In 2026 a sole proprietor (IP/YaTT) is the simplest and cheapest format for a single entrepreneur in Uzbekistan: 1% turnover tax on income up to UZS 1 billion, no full bookkeeping or financial statements — but liability for business debts with all personal assets. An LLC (OOO/MChJ) costs more to run — 4% turnover tax or the general regime (VAT at 12% and profit tax at 15%), full accounting and an accounting policy — but participants risk only their contribution, and it is easier to bring in a partner or investor. If you work alone and turnover is clearly below UZS 1 billion, a sole proprietorship is usually cheaper; if you are growing, hiring or serving large clients, choose an LLC.
Sole proprietor vs LLC: comparison table
| Criterion | Sole proprietor (IP/YaTT) | LLC (OOO/MChJ) |
|---|---|---|
| Liability | all personal assets | participants — up to their contributions; the company — with its own assets |
| Main tax in 2026 | 1% turnover tax on income up to UZS 1 billion | 4% turnover tax with turnover up to 12,000 BRV (about UZS 5 billion), or VAT 12% + profit tax 15% |
| How the owner takes money out | the business income is the owner's income, no separate tax on withdrawal | dividends (5% tax) or salary (PIT 12% + social tax 12%) |
| Bookkeeping | income records, cash register, e-invoices | full accounting, accounting policy, chart of accounts |
| Financial statements | not prepared | annual for small enterprises |
| Staff | may hire; limits apply to some forms | no limit on the number of employees |
| Partners and investors | no share mechanism | up to 50 participants, shares, founders' agreement |
| Registration | state fee 1 BRV | state fee 1 BRV, charter, founders' EDS |
Liability: the key difference
A sole proprietor is an individual doing business in their own name. If the business owes a supplier, a bank or the budget, recovery can be made from the entrepreneur's personal property. In an LLC, under Law No. ZRU-1137 of 21.04.2026, participants bear the risk of the company's losses up to the value of their contributions to the charter capital, while the company is liable with all its property. For a business with large contracts, loans or inventory, this is often the deciding argument.
Taxes in 2026
Sole proprietor: 1% of turnover
From 1 January 2026, sole proprietors and self-employed persons with sales income up to UZS 1 billion per tax period pay turnover tax at 1% (Law ZRU-1108 of 25.12.2025). The fixed personal income tax for sole proprietors was abolished. Above UZS 1 billion the 1% rate no longer applies. From 1 June 2026 the threshold for small businesses' mandatory move to the general regime was raised to 12,000 BRV, and sole proprietors no longer become VAT payers automatically above UZS 1 billion; agree with your accountant in advance which rate applies between these two thresholds.
LLC: 4% or the general regime
An LLC that is a small business pays turnover tax at the base rate of 4% with turnover up to 12,000 BRV, or works under the general regime: VAT at 12% and profit tax at 15%. From 1 June 2026 trade, catering and services can opt into a simplified 6% VAT with zero profit tax. The regimes are compared in detail in "Turnover tax or VAT".
A worked example
With annual revenue of UZS 800 million, a sole proprietor pays UZS 8 million of turnover tax (1%), while an LLC on turnover tax pays UZS 32 million (4%). If the LLC owner then takes the profit as dividends, a 5% tax on the dividend amount is added. The gap is significant, so with small turnover and a single owner a sole proprietorship is almost always cheaper. The example is illustrative: it ignores payroll, property tax and other payments.
Staff
A sole proprietor may hire employees: sign employment contracts, register them in the Unified National Labour System (my.mehnat.uz), withhold 12% PIT and pay social tax. Historically, the law has limited the number of employees a sole proprietor may hire, and family businesses without a legal entity are limited to three permanent employees. Before expanding, check which limit applies to your form and activity. An LLC has no limit on the number of employees. More on HR duties in our article on HR records.
Bookkeeping and reporting
A sole proprietor does not keep full accounting under national standards but must record income reliably: through an online or virtual cash register, the bank account and electronic invoices. Reporting is the turnover tax return and, with employees, PIT and social tax returns. Details are in "Accounting for sole proprietors".
An LLC keeps full accounting: the director must ensure an accounting policy is developed, the company applies the chart of accounts and national standards, and small enterprises file annual financial statements (by 1 March of the following year). From 1 January 2027 national standards move to NSFO based on IFRS for SMEs — one more task for an LLC's accountant.
When a sole proprietor should become an LLC
- income is approaching UZS 1 billion a year and the 1% rate will soon stop applying;
- large clients ask you to work with VAT and issue invoices showing the tax;
- a partner or investor is joining and you need shares and a founders' agreement;
- you are hiring more people than your form allows;
- risks from contracts, loans or guarantees are growing and personal liability becomes too expensive;
- you need legal-entity status — for example, for IT Park residency (see IT Park benefits).
A sole proprietorship cannot be "converted" into an LLC: a new legal entity is registered, contracts, staff and accounts move to it, and the sole proprietorship is then closed or kept for a separate line of business. Plan the switch from the start of a quarter so reporting periods do not overlap. The step-by-step process is in our article on LLC registration.
What about self-employment?
Individuals who provide services from the permitted list and do not hire staff can use the self-employed regime — also at 1% up to UZS 1 billion. The list of activities was shortened from 2026, so first check that your occupation is on it (see our article on the self-employed).
How WealthWise helps you choose
In a consultation we calculate taxes for both forms on your numbers and show what changes in the books. If you already operate as a sole proprietor or LLC, we can take over bookkeeping — from UZS 3,890,000 per month on the Start plan; a consultation costs UZS 500,000 per hour, with the first 30 minutes free.
Frequently asked questions
Which is cheaper in 2026: a sole proprietorship or an LLC?
For taxes with income up to UZS 1 billion, a sole proprietorship is usually cheaper: 1% of turnover versus 4% for an LLC on turnover tax. An LLC wins when limited liability, partners, VAT for large clients or growth beyond UZS 1 billion matter.
Is an LLC founder liable with personal assets?
As a general rule, no: participants are liable up to the value of their contributions to the charter capital. A sole proprietor, by contrast, is liable for business debts with all personal assets.
Does a sole proprietor need financial statements?
No, a sole proprietor does not prepare financial statements but files tax returns and must support income with cash receipts, bank statements and e-invoices.
Can I be a sole proprietor and an LLC founder at the same time?
Yes, the law does not prohibit it. Keep operations clearly separate: each transaction must go through whoever actually supplies the goods or services, otherwise the tax authority may challenge the arrangement.
Tax rates, thresholds and rules for sole proprietors and LLCs in Uzbekistan change. This information is current as of publication; consult a specialist before choosing a business form.