The Sole Trader (Empresário em Nome Individual – ENI) structure is established by a single person.

In other words, only one entrepreneur is registered, without any other individual or legal entity representing the business.

However, before choosing this structure, it is important to understand how it works and determine whether it is really the best solution for your business.

For this reason, in today’s article we answer some of the most common questions about the ENI structure.

Discover the 7 most common questions about the Sole Trader structure

If you are planning to start a business, this structure is the simplest way to set up a business operated by a single person.

For this reason, it is particularly suitable for small businesses requiring limited investment and involving relatively low risk.

Under the ENI structure, the business name must consist of the holder’s full or abbreviated name.

Below, we explain some other relevant aspects of the Sole Trader structure.

1 – Which accounting regime is applicable?

A Sole Trader can choose between the two available accounting regimes: the simplified regime or organised accounting.

The simplified regime is the most common and is automatically assigned to the entrepreneur when they register their activity.

It is important to know that under this tax regime, annual turnover cannot exceed €200,000.

Organised accounting, on the other hand, becomes mandatory for businesses exceeding €200,000 in annual turnover.

Anyone opting for this regime must appoint a certified accountant.

2 – Is there a minimum share capital requirement?

A Sole Trader does not need to provide a minimum share capital to establish the business.

This is one of the factors that leads many people to choose this business structure. However, there is an important point to consider.

We explain why in the next section.

3 – Who is liable for the business’s debts?

This is one of the main disadvantages of the ENI structure. There is no minimum share capital requirement because the structure links the business to the entrepreneur’s personal assets.

This means that, in the event of debts, the entrepreneur who operates as a Sole Trader is unlimitedly liable for debts incurred while carrying out the business activity.

4 – Can expenses be deducted?

Yes. Some of the expenses that may be deductible include:

• Travel carried out using your own vehicle; 
• Meals incurred in connection with your professional activity; 
• Purchase of raw materials; 
• Accommodation; 
• Computer equipment; 
• Other business expenses. 

5 – Does this structure entitle the entrepreneur to unemployment benefits?

It is possible to receive the so-called benefit for cessation of professional activity. To qualify, the entrepreneur must generally have made contributions for at least two years.

To access this benefit, it is necessary to demonstrate that there has been a reduction in turnover requiring the closure of the business, or that economic circumstances beyond the entrepreneur’s control prevent the business from continuing to operate properly.

6 – What is the difference between a Sole Trader and a Self-Employed Worker?

The main difference is that a self-employed worker is generally a service provider who issues invoices-receipts, commonly known as recibos verdes.

A Sole Trader, on the other hand, can sell products as well as provide services and can choose between the simplified regime and organised accounting.

Despite these differences, it is important to note that, for tax purposes, both are considered self-employed because they do not work for an employer.

7 – What is the difference between a Sole Trader and a Single-Member Company?

The separation between the company’s assets and the entrepreneur’s personal assets is one of the main differences between a single-member company and a Sole Trader.

As a result, the entrepreneur has greater protection because, in the event of debts, their personal assets are generally protected.

In addition, setting up a single-member company requires share capital (starting from €1), a company bank account and an accountant.

Do you still have questions about the Sole Trader structure? Contact us for personalised advice.