entrepreneur is a lifestyle but it does not mean slaving away 24/7. If running your business takes up all the hours in the day, something is wrong with your business idea, resources or pricing. An entrepreneur needs time off, friends and other things to do, just like everyone else. You can’t cope without these – and an entrepreneur who can’t cope is soon a former entrepreneur.