An obrt is Croatia’s version of a sole proprietorship. It is commonly used by:

• Freelancers and consultants

• Small service providers

• Trades and crafts

• Early-stage founders validating an idea

One of the biggest attractions is its relative simplicity. Certain obrts may qualify for flat-rate (paušalno) taxation, which reduces administrative burden and makes monthly obligations predictable.

The Core Limitation: Unlimited Personal Liability

The most important downside of an obrt is personal liability.

In an obrt:

• You and the business are legally the same

• Business debts, claims, and disputes can expose personal assets

• Risk grows alongside revenue and client complexity

For low-risk consulting work, this may be acceptable. For businesses with employees, larger contracts, higher revenue, or client-facing risk, it often is not.

Foreign founders usually consider switching to a d.o.o. when one or more of the following applies:

1. You Need Liability Protection

If you are signing larger contracts, dealing with corporate clients, or operating in a higher-risk environment, personal liability becomes a serious concern.

2. You Want Partners or Investors

An obrt is tied to one individual. A d.o.o. allows:

• Multiple shareholders

• Defined ownership percentages

• Investment and partnership structures

3. You Plan to Hire or Scale a Team

Hiring under an obrt is possible, but payroll, contracts, and internal controls are generally easier and cleaner inside a company structure.

4. You Are Approaching VAT Reality

Croatia’s VAT registration threshold is €60,000 in annual turnover. Once your business approaches that level, VAT planning becomes unavoidable and must be handled carefully to avoid pricing and cash-flow issues.

5. You Need Stronger Banking and Corporate Credibility

Banks, payment processors, landlords, and corporate clients often view a d.o.o. as a more stable and scalable structure than an obrt.

A d.o.o. is a limited liability company and a separate legal entity from its owners.

A j.d.o.o. is a simplified version designed for low-capital starts. While attractive on paper, it may carry practical limitations depending on your growth plans and counterparties.

Minimum Share Capital

For a standard d.o.o., the minimum share capital is €2,500. Part of this must be paid in before registration, with the remainder paid within the legally prescribed period.

This is not just a formality — capital payment, registration timing, tax setup, and banking must be sequenced correctly to avoid operational delays.

1. Limited Liability

A d.o.o. separates personal assets from business obligations, significantly reducing personal risk when the business grows.

2. Scalable Ownership Structure

A d.o.o. allows:

• Shareholders

• Ownership transfers

• Investment

• Structured exits

None of these are realistically possible under an obrt.

3. Professional Operational Framework

A company structure supports:

• Payroll systems

• Internal roles and signing authority

• Formal accounting and reporting

• Clear separation of personal and business finances

4. Long-Term Compliance Stability

Although compliance obligations increase, they also reduce risk by forcing clean documentation, proper invoicing, and transparent reporting.

An obrt can feel light and flexible. A d.o.o. is formal by design.

With a d.o.o., you should expect:

• Mandatory bookkeeping

• Regular accounting and reporting

• Clear invoice, payroll, and documentation standards

• Greater interaction with accountants and tax authorities

This increases monthly costs but creates a structure that can actually support growth.

Croatia’s VAT threshold is €60,000 per year.

Once VAT applies, it affects:

• Pricing strategy

• Cash flow

• Invoice format and compliance

• B2B vs B2C positioning

• Cross-border EU transactions

VAT should never be handled reactively. If your revenue trend suggests you are approaching the threshold, planning must begin early.

Most problems do not come from switching structures — they come from bad execution.

Common mistakes include:

• Invoicing under the wrong entity

• Banking delays

• Contracts referencing the wrong business

• VAT status confusion

• Misaligned registered addresses

• Payroll or employment gaps

Company formation in Croatia follows a defined legal process, but the operational transition is where most founders stumble.

Instead of shutting down the obrt immediately, many founders benefit from a parallel-run approach.

Step 1: Set Up the d.o.o. While the Obrt Continues

This allows time to complete:

• Court registration

• Tax registrations

• Banking

• Accounting onboarding

• Contract and invoice updates

Step 2: Make the d.o.o. Fully Operational

Before moving revenue:

• Bank account must be live

• Invoicing templates must be correct

• VAT status must be clear

• Accounting must be ready

Step 3: Controlled Cutover

Options include:

• New clients go to the d.o.o.

• Existing contracts finish under the obrt

• Full cutover on a fixed date

Step 4: Close or Pause the Obrt

Only after operations, cash flow, and compliance are stable.

This method costs slightly more upfront but dramatically reduces long-term risk.

• Residency and work authorization alignment

• Activity and licensing requirements

• VAT exposure and pricing strategy

• Banking timelines

• Contract continuity

Your company structure should support both business growth and legal stay, not conflict with it.

An obrt is often the right starting point in Croatia. But it is rarely the right end point for a growing business.

A d.o.o. offers:

• Legal protection

• Scalability

• Credibility

• Long-term stability

The key is not whether to switch — it is how and when to do it properly.

Relocation Croatia provides structured, compliant, end-to-end support for foreigners transitioning from an obrt to a d.o.o., ensuring your business, residency, and tax position remain aligned as you scale.