Self Employed or Limited (SL) Company?

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30 Sep 2010 00:00 by mariadecastro Star rating in Algeciras (Cadiz). 9000 posts Send private message

Legal Questions? Speak to Maria Direct

 Legal tip 351. Self employed or limited (SL) 


 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 assets, 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.

No initial capital is required to be registered both in Social Security system and Taxes for a  self employed. 


Self-employed individuals  obtain directly the benefits of their business and are taxed in the income tax. However, the limited is taxed through corporation tax.  Sometimes corporation tax is more advisable than income tax levels when this are very high.

 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. 

 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

Castellar.Houses inside the Castle by Roberto Pecino at



Maria L. de Castro, JD, MA



El blog de Maria

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01 Oct 2010 09:52 by EOS Team Star rating in In Spain of course!. 4017 posts Send private message

EOS Team´s avatar

Thanks for this, it's the best comparison I've seen in a while. 

This question often comes up!



Schools in Spain Guide | The Expat Files | Learn Spanish | Earn a living in Spain

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01 Oct 2010 16:48 by mariadecastro Star rating in Algeciras (Cadiz). 9000 posts Send private message

Legal Questions? Speak to Maria Direct

 Thank you always Justin!



Maria L. de Castro, JD, MA



El blog de Maria

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04 Oct 2010 19:28 by John Wolfendale Star rating in Granada. 57 posts Send private message

Someone once said to me if you think its going to be successful then opt for a limited company which is good advice.

Ltd companies as conceived in the UK are similar but not exactly the same as SLs in Spain.

One key difference is that the administrator of an SL can be held liable for commercial debts under certain circumstance (there's a formula related to paid up capital and the timing of when the debt was incurred) and are, as I understand it, always liable for debts to the state (hacienda and social security). "Negligence" is a given under these circumstances.

It is far more difficult for directors of UK companies to be found negligent or persued for commercial debts or those to the state. Unless they have actually pocketted the money they can walk away from it.

This makes winging it in Spain far more hazardous from a cash flow perspective.

I daresay Maria could make this snippet of information more acurate and that there are other differences worth noting for the entrepreneur with a UK perspective who is thinking of setting up in Spain.

Actually its a good idea for a book or at least an article.

John Wolfendale Tel 958990964 Mobile 606380244

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