As a self-employed person, do I need an accountant?
Your sole proprietorship doesn’t know the meaning of crisis? Wonderful! In this case, does your small business need an accountant? Legally no but in practice, the answer is subtler than you think.
A risky business
First of all, let’s define what is a sole proprietorship. In Luxembourg, a sole proprietorship indicates a person carries out his activity in his own name, whether he is a trader, a skilled craftsman, an industrialist, a farmer or a self-employed intellectual worker (liberal professions like doctor, architect, auditor, engineer or… accountant!).
Sole proprietorship guarantees you a total independence. You take decisions alone and have sole responsibility for the financing of your business. Another advantage is the lack of formalities. No minimum capital is required; you alone decide to commit capital to your business. No constitutional document is required; you are acting in your own name.
There are nevertheless important risks. You alone assume full responsibility towards third parties (debts of your business). Liability is not limited to your contribution and all your personal assets are exposed to creditors. That’s why you need to keep right and transparent accounts.
As a self-employed person, you can keep your own accounts if you are rigorous and use accounting software.
Pros: It is the least costly option. Moreover, it allows you to focus on the administrative aspect of your activities.
Cons: Keeping internal accounting can be time consuming and therefore detrimental to your commercial activities. It could eventually have a negative impact on your client management and lead to a loss of business. This option is also risky: you have to know and respect accounting, tax, law and social rules and update your knowledge regularly.
You can decide to outsource your bookkeeping to an accountant.
Pros: Accounting is a regulated profession, belonging to a professional order and governed by a code of ethics. Accountants have an obligation to give advice and need to take out special insurances in order to protect their activities and their clients.
Cons: Even if you can reduce the fees of your accountant by giving him just a part of your bookkeeping, this option is still the most expensive.
So do you really need an accountant or not? The answer will depend of your budget and of the risk you are ready to take…
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