Sole proprietor status in Ukraine is a fast and convenient starting point, offering minimal bureaucracy, a clear structure, and the ability to begin operations within a few days. For testing a niche, freelancing, or working with local clients, this format is often optimal.
However, once a business enters international markets, requirements change. Contracts with EU-based companies emerge, counterparties conduct due diligence, and expectations regarding the format of cooperation and B2B credibility increase. Additional complexities may arise when working with international banks, payment service providers, and marketplaces.
In such circumstances, entrepreneurs begin to consider establishing a legal entity abroad, not to reduce their tax burden, but to operate within a structure that is familiar and transparent to partners, with corporate banking details, stable payment infrastructure, and a standard B2B framework.
One practical jurisdiction for this purpose is Romania, an EU country with relatively straightforward administrative processes for small businesses and the opportunity to structure operations legally for international work.
This article provides a practical overview based on WoBorders client cases: when the sole trader model ceases to be effective, and in which situations establishing a microcompany in Romania becomes a logical stage in business development.
When a Sole Proprietor model stops working as a business structure
A sole proprietor (Ukrainian FOP) is a strong option at the initial stage of business. But over time, it can begin to limit a business not because of taxes, but because of the legal structure itself.
This most commonly becomes evident in the following situations.
1. The business grows but legally remains tied to "one individual."
You manage several projects simultaneously, increase your average transaction value, plan to hire, or have already delegated part of your processes. The scale and risks increase, while the liability model remains unchanged.
2. Partners impose requirements regarding the cooperation format.
In contracts or during negotiations, a requirement to work with a company appears more frequently. Formally, a sole proprietor/trader may still be acceptable, but for many counterparties, this means additional due diligence, more complex internal procedures, or even additional tax implications.
3. Infrastructure is needed for the next stage.
SaaS projects, IT outsourcing companies, marketing agencies, and consulting firms reach a point where corporate agreements, contractor engagement, partnership arrangements, or investment agreements become necessary.
4. Operational limitations affect execution speed.
Compliance procedures, additional documentation requests, limits, and extended verification processes may shift from being occasional issues to becoming ongoing operational factors.
If you recognize your situation in at least two of these points, it usually indicates that the business has outgrown the self-employed format and that reviewing the structure is advisable.
We’ve gathered everything that matters in one guide: jurisdictions, taxes, payment systems, and the most common mistakes entrepreneurs face when entering new markets.
What is a Microcompany in Romania, and how is it different from a Ukrainian FOP
A microcompany in Romania is an SRL (Societate cu Răspundere Limitată), the Romanian equivalent of a Ukrainian LLC, which can operate under the microenterprise regime. It is a fully-fledged legal entity in the EU, established to conduct business in a corporate format.
Why Romania
Romania is considered not because it is "the best country for everyone," but because, for small service and online businesses, it often offers a practical combination of:
- EU jurisdiction
- a relatively simple administrative model
- a widely used microenterprise regime
Put simply, when a business needs an EU-based company for contracts, compliance, and payment infrastructure, Romania often looks like a pragmatic solution without complex structures.
This format is most commonly chosen by:
- IT specialists and developers
- marketing and digital agencies
- consultants and service companies
- freelancers working with international clients
- e-commerce and online projects
A Ukrainian FOP is an individual, and all contracts and risks are tied directly to the owner, while an SRL is a separate legal structure where the business exists independently of the founder.
This provides:
- limited liability protection
- stronger credibility with international clients
- the ability to build and manage a team
- the option to bring in partners or sell an equity stake
For EU B2B counterparties, a company’s legal status typically matters more than a few percentage-point difference in tax burden.
When Romania is a more advantageous option than a Ukrainian Sole Proprietor (FOP)
Romania typically becomes a logical choice when a business moves beyond the testing phase and starts operating as a systematic B2B project.
Typical Indicators:
- the business has expenses outside Ukraine
- income is stable or growing
- clients are mainly in the EU
- the business operates in SaaS, IT, marketing, or consulting
- relocation or scaling is planned (team, contractors, new markets)
In such situations, taxes are only part of the picture. The decisive factors are structure and operational predictability: it becomes easier to sign contracts, pass compliance checks, and operate in a format familiar to European partners.
If a business needs a European legal entity for contracts, partnerships, or investor negotiations, the decision is about the development model, not the tax rate.
WoBorders practical case
A senior IT specialist approached us. He had been operating as a sole proprietor (FOP) and held stable contracts with companies in Germany and France. One of his clients offered a 12-month engagement with a budget of around €90,000 per year, but with a condition: the contract had to be signed with a company registered in the EU.
Formally, the FOP could have performed the work, but for the client’s finance department, this meant additional checks, longer payment approvals, and internal risk considerations. The issue was not taxes or competence, but the cooperation format.
– the contract was signed without additional approvals
– negotiations with new clients became simpler
– business finances were separated from personal ones
– it became possible to involve other specialists
As a result, the client moved to a standard B2B format and began to be perceived by European companies as a corporate partner.
A separate question arises for those already living in Romania: what to choose between a PFA and an SRL?
PFA vs. Microcompany in Romania: what to choose if you already live in the country
If you are already living in Romania and plan to work or run a business, a practical question often arises: what to choose — a PFA or an SRL under the microenterprise regime.
Essentially, it’s a choice between two different working models:
- PFA (Persoană Fizică Autorizată): individual activity format
- SRL under the microenterprise regime: a full-fledged company
At first glance, the difference may seem purely legal. In practice, however, these are two different approaches: self-employment versus a corporate business structure.
Key distinctions between PFA and SRL
| Criterion | PFA | SRL |
|---|---|---|
| Work format | Self-employment | Full-fledged company |
| Legal status | Individual (natural person) | Separate legal entity |
| Liability | Personal liability (all assets) | Limited liability |
| Taxation | Income tax + social contributions | 1% turnover tax (microenterprise regime) |
| Social contributions | Mandatory if thresholds are met | Applied only to official salary |
| Client perception | Independent contractor | EU company |
| B2B operations in the EU | May require additional verification | Standard corporate structure |
| Scalability | Limited | Hiring, partnerships, expansion |
| Equity / investors | No | Yes |
| Dividends | No | Required to withdraw profits for personal use |
What does this mean in practice?
Under the PFA model, taxation applies to profit. In addition to income tax, social contributions (CAS and CASS) arise, which may significantly increase the overall burden as income grows.
An SRL under the microenterprise regime operates differently:
- 1% tax on turnover
- a mandatory minimum of one employee
- social contributions arise only within the scope of the salary paid
For a service business with high margins, this typically results in a more predictable and manageable financial model.
– it is easier to explain to international clients
– the company more easily passes corporate compliance procedures
– it allows engagement of a team and contractors
– it creates the possibility of partnerships, investment, or the sale of shares
For this reason, entrepreneurs who plan stable cooperation with EU-based clients or scaling more frequently consider an SRL as a long-term model. A PFA typically remains the optimal option for individual work, testing activities, or local projects.
Therefore, the choice between a Ukrainian sole trader (FOP), a PFA, or a microcompany in Romania is not merely a matter of taxation. Above all, it is a choice of the model under which your business will operate.
If you are testing a niche, working independently, or focusing on small-scale projects, the self-employment format (FOP or PFA) remains a simple and sufficient solution.
If the business is steadily working with EU clients, growing, or planning to scale, at a certain point the decisive factor becomes not the tax rate, but the structure: the ability to operate in a standard B2B format, the ability to pass compliance procedures, the ability to engage a team and build long-term partnerships
In such situations, an SRL in Romania becomes not an “alternative to a sole trader,” but the next stage of business development.
If you are uncertain which model is right for you, it is important to evaluate the decision not from the perspective of “where are taxes lower,” but from the perspective of: What kind of business structure do you intend to build over the next 3–5 years?
The WoBorders team helps you: choose the optimal jurisdiction and business setup; incorporate a company and structure it properly; arrange ongoing and accounting support in Romania. Start with a consultation, and make your decision based on your growth model, not solely on the tax rate.
