With this post, we will dig deeper into the main differences between obrt and društvo s ograničenom odgovornošću (e.g. d.o.o. or j.d.o.o.).
In this post we cover:
- Conditions and establishing costs
- Responsibilities and duties
- Book management and accounting
- Employment and salary
- Taxation of earnings
- A short list of advantages and disadvantages
Obrt is the simplest and cheapest type of company to launch and operate.
You can register obrt here:
- At Nadležni ured za registraciju obrta nearest to the headquarters of obrt (Competent office for registration of trades ) OR
- At nadležni ured Grada Zagreba – Gradski ured za gospodarstvo, or Odjel za upravno-pravne poslove (City Economy Office – general administration)
- Online via e-Građani (e-Citizen) START application – as long as you have a Croatian ID card and therefore security certificate
- Online via e-Obrt application
Obrt can be categorized in 2 groups:
- Paušalni obrt (Flat-rate trade business) – It is an ideal obrt type for beginners with small incomes. It is excluded from taxation, since incomes can’t exceed 300.000 kuna.
- Obrt (Trade business) – It is ideal for businesses whose incomes exceed 300.000 kuna. It is included in the taxation system.
Initial start-up capital isn’t required.
Here are all the costs:
- Costs of establishing obrt – ~ 500 kuna
- License (obrtnica) – 200 kuna
- Registration process
- ~ 270 kuna in Zagreb
- 250 kuna everywhere else
For more detailed information on what an obrt trade business is and its options, view this post.
For details on how to open and close an obrt, view this post.
To establish a j.d.o.o. (Jednostavno društvo s ograničenom odgovornošću ) you need only 10 kuna for the initial start-up capital investment. If you’re planning to enter the service industry where there is no investment in equipment, you should open a j.d.o.o.
Registration can be done by the public notary (javni bilježnik) and establishment costs are around 800 kuna. If you are not fluent in Croatian, an official translator is usually required at the notary for which there is an additional cost.
A j.d.o.o. can have only one director and a maximum of three owners.
For detailed information on how to open and close a j.d.o.o., view this post.
D.o.o. (Jednostavno društvo s ograničenom odgovornošću) is the most common type of company for small entrepreneurs. The cost of establishment is approximately 5.000 kuna. The initial start-up capital is 20.000 kuna, which can be used by the owners immediately.
D.o.o. can have an unlimited number of directors and owners.
For more information on how to open and close a d.o.o., view this post.
The obrt’s owner is responsible for obrt’s duties, liabilities and associated personal property while owners of j.d.o.o. and d.o.o. have a limited responsibility and liability as it relates to the company’s property only.
J.d.o.o. and d.o.o. are required to manage all the business books according to the dual accountancy principle. Book entries are done when the bill is released and PDV has to be paid even if an invoice isn’t charged on time. A licensed accountant is required, either on staff or a third party.
Obrt can manage its business books according to the simple accountancy principle, which is simpler and cheaper. Owners can manage their books independently, on their own. Book entries are done when the bill is charged, which means that their receivables are only charged invoices.
If you’re the obrt’s owner, you’ll have to pay for all the taxes (pension, health insurance, employment, safety at work) totaling approximately 1.800 kuna per month. That means that taxes have to be paid even if you don’t achieve any profit in a given month.
The j.d.o.o. and d.o.o. are obligated to employ at least one employee (a director) whose minimal bruto salary must be 5.491,20 kuna for full-time working hours. Taxes are around 1.160 kuna per month. An employee also has an option to work part-time, but a director must be full time.
An obrt’s owners usually have the possibility to choose between 3 different types of taxes. They usually pay an income tax, but it is possible to choose another taxation type if it’s more suitable for obrt’s management.
Obrt’s owners can choose between these 3 tax schemes:
- Porez na dohodak (an income tax) – Owner pays a progressive tax rate of on income (dohodak)
- Porez na dobit (a profit tax) – Owner pays taxes for the gained profit according to the 20% rate
- Paušalno oporezivanje – The flat rate is calculated according to the obrt’s profit and the income is completely excluded from the taxation
J.d.o.o. and d.o.o. do not have the option to choose how they are taxed.
- Paušalni obrt can be quickly launched
- Low opening costs
- Self-management of books
- No initial capital is needed
- Easy to open and close
- Not required to have an employee
- Ability to pause the obrt, during which taxes are not due. Most commonly used for tourism businesses that pause during winter.
- Owner is personally liable for the business
- An income tax payment is higher than a profit tax payment
- A master exam or a professional qualification is usually required for obrt’s opening
- You may not take in more than 300.000 kuna of revenue annually
- A profit tax payment is lower than an income tax payment
- Owner isn’t personally responsible for the business
- invoices are paid
- Dual book management enables quality reporting
- No limit on revenue
- J.d.o.o. can be opened with only 10 kuna start-up capital
- Higher business costs
- A minimal initial capital of 20.000 kuna is mandatory for d.o.o.
- The liquidation and closing process is time-consuming and expensive, during which the director must continue to be paid full salary
- An accountant is required
- Must hire at least one employee, usually the director whom must have a full time salary
- Not allowed to pause the business