For most freelancers starting out in Spain, registering as an autónomo is the default choice. The setup is faster, cheaper and involves less administrative work. You register with the Spanish Tax Agency (Agencia Tributaria) and Social Security (Seguridad Social) and you're ready to go.
Key characteristics of an autónomo:
- Simple Setup: Registration is straightforward and can be completed quickly. In fact, services like Facturaz can get you registered for free within 24 hours.
- Lower Initial Costs: There's no minimum capital investment required to become an autónomo. Your main upfront costs are the monthly social security contributions (cuota de autónomo).
- Direct Control: You are the business. All decisions, profits and losses are yours alone.
- Progressive Taxation: Your business income is taxed as personal income through the IRPF (Impuesto sobre la Renta de las Personas Físicas). The tax rates are progressive, meaning they increase as your income grows, ranging from 19% to 47%.
The simplicity of the autónomo structure makes it ideal for individuals with moderate income who want to test a business idea or maintain a flexible, low-overhead operation.
Signs it's time to consider an SL
As your business grows, the advantages of the autónomo structure can start to diminish. The very things that made it attractive may give way to higher tax bills and greater personal risk. Here are the key signs that it might be time to think about forming a Sociedad Limitada.
1. Your annual earnings exceed €60,000
This is the most common and compelling reason to switch from autónomo to SL. As an autónomo, your profits are taxed at progressive IRPF rates. Once your net income (revenue minus expenses) climbs above €60,000, your marginal tax rate will likely be higher than the flat 25% corporate tax rate (Impuesto de Sociedades) that applies to most SLs.
- Autónomo: You pay IRPF on profits, with rates up to 47%.
- SL: The company pays a flat 25% tax on its profits. You then pay yourself a salary (nómina), which is taxed as personal income (IRPF).
By structuring your remuneration as a mix of salary and future dividends, you can often achieve significant tax savings compared to paying the higher-end IRPF rates on all your business profits.
2. You want to protect your personal assets
As an autónomo, there is no legal distinction between you and your business. This means you are personally liable for all business debts and obligations. If your business runs into financial trouble, your personal assets like your home, car and savings could be at risk. This is known as unlimited liability.
A Sociedad Limitada, on the other hand, is a separate legal entity. This creates a "corporate veil" that separates your personal finances from your business finances. The liability of the owners (shareholders) is limited to the amount of capital they invested in the company. If the SL incurs debt, creditors can only claim against the company's assets, not your personal ones. This protection becomes crucial as your business takes on larger projects, hires employees or incurs significant debt.
3. You plan to raise capital or bring on partners
If your long-term plan involves seeking investment or bringing partners into the business, an SL is the appropriate structure. An SL has a formal share structure, making it easy to issue shares to new investors or partners. This is not possible as an autónomo, where the business is legally tied to you as an individual. An established SL also appears more credible and stable to banks and investors, making it easier to secure loans or funding for expansion.
4. You need to improve your professional image
While being an autónomo is perfectly respectable, operating as an SL can project a more professional and established image. Some larger corporate clients may even prefer or require their suppliers to be registered as a limited company. Having "SL" after your business name can enhance your credibility and open doors to bigger contracts and opportunities.
Making the switch: from autónomo to SL
Transitioning from an autónomo to an SL involves a formal legal process. You'll need to dissolve your autónomo registration and establish a new company. The main steps include:
- Reserving the Company Name: Choose a unique name for your SL and register it with the Central Mercantile Registry (Registro Mercantil Central).
- Opening a Company Bank Account: Deposit the minimum share capital of €3,000.
- Drafting the Bylaws (Estatutos Sociales): This document outlines the rules governing the company.
- Signing the Deed of Incorporation: This must be done before a public notary.
- Registering the Company: File the deed with the Mercantile Registry and obtain a tax identification number (NIF) from the tax office.
The process is more complex and costly than registering as an autónomo, but the long-term benefits can be substantial for a growing business.
