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Your daily Spanish Law reporter. Have it with a cafe con leche. www.costaluzlawyers.es

Business tip 3. Self-employed or limited liability company?
18 February 2010 @ 08:07



There are two options to choose when someone wants to start a business in Spain:

1) Be a self-employed person.
2) To create a commercial company: usually the most common form of company is the Limited Partnership.
    
    Before you decide:

    Definitions and main charactristics:

    SELF-EMPLOYED: In Spain, a self-employed or sole proprietor is the natural person who carries on a regular basis,  a personal and direct economic activity with lucrative purposes, not subject to work contract and with the possibility of hiring workers.
    
It is assumed the status of self-employed if you have ownership of an establishment open to the public as owner, tenant, or lessee.
    
The self-employed has an unlimited liability, responding to business activities with all its present and future assets, so there is no separation between personal wealth and enterprise assets.
    
The self-employed person is obliged to pay Social Security fees from the first day of the month that he began its activity and this obligation continues until the employee is active, even during situations of temporary disability, risk during pregnancy, risk during breastfeeding, periods of maternity or paternity leave. The compromise ends the last day of the month in which the employee ends his self-employment.
    

LIMITED LIABILITY COMPANY: Organised to give its owners limited liability. The capital of the company consists of contributions from all partners and is divided into equal shares, cumulative and indivisible, which can not be incorprated to negotiable shares and nor be named shares.  Partners are not personally liable for debts, the liability is limited to capital.
    
SELF EMPLOYED OR LIMITED?
    
    There are different  economic, legal or images sake reasons in order to choose between one or other form of trading. You need to choose the legal form that best suits your needs.
    
Disclaimer:

    In the case of a self-employed, the liability is unlimited,  as there is an absence of divission between  company and personal assets . While limited liability companies is limited to the capital. Thus, when a limited company goes bankrupt, only respond with his possessions, and never will with the properties of their owners.

    Financial requirements:

A limited requires a minimum capital of € 3006.00. In this case when it comes time to grant a loan, banks require the partners or directors to  provide personal guarantees.

    Taxes:

     Self-employed individual can obtain directly the benefits of their business and be taxed in the income tax. However, the limited is taxed through corporation tax.

    Number of members:
    
    More than one person trading together usually makes a company, although  law envisages the possibility of one-person limited companies, consisting of a single person or entity.

    Social Security and Taxes formalities:

    To commence a business as a sole trader is much faster and easier than opting for a limited company. As a self-employed you just need to register within the Treasure Department and start paying taxes and social security fees. As a limited company, you need to first establish the company- through the granting of a Notary deed and register it in the Commercial Registry- and also perform registration at Taxes and Labour departments, basically.
    
    Some independent proffessional can pay fees to the Proffessional Mutual Benefit Society instead of fees to the Social Security.
    
    Bases for calculation of the Social Security fees are published by the Ministry of Finance each year. Therefore, the worker must pay a monthly fee, which varies according to the chosen base. The larger the base, the higher the fee. The type of base and fee wil also have an impact on the volume of coverage that Social Security provides for sickness, disablement and retirement.

    CONCLUSIONS:
 There are not automatical criteria for deciding between self-employed and limited company. The most  advantageous option depends on the specific circumnstances of each one.
    
    A tip: If you are starting an activity and are not sure of its viability, better to choose to be a self-employed with a low base and see what happens.... who knows? You may become a multinational company in the future...

By Jesús Castro and María L de Castro

 

Tossa del Mar by Brieanddylan at Flickr.com



Like 0




7 Comments


Michael said:
03 March 2010 @ 13:49

Excellent info i was looking at starting a business but found the startop fees very high will definately look at the self employed root.


Maria said:
03 March 2010 @ 13:57

Please contact us if you need any further information.
Best,
Maria


KUMAR SURENDRA said:
04 October 2011 @ 08:19

Madam,
I am an Indian Citizen (Graduated in law in 1976 at India), at present living in Nigeria at work permit. I want to start trading at Spain to manage by myself. Should I start as self employed or single shareholder limited company? How much minimum money to involve, so that I can get self employed visa or business visa?
can you help me forming my legal entity.Please mention your fee also for it.Thanks
Kumar S


KUMAR SURENDRA said:
04 October 2011 @ 08:34

Madam,
I am an Indian Citizen (Graduated in law in 1976 at India), at present living in Nigeria at work permit. I want to start trading at Spain to manage by myself. Should I start as self employed or single shareholder limited company? How much minimum money to involve, so that I can get self employed visa or business visa?
can you help me forming my legal entity.Please mention your fee also for it.Thanks
Kumar S


Maria said:
04 October 2011 @ 10:32

You need to submitt a project before the Work Authorities and be approved. Please email us if you need more information.

Kindest regards,

Maria


shoeb akhtar said:
18 December 2011 @ 18:18

i am a indian citizen living in malawi with residence permit there . i am self empl. here also , done my b.tech from india and now currently design and manufacturing machine/automobile rubber/rubber to metal bounded parts. i wold like to o
pen my single ownership firm in spain . please advice me .


regards shoeb


Maria said:
19 December 2011 @ 09:59

Dear Shoeb:
Please email me here ( web@costaluzlawyers.es) for further advise on company setting in Spain.
Kindest regards,
Maria


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