Individual activity, business certificate or MB: choosing in 2026

Short answer: if your activity is small, your services are simple and your income is predictable up to a few thousand euros a month, a business certificate (verslo liudijimas) usually pays off. If your income fluctuates, you have real costs, or you work with companies, individual activity under a certificate (pažyma) is more convenient. Once you grow, hire people, retain profit, or want to separate personal liability, it is time to consider a small partnership (mažoji bendrija, MB). There is no universal answer: it all depends on turnover, your share of costs, and whether you work alone or with a team.

This article compares the three most popular legal forms for small operators in Lithuania in 2026 — taxes, thresholds and day-to-day admin — and shows how to check the numbers for your own situation. All rates and amounts here are illustrative (2026); always verify the current thresholds and rates on the State Tax Inspectorate (VMI) and Sodra websites, as they are indexed annually.

The three forms in brief: business certificate, individual activity, MB

Before comparing taxes, let us align on terms — people mix them up constantly.

• Business certificate is a permit to carry out a specific activity from a VMI-approved list (e.g. hairdressing, construction, trade, photography). The tax is fixed and paid in advance, before you earn anything. Bookkeeping is minimal.
• Individual activity under a certificate (pažyma) is registered electronically with VMI and suits almost any lawful activity. Tax is paid on actual profit under a progressive income tax (GPM). You keep an income ledger and file an annual return.
• Small partnership (MB) is a legal entity (limited liability) that 1–10 individuals can set up. Its assets are separate from personal ones, you can hire staff, and profit is taxed with corporate tax and again when distributed as dividends.

The key distinction: the business certificate and individual activity are activities of a natural person (you are liable with all your assets), whereas an MB is a separate legal entity.

Business certificate 2026: a fixed tax paid up front

The logic is simple: the municipality sets a fixed annual (or monthly) tax for a specific activity, you pay it in advance, and then you work without calculating income tax on every euro. The amount depends on the activity type and municipality — the same activity may cost a few hundred euros a year in one place and more in another.

Key 2026 rules and thresholds (illustrative; verify with VMI):

• Income ceiling of 50,000 EUR per year. Exceed this from the same or related activity and the certificate no longer applies — you must switch to individual activity.
• You generally cannot provide services to companies (legal entities) as your main income source — the certificate is essentially meant for serving individuals. (There are exceptions, so check your specific case.)
• On top of the fixed tax come Sodra contributions (health and social insurance), calculated on a set base.

A business certificate pays off best when the activity earns well with relatively low costs and income is stable. Example: if a hairdresser earns 1,800 EUR a month and the fixed certificate costs only a few hundred euros a year, the effective tax burden is lower than under progressive income tax. But if one month you earn 200 EUR and the next 0, you still pay the fixed amount.

Individual activity under a certificate: progressive GPM

Individual activity is the more flexible option. You pay on actual profit, so a weak month automatically means lower tax. The income tax here is progressive: the higher your annual taxable profit, the higher the effective rate.

In Lithuania, individual-activity income tax works via a tax-credit mechanism: the headline rate is 15%, but after the credit the effective rate near the start drops to roughly 5% and gradually climbs toward 15% at higher profit (around 35,000 EUR and above). Separately, there is a general progressive income-tax scale for a person's annual income, in which the top rate reaches 32% once annual income exceeds the statutory threshold. Verify exact 2026 thresholds and rates in the VMI guide on individual activity and the business certificate.

The essence: a business certificate is a fixed tax regardless of result; individual activity is a tax that grows with profit. The first rewards high earners, the second protects you when income fluctuates.

The 30% cost rule and Sodra contributions

In individual activity you can compute taxable profit two ways:

1. Actual costs — deduct genuinely incurred, documented expenses (materials, equipment, rent).
2. The 30% rule — with no documents at all, you may treat costs as 30% of income, taxing only the remaining 70%. Handy when real costs are small or hard to prove.

On top of income tax come Sodra contributions, calculated on taxable profit (illustrative 2026 rates; verify with Sodra):

• Social insurance (VSD) — roughly 12.52% (without extra pension saving), or more if you contribute extra.
• Health insurance (PSD) — roughly 6.98%.

Important: Sodra contributions are calculated not on the whole profit but on a portion of it (a statutory coefficient), so the real rate is lower than it looks when you simply add the percentages. There is also a contribution ceiling. The cleanest way to handle these nuances is a calculator or your accountant.

MB: when the overall tax burden becomes more favourable

A small partnership is already a business as a company, not the activity of a natural person. It becomes more attractive when:

• profit grows enough that personal income tax (especially at the higher progressive tiers) starts to hurt;
• you want to retain profit in the company and reinvest rather than withdraw everything personally;
• you need limited liability so business debts do not touch personal assets;
• you plan to hire staff or work with partners.

MB profit is taxed with corporate tax, and the manager/members usually take income two ways: through manager (member) remuneration (subject to Sodra and income tax) or through dividends (taxed separately). Small and new companies may get a reduced corporate-tax rate in the early years — check exact conditions and 2026 rates with VMI. The company must be registered with the Centre of Registers, and accounting is more involved — an accountant is almost always needed.

For a detailed side-by-side of MB, individual activity and the business certificate, specialised sources such as mazojibendrija.lt are also useful.

Decision table: which form fits which model

A quick orientation (no option is universally best):

• Stable, well-earning services to individuals (hairdressers, beauty, small construction, repair tradespeople), low costs → business certificate.
• Fluctuating income, work with companies, project-based work (IT, design, consulting, freelance) → individual activity under a certificate.
• Growing activity, goods with costs, a team, a wish to retain profit and limit liability → MB.
• A brand-new, still-uncertain venture you want to test → start with individual activity or a business certificate, then move to an MB later.

A classic mistake is choosing a form because a friend chose it, rather than because of your own numbers. Two people in the same profession can have completely different optimal answers if one earns 1,000 EUR and the other 4,000 EUR a month.

Check your taxes with a calculator and VMI sources

Theory is useful, but make the decision only after running your real numbers. A practical flow:

1. Estimate annual turnover (the realistic figure, not the dream) and your cost share as a percentage.
2. Compute each option — what stays in your pocket after income tax and Sodra. For a quick orientation use our salary and tax calculator, and for other business sums the full calculator set.
3. Verify current thresholds and rates on VMI and Sodra — they are indexed annually, so older articles go stale fast.
4. Consult an accountant, especially if you are weighing an MB or your income is nearing a progressive tier or the 50,000 EUR ceiling.

If you plan to raise funding or investment to grow, the legal form matters — read about the options on our funding page, since some support measures are open only to legal entities.

Disclaimer: all rates, thresholds and amounts in this article are illustrative (2026) and for general understanding only — this is not tax or legal advice. Always verify the current rules at the official VMI and Sodra sources.

Want a clean start without paperwork chaos? web1o helps small businesses build a website, organise customer flow, and automate invoices and reminders — so you can do your taxes calmly rather than at the last minute. Start with the free calculators and, if you need a concrete plan, book a consultation.