Now that we can perfectly understand in which cases you will be considered tax resident in Spain – Tips for Vortex Members: what is tax resident in Spain) and its implications – Implications according to Tax Residency status – it is time to learn about the factors we need to take into account when deciding whether to set up a company (an SL in Spain) or register as Self-Employed (autónomo in Spain).
In order to make the right decision, several factors have to be taken into account:
Liabilities: The main disadvantage of self-employment is its unlimited liability. A self-employed person is liable for any debt that his or her activity may generate against third parties with all his or her assets, whereas if you are a partner in a company, you are only liable with the money you contributed to set up the company. a company, you are only liable with the money you contributed to set up the company.
Time spent to set up a company: You can be self-employed in 1 day, on the other hand, setting up a SL can take between 5 and 30 days. to register as a self-employed person, you only need to have a digital certificate. once you have it, you can complete the formalities in just one day. setting up a company, on the other hand, is more costly, as you have to complete all the following formalities, which can take 5 to 30 days:
- apply for the company name
- deposit the share capital in a bank.
- go to the notary to incorporate the company.
- to pay the regional incorporation taxes.
- Register the company in the Commercial Register.
Management costs: in a company, the management costs are higher due to the extra obligations to be fulfilled. companies have to comply with accounting and registration obligations that self-employed workers do not, such as keeping accounts, filing annual accounts or legalising accounting books. This is why the costs associated with the administration of this are higher, as the procedures to be completed are more numerous.
Minimum capital stock: to set up an SL requires the contribution of a minimum share capital of 3,000 euros, while as a self-employed person no contribution is necessary
Taxes:. The self-employed is taxed by the IRPF which is a progressive tax. The SL is taxed by the Corporate Tax with a fixed tax rate. Therefore, the self-employed will be penalised when their net profit increases, since, being a progressive tax, the higher the level of net profit, the higher the tax rate will be. on the other hand, the company, the tax rate will always be the same, irrespective of its level of profits
Access to bank financing: limited liability companies have easier access to bank loans.
Commercial branding: SL offer a more professional image of a larger and more solvent company.
Remember that if you have any doubt about your taxes or you need personalized tax advice to know when, how, and what taxes you should pay according to your particular case, as well as the possible deductions and bonuses that will allow you to save money, do not hesitate to contact our partners Gestion Valenciana, a group of expert lawyers and accountants in Valencia