Can a company operate without employees? Everything you need to know

Many entrepreneurs in Croatia wonder if it is possible to register and run an LLC (d.o.o. or j.d.o.o.) without anyone being in an employment relationship. The answer is affirmative – according to the Companies Act, a company can exist and operate without a single employee, unless special regulations for a certain activity dictate otherwise.

However, although there are no workers, the company still has its legal obligations and a specific Way of recognizing costs.

Who does the work?

Although the company has no employees, someone must make decisions and sign documents. This role is held by a board member (director). It is important to know:

• If the director is not employed in that company, nor is insured on some other basis (e.g., is employed in another company), they become a mandatory insured person and must independently pay contributions.
• If the director is already employed elsewhere, they can manage the company without establishing an employment relationship.

Which costs are tax-deductible?

The good news is that tax standards do not distinguish between companies with employees and those without them when it comes to recognizing business costs directly related to generating income.

• Rent and utilities: Business premises, phone, internet.
• Company vehicle: A company can acquire a car, and costs are recognized in the usual ratios (70/30).
• Representation: Entertaining business partners is recognized at 50% of the cost.

Business Card Use and Cash

A common challenge is the use of a business card by the director. Every cash withdrawal must be justified by an invoice or an agreement. Remember, withdrawing cash is not a distribution of profit!

Conclusion

Running a company without employees offers flexibility and lower fixed costs, but requires precise bookkeeping and strict adherence to tax rules.