Bookkeeping and Accounting Services in FBiH: Rights and Responsibilities of a Sole Proprietorship Owner

Rights of a Sole Proprietorship Owner in the Federation of BiH

After obtaining the decision from the competent municipal authority for economy and completing registration with the FBiH Tax Administration, the owner of a sole proprietorship acquires a range of legally guaranteed rights:

• Free Disposal of Net Income: Unlike directors and founders of a limited liability company (d.o.o.), where cash withdrawals are strictly dedicated and limited, the money in the sole proprietorship’s transaction account and cash register belongs to the owner. After settling due taxes, fixed contributions, and obligations to suppliers, the remaining net funds can be freely used by the owner for personal needs without passing a formal profit distribution decision or paying additional dividend tax.

• Independent Business and Strategic Decision-Making: The sole proprietor independently signs commercial contracts, defines prices for products and services, negotiates commercial terms, and represents the business in legal transactions.

• Right to Hire Employees: The sole proprietorship owner has the right to hire employees in accordance with the FBiH Labor Law. In this segment, a professional bookkeeping service prepares employment contracts, registers employees with the Unified System of the FBiH Tax Administration (Form JS3100) prior to the start of employment, and handles regular payroll calculations.

• Option for Temporary Suspension of Business Activity ("Freezing" the Craft): In case of illness, seasonal business nature, or unexpected market circumstances, the owner can notify the municipal authority of a temporary suspension of work. During this period, certain tax and administrative obligations are put on hold, preventing the complete closure of the business and avoiding unnecessary re-registration costs.

Employment and Legal Status: Primary vs. Secondary Business Activity in FBiH

The method of calculating public revenues depends on the defined employment and legal status of the sole proprietor in the Federation of BiH:

• Sole Proprietorship as a Primary Activity: The owner has no other employment relationship and is socially insured exclusively through their sole proprietorship. Calculating and paying monthly fixed contributions for pension and disability insurance (PIO/MIO), health insurance, and unemployment insurance is a legal obligation. The contribution calculation bases are officially published every year by the Federal Ministry of Finance, while a licensed accountant prepares monthly specifications and payment orders.

• Sole Proprietorship as a Secondary Activity: This model is applied by individuals who are already fully employed (40 hours per week) with another employer. Since the primary employer already pays full payroll contributions, the sole proprietor pays legally defined proportional contributions and income tax through the secondary activity, while maintaining records of generated revenue.

Key Legal Obligations and Responsibilities of a Sole Proprietorship Owner

Operating a sole proprietorship carries significant financial, legal, and operational duties:

• Full Financial Liability with All Personal Assets: This is the most critical legal characteristic of a sole proprietorship. Unlike a legal entity (d.o.o.), where the founder generally risks only their initial capital investment, a sole proprietorship owner guarantees and is personally liable for all business debts—to suppliers, commercial banks, employees, and the FBiH Tax Administration—with all their personal assets (personal bank accounts, family real estate, motor vehicles).

• Maintenance of Business Books (KPR, KP, KOS): Sole proprietors keep business books using the single-entry bookkeeping system, based on the cash principle (collected revenue and paid expenses). It is a legal duty to properly and chronologically maintain:

  • Book of Revenues and Expenses (KPR): The core accounting record of all business inflows and outflows supported by valid invoices/receipts.

  • Book of Turnover (KP): Daily record of collected turnover through cash and non-cash payments.

  • Book of Fixed Assets (KOS): An inventory of long-term equipment, tools, and machinery used for business operations and subject to depreciation.

• Flat-Rate Taxation (Paušal): Sole proprietors who meet the criteria prescribed by the FBiH Income Tax Law for flat-rate taxation keep simplified records (Book of Turnover), but must strictly ensure that their collected revenue does not exceed the prescribed threshold to avoid losing the right to flat-rate tax status and being transferred to the standard bookkeeping system.

• Fiscalization and Application of the Decree on Cash Payments in FBiH:

  • Fiscal Receipts: Every cash payment must be recorded immediately through a fiscal device, with an obligation to issue a fiscal receipt to the customer.

  • Compliance with Authorized Technicians: Any breakdown of the fiscal device must be reported immediately to an authorized technician (fiscalizer), and sales during the repair period must be recorded according to legal instructions.

  • Cash Payment Limit up to 200 KM: Sole proprietorship owners in FBiH are subject to the provisions of the Decree on Conditions and Methods of Cash Payment. Paying for goods and services in cash to another sole proprietorship or legal entity (d.o.o.) is allowed exclusively up to the amount of BAM 200 per single invoice within a single day. Splitting a single purchase into multiple smaller cash receipts is strictly prohibited.

• Tax Deadlines and Annual Settlement:

  • Form GPD-1051: Mandatory submission of the Annual Income Tax Return accompanied by the specification (Form SPR-1053) by the prescribed legal deadline in the current year for the previous year, along with regular payments of monthly advance income tax payments (10%).

  • Monitoring the VAT Threshold: When the taxable turnover of the sole proprietorship reaches the legal threshold within the previous 12 months, the owner is required to immediately submit a request to the Indirect Taxation Authority (ITA BiH) for VAT registration. Delays in registration lead to mandatory ex-officio registration, retroactive VAT assessments, and misdemeanor penalties.

Most Common Misdemeanors and Fines for Sole Proprietorships in FBiH

The FBiH Tax Administration, cantonal inspection authorities (market inspection, labor inspection), and ITA BiH conduct regular field audits. Fines for natural persons range from BAM 500 to several thousand BAM for violations such as:

• Undeclared Work ("Rad na crno"): Employing workers without an employment contract or engaging family members without a legally regulated status (fines from BAM 1,000 to BAM 3,000 per worker).

• Fiscal Violations: Failure to issue a fiscal receipt, discrepancies between cash in the register and the daily report, or operating an un-fiscalized device (fines from BAM 500 to BAM 3,000, along with the temporary sealing of the business premises).

• Unupdated Bookkeeping: Irregular maintenance of KPR and KP books, lack of supporting invoices and delivery notes for inventory (fines up to BAM 2,000).

• Non-Payment of Contributions: Delays in contribution payments for PIO/MIO and health insurance incur default interest and lead directly to the forced freeze of the owner's personal transaction account.

Protect Your Business: Agencija Poslovnost d.o.o. Sarajevo – All Under One Roof

Since the sole proprietor is liable for all obligations and potential oversights with their entire personal assets, choosing a competent and reliable partner is the fundamental security for your business.

Through the unique "All Under One Roof" concept, Agencija Poslovnost d.o.o. Sarajevo integrates accounting and bookkeeping services with a long-standing network of external partners—lawyers, auditors, software vendors, and authorized fiscalizers:

• Bookkeeping Service: Precise maintenance of business books (KPR, KP, KOS), expense tracking, management of incoming and outgoing invoice records, and archiving of documentation in compliance with regulations.

• Accounting Services and Payroll: Employee registration and deregistration with the FBiH Tax Administration, preparation of employment contracts, regular payroll processing and specifications, and calculation of fixed monthly contributions for the sole proprietor.

• Tax Advisory: Professional cost-benefit analysis of transitioning to a d.o.o., preparation of annual tax returns (GPD-1051), monitoring VAT thresholds, and protection against penalties.

• Legal Services and Lawyers: Legal support during business registration, contract drafting, voluntary liquidation processes, or status changes of the sole proprietorship.

• Business Software and Fiscalization: Implementation of modern invoicing software tools and cooperation with authorized fiscalizers for uninterrupted maintenance and programming of fiscal cash registers.

Contact us for a free initial consultation or visit us in Sarajevo. Leave the administration to the professionals!

🏢Agencija Poslovnost d.o.o.
📧info@poslovnost.ba
📞033/246-421
📍Kotromanića 48, Sarajevo