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How can we manage revenues with Xolo Leap as two freelancers performing a joint project?

Last updated: December 01, 2023

As Xolo Leap doesn't support businesses with more than one shareholder, our customers use set-ups where each individual starts and manages an OÜ with Xolo Leap. If you decide to partner up with someone in a (freelance) project/business venture, you need to agree on how to share revenues, who invoices the customer, and which OÜ invoices the other to distribute revenues as agreed.

This way freelancers can partner up and split businesses as needed during their business life cycles.

Let's assume the following example:

  1. Two freelancers operate their own businesses independently of each other. Sometimes they sell and deliver joint projects to customers.
  2. For ease of administration, they operate separate Xolo Leap provided business accounts registered in Estonia.
  3. The two freelancers have agreed on a new project with a customer and plan to deliver the project together.
  4. The freelancers have agreed that in the project Freelancer A is the main contractor to the customer and Freelancer B is the subcontractor to Freelancer A.
  5. Both freelancers perform 50% of the work.

Step 1 - Freelancer A invoices the customer for work performed

  • Freelancer A sends invoice X to the customer for €1 000 + 0% VAT (as in most cases assuming export from Estonia and the customer is from the EU and has a valid VAT number or the customer is from outside the EU).
  • Based on invoice X the customer transfers €1 000 to Freelancer A's business bank account
    • Balance Freelancer A: €1 000
    • Balance Freelancer B: €0

Step 2 - Freelancer B invoices Freelancer A for his part of the work performed

  • Freelancer B sends invoice Y to Freelancer A for €500 + €100 (Estonian VAT) = €600
  • Based on invoice Y Freelancer A transfers €600 Freelancer B.
    • Balance Freelancer A: €400
    • Balance Freelancer B: €600

Step 3 - Freelancer A reimburses VAT

  • Balance Freelancer A before: €400
  • Based on invoice Y, Freelancer A reimburses (+) €100 (Estonian VAT) from the tax authority.
    • Balance Freelancer A: €500

Step 4 - Freelancer B pays VAT

  • Balance Freelancer B before: €600
  • Based on invoice Y, Freelancer B pays (-) €100 (20% VAT) to the tax authority.
    • Balance Freelancer B: €500

In summary, the project has been completed and the customer paid €1 000 for it. Both freelancers received €500 each for the work they performed.

Admin tasks related to invoicing, accounting, and VAT compliance are executed by Xolo as a feature of our "Professional" plan.

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