Entrepreneur: Self-Employed Or Company?


Do you consider yourself a born entrepreneur? Do you have a business idea and want to carry it out? Initiative, commitment, passion and leadership are characteristics that every good entrepreneur must-have. But if you are determined to start and create your own company, you should be prudent and consider some factors so that your project goes in the right direction.

Entrepreneurship As A Freelancer Or Company?

One of the first decisions you will have to make when setting up your company is the choice of its legal form, that is, the identity that it will legally assume.

This decision depends on different aspects, such as the number of partners, capital or legal responsibility. In addition, depending on the type of activity and the business model you have chosen to undertake, you can benefit from one or other tax advantages.

Depending on your situation and the characteristics of the business, the legal form may be individual, corporate or cooperative. So before making any decision, it is essential that you carefully analyze the different legal documents in Spain for entrepreneurs and startups.

Currently, the Ministry of Economy recognizes up to 20 legal forms. However, the most common formulas in our country are summarized as autonomous (individual entrepreneur) and commercial company (legal person).

Minimum Initial Capital

As an entrepreneur, when creating a solo company, you have the option of registering as a freelancer. This legal form does not require any initial capital investment. 

However, it is necessary for the constitution of a limited company or a public limited company. The minimum share capital for incorporating a limited company is € 3,000, and for a public limited company, it increases to € 60,000. 

On the other hand, registering as a freelancer is more straightforward and involves fewer bureaucratic procedures. To begin with, the cost of these procedures is free, unlike forming a company whose minimum value, if we talk about a limited company, is usually around € 500. These expenses include notary, agency and registration in the Mercantile Registry. 

To these costs must also be added the Social Security contributions, an aspect in which companies do not have the same discounts. In the case of the self-employed entrepreneur, the minimum Social Security fee is € 275, although it is possible to benefit from the flat rate of 50 euros. On the other hand, for self-employed companies, the price is € 357.

Responsibility For Debts

Upon registering with the RETA, the self-employed become sole and individual entrepreneurs, which means that they will have to take care of them with their assets in the event of possible debts. On the other hand, if, as an entrepreneur, you decide to establish a limited company, the liability will be limited to the company’s assets.

What Taxes Do I Have To Pay As An Entrepreneur?

Depending on the legal form you have chosen, you will also pay a series of taxes. In the case of VAT, the operation is very similar in one way or another. However, the self-employed must be taxed by the Personal Income Tax (IRPF), while companies will do so by the Corporation Tax (IS). 

It must be borne in mind that the tax bill in personal income tax can be much higher than in IS from a specific income scale. Let’s not forget that personal income tax is a progressive tax. 

Instead, the IS works with a fixed rate of 25%. Although to support the creation of companies, there is a reduced rate of 15% for entrepreneurs and newly created entities. 

If you still have doubts in this regard, the Ministry of Economy offers you an online tool to help you choose the legal form that best suits your company.

Help For Entrepreneurs

Many aids can help you start your project. Suppose you want to access some external financing. In that case, you should know that companies tend to have more facilities since they have more prestige and offer greater security and economic confidence to investors.

In addition to bank financing or crowdlending, there are some state subsidies. These are public aid granted by the Administration to promote the creation of companies.

Among the most prominent statewide found the aid to self-employment for women entrepreneurs and young entrepreneurs. In addition, it is also possible to capitalize on unemployment to start an activity on your own, either as a self-employed or self-employed company. 

You must bear in mind that these aids are constantly updated, so we recommend that you consult the website of the Directorate-General for Industry and SMEs for more information.

Accounting Is Also A Thing For Entrepreneurs

Suppose you consider yourself an entrepreneur and are determined to carry out a business idea. In that case, you should bear in mind that keeping the company’s accounting up to date may be somewhat more accessible for a freelancer. 

Companies must carry out complete control of their accounting, as they are obliged to present a book of inventories and annual accounts, as indicated in the General Accounting Plan. In addition to the journal book, minute book, partner registration book and the rest of the related fiscal books. 

Having good billing software can help you manage your business. You must bear in mind that you will have to take on particular management and accounting tasks as an entrepreneur.

Also Read: How To Start A Business From Scratch?

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