Sole Proprietorship in Latvia

With a GDP of 40 billion USD in 2022, Latvia is one of Europe’s most economically favorable countries for entrepreneurs to start an enterprise. Furthermore, Latvian rules and regulations have made it even easier for business owners to establish a physical presence there. Latvia held a position of 19 in the ease of doing business index among 190 countries in 2020. This demonstrates the country’s business-friendly environment. 

Among the different business models in Latvia, a sole proprietorship is particularly popular for its various advantages related to finances, company management, etc. This article looks into the various aspects of setting up a sole proprietorship in Latvia. 

Do You Have to Register Your Sole Proprietorship in Latvia?

In Latvia, it is mandatory to register your sole proprietorship in the Commercial Register. To apply for sole proprietorship registration in the country, one of the following conditions should be valid:

• The business works under a broker or commercial agent. 
• The business has an annual turnover exceeding 284,600 EUR. 
• The business has an annual turnover exceeding 25,500 EUR and employs more than five employees. 

However, entrepreneurs can still apply for registration even if they do not meet the above conditions. 

Benefits of Sole Proprietorship in Latvia

A sole proprietorship is one of the most simplified business models in Latvia. Its key benefits are: 

• Time-saving: Starting a sole proprietorship in Latvia saves much time since the entire process can be done online within 2-3 days. Hence, it takes entrepreneurs a short time to become operational in this country. 
• Flexible decision-making: In sole proprietorships, the owner is the only business head of the company. Hence, they can make any business decision they consider appropriate without going through several approval stages. This leaves a lot of room for flexibility and quick decision-making.
• No minimum capital requirement: Unlike other business models, no minimum capital must be paid to start a sole proprietorship in Latvia. Hence, new entrepreneurs can save money with this business structure. 

Documents Required for Registering Your Business in Latvia

The essential documents required to start a sole proprietorship in Latvia are:

• Personal identity document
• Business identity documents (such as business name registration, business location, and so on)
• Document confirming the registration fee payment
• Certified KR2 form

Other Criteria for Registering a Sole Proprietorship in Latvia

In addition to the above-stated documents, some businesses must also register for specific licenses and permits in case of conducting business activities related to transport, tourism, construction, pharmacy, warehouse, insurance, security services, and so on. 

How to Register a Sole Proprietorship Company in Latvia

Overall, setting up a sole proprietorship in Latvia is simple and can be executed in a few easy steps. 

• Choosing a name: Firstly, you should select a name for your sole proprietorship. The name must include individuālais komersants or IK at its beginning or end to indicate its legal status as a sole proprietorship. Furthermore, the name must be unique and not something already registered with the Commercial Register. 
• Registering business address: You have to register and verify your business address with the Latvian State Address Register. 
• Filling out the KR2 form: Now, you must fill in the KR2 form. To apply for the status of a micro-enterprise taxpayer, you must note that in section 8 of the KR2 form. Additionally, you will also have to fill out the form for a micro-enterprise taxpayer separately. 
• Certifying signature: Before submitting your duly filled-in application form, certify your signature using a notary or online. 
• Paying registration fee: The last step before submitting your form is paying the registration fee. The fees should be paid at least two days before the submission of the form and documents. The different fees to pay are:

1. 1. 30,000 EUR state fee to the Treasury 
   2. 4,000 EUR for submitting the registration application form to the Commercial Register (to be paid only when the submission is made in person) 
   3. 1,850 EUR for publication in the Latvian official gazette to the VSIA Latvijas Vēstnesis 
   4. 315 EUR for retrieving a derived document that must be submitted to the Commercial Register 

• Final submission: Finally, the registration form can be submitted using one of the following ways:

1. 1. In person at the regional Commercial Register’s office
   2. Via mail
   3. By using the government’s e-services portal 

How Multiplier Can Help You

Setting up a sole proprietorship in Latvia is easy if all the local regulations are followed. Furthermore, another aspect of a sole proprietorship that needs considerable attention is managing freelancers and their payroll. Therefore, companies are contacting PEO firms to take care of this aspect on their behalf, in compliance with the local laws. 

So, if you are considering starting your sole proprietorship in Latvia, you can partner with Multiplier to provide you with the most comprehensive employee management solutions. Our outstanding payroll services ensure entrepreneurs can focus more on the core activities of their companies and leave the rest to us. Hence, choose us to get the best of payroll and employee management.