SIA vs IK vs Self-Employed: Which Is Best for You?

A Latvian accountant once told us that the question "SIA or IK?" is asked in roughly 80% of first-time consultations. The remaining 20% ask "SIA or self-employed?" — which is essentially the same question in different clothing. The answer has always been "it depends," but in 2026, the variables have shifted enough that the old rules of thumb need updating.

Here is a framework that actually works.

The Three Options, Briefly

SIA (Sabiedrība ar ierobežotu atbildību) — a limited liability company. Separate legal entity. Profits taxed at 20/80 on distribution (or 15%+6% under the new alternative regime). Requires registration, bookkeeping, annual reports.

IK (Individuālais komersants) — a sole proprietorship registered in the Commercial Register. Not a separate legal entity — the owner is personally liable. Profits taxed as business income under PIT rules (25.5%/33%) plus VSAOI.

Self-employed (Saimnieciskās darbības veicējs) — a natural person registered with VID for economic activity. Similar to IK in tax treatment, but without commercial registration. Simpler setup, fewer formalities.

The critical distinction: SIA creates a wall between your personal assets and business liabilities. IK and self-employed do not.

Tax Comparison: The Numbers That Matter

Let's model three income levels with typical expense ratios. All figures reflect 2026 rates.

At EUR 25,000 annual income (EUR 5,000 expenses)

SIA (standard regime, all distributed as dividends):

• Profit: EUR 20,000
• CIT: 20,000 / 0.8 × 20% = EUR 5,000
• But owner needs salary for social protection: EUR 780/month × 12 = EUR 9,360
• Employer VSAOI: EUR 2,208
• Employee VSAOI + IIN on salary: approximately EUR 2,150
• Remaining profit for dividends: approximately EUR 6,282
• CIT on dividends: 6,282 / 0.8 × 20% = EUR 1,571
• Total tax + VSAOI: approximately EUR 10,929
• Bookkeeping cost: EUR 150/month × 12 = EUR 1,800

Self-employed:

• Net income: EUR 20,000
• Apply non-taxable minimum: EUR 550/month × 12 = EUR 6,600 (reduced progressively — effective around EUR 4,000 at this income)
• PIT: approximately EUR 4,080
• VSAOI: approximately EUR 6,214
• Total tax + VSAOI: approximately EUR 10,294
• No bookkeeping costs (simple income/expense journal)

At EUR 25,000, both options produce roughly similar total burdens. Self-employed is slightly cheaper and much simpler. The SIA's bookkeeping costs further tilt the balance.

At EUR 60,000 annual income (EUR 10,000 expenses)

SIA (standard regime, salary + dividends):

• Salary: EUR 780/month = EUR 9,360
• VSAOI total: approximately EUR 4,358
• Remaining profit: EUR 36,282
• CIT on full distribution: 36,282 / 0.8 × 20% = EUR 9,071
• Total tax + VSAOI: approximately EUR 13,429

Self-employed:

• Net income: EUR 50,000
• Non-taxable minimum: effectively near zero at this income
• PIT at 25.5%: EUR 12,750
• VSAOI at 31.07%: EUR 15,535
• Total tax + VSAOI: approximately EUR 28,285

At EUR 60,000, the SIA is dramatically cheaper — saving over EUR 14,000 in annual taxes. This is the income level where SIA becomes the obvious choice.

At EUR 120,000 annual income (EUR 20,000 expenses)

SIA (standard, salary + dividends):

• Salary: EUR 780/month = EUR 9,360 (minimum for social protection)
• VSAOI: approximately EUR 4,358
• Profit: EUR 86,282
• CIT: 86,282 / 0.8 × 20% = EUR 21,571
• Total tax + VSAOI: approximately EUR 25,929

Self-employed:

• Net income: EUR 100,000
• PIT: EUR 25,500 (25.5% on full amount, no non-taxable minimum at this level)
• VSAOI: approximately EUR 31,070
• Total tax + VSAOI: approximately EUR 56,570

The gap widens to EUR 30,641. At this level, not operating through a SIA is extraordinarily expensive.

The Liability Question

Tax optimization aside, liability is often the deciding factor — and it should be.

An IK owner or self-employed person is personally liable for all business debts. If a client sues you, they can go after your apartment, your car, your savings. There is no separation.

A SIA limits liability to the company's assets and the owner's capital contribution (minimum EUR 1 for a reduced-capital SIA, typically EUR 2,800 for a standard one). Your personal assets are protected unless you have personally guaranteed company debts or engaged in fraud.

If your business involves:

• Client contracts with penalty clauses
• Physical products (product liability)
• Construction or renovation
• Significant accounts payable
• Employees (labor dispute risks)

...then a SIA is not optional. It is essential risk management.

For a solo consultant with no employees, no inventory, and low-value contracts, the personal liability of self-employed status may be an acceptable risk.

Cost of Maintenance

Annual cost of maintaining each structure (approximate, 2026):

| Cost | SIA | IK | Self-Employed | |---|---|---|---| | Registration | EUR 150–250 | EUR 15–25 | EUR 0 | | Annual report | EUR 200–500 | EUR 100–200 | Not required | | Bookkeeping | EUR 1,200–6,000/year | EUR 600–2,400/year | EUR 0–600/year | | Registered address | EUR 0–1,800/year | EUR 0 | EUR 0 | | Bank account | EUR 60–300/year | EUR 0–120/year | EUR 0 | | Total overhead | EUR 1,610–8,800 | EUR 715–2,745 | EUR 0–600 |

At low income levels (under EUR 20,000), these overhead costs can consume a significant portion of the SIA's tax advantage. A self-employed person earning EUR 15,000 saves perhaps EUR 1,500 in taxes via SIA — but spends EUR 2,000–3,000 on maintaining the SIA. Net loss.

Our Recommendation by Scenario

Freelancer, EUR 10,000–25,000/year, low risk: Self-employed. The simplicity and low overhead outweigh the modest tax advantage of a SIA.

Growing service business, EUR 25,000–40,000/year: Consider micro-enterprise SIA if expenses are low. Otherwise, standard SIA if you expect to grow past EUR 40,000 within two years.

Established business, EUR 40,000+/year: SIA, standard regime. The tax savings are substantial and grow with income. Consider the alternative CIT regime if distributing 75%+ of profits.

Business with employees or liability exposure: SIA regardless of income level. The liability protection is worth the overhead.

Seasonal or occasional income under EUR 15,000: Patent fee or self-employed, depending on activity type.

IK specifically: The IK sits in an awkward middle ground — it has the tax treatment of self-employed status but requires commercial registration and additional formalities. In 2026, we rarely recommend IK over either SIA (for the liability protection) or self-employed status (for the simplicity). The main use case for IK is when your business name or commercial registration is important for marketing or client trust, but you do not want the full structure of a SIA.

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Not Sure Which Structure Fits?

CORVUS Accounting & Tax (Russell Bedford network) analyzes your specific situation — income level, expense structure, growth plans, risk profile — and recommends the optimal business form. We also handle registration and setup for any structure you choose.

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