Sole trader or company for an online store?
For product retail, the legal form is not only a tax question: liability and the way you deduct the cost of goods matter too. In practice, an online store with stock almost always goes with a limited company.
Short answer
- As a sole trader you are liable with personal assets; in a company liability is limited to the share capital.
- A company allows clear deduction of the cost of goods, shipping and packaging.
- A sole trader on a fixed-income basis cannot deduct expenses, so it is unsuited to low-margin retail.
- In a company, money taken as dividends is taxed additionally, at the rate in force.
- Decide with an accountant, on your own numbers: margin, volume, stock and expenses.
Head-to-head comparison
Sole trader vs company for online retail
| Criterion | Sole trader | Limited company |
|---|---|---|
| Liability | With personal assets | Limited to the contribution to the company |
| Deducting goods | Only on the real-income basis; not at all on a fixed-income basis | Yes, like any operating expense |
| Stock accounting | Cumbersome, not designed for stock | Natural, with inventory accounting |
| Taking out profit | Directly, after tax and contributions | Through dividends, with additional tax |
Practical example
Example: you buy products at 60 lei and sell at 100 lei. As a sole trader on a fixed-income basis you pay according to the set norm regardless of that 60 lei cost — so the real 40 lei margin erodes fast. In a company the 60 lei is a deductible expense and you are taxed on the result only, which matters enormously at high volume and thin margins.
Common mistakes
- Choosing a fixed-income sole trader for goods retail, where costs dominate.
- Comparing only the tax, ignoring contributions and personal liability.
- Not checking whether your activity can be carried out as a sole trader under the desired activity code.
- Postponing the accountant conversation until after launch, when changing form costs time and money.
How 4shopy helps
- The same features whatever the legal form — company details change from one setting.
- Invoice drafts in 4invoices (optional connection), for both sole traders and companies; issuing and e-invoicing transmission happen there.
- Orders and sales exported to a file, for your accountant.
- Stock management per product, so you see what sells and what stays in the warehouse.