"Should I set up an SL?" is one of the questions Spanish freelancers ask most once things start going well. There's no magic figure above which a company always wins. It depends on how much you earn, how much of it you need to live on, and how much risk you carry.
What you can do is compare the two side by side. These are the four differences that matter: liability, tax, social security and paperwork. Everything below is for a business based in Spain.
Liability: what's on the line
As a sole trader (autónomo), you and your business are the same person. The Spanish Civil Code puts it in one line: a debtor is liable for their obligations with all their present and future assets. If the business owes money, your personal assets are exposed too.
In a limited company (sociedad limitada, SL), the partners aren't personally liable for the company's debts. What you risk is what you put in.
The minimum share capital for an SL is now €1. But while it stays under €3,000 two rules apply: the company must put at least 20% of its profit into a legal reserve until it reaches that figure, and if it's wound up unable to pay its debts, the partners are jointly liable for the gap between €3,000 and the capital they put in.
Tax: income tax versus corporate tax
A sole trader pays personal income tax (IRPF) on their profit. The scale is progressive: each slice of income has its own rate, and the higher slices pay more. It has a state part and a regional part set by each autonomous community. This is the state part:
| General taxable base | State rate |
|---|---|
| Up to €12,450 | 9.5% |
| €12,450 to €20,200 | 12% |
| €20,200 to €35,200 | 15% |
| €35,200 to €60,000 | 18.5% |
| €60,000 to €300,000 | 22.5% |
| Over €300,000 | 24.5% |
Your region's scale is added on top.
A company pays corporate tax (Impuesto sobre Sociedades) on its profit, at a rate that doesn't climb with profit, apart from the bands for small businesses. For tax periods starting in 2026:
| Type of company | 2026 rate |
|---|---|
| General | 25% |
| Turnover under €1 million in the previous year | 19% on the first €50,000 of taxable base; 21% on the rest |
| Other small companies meeting article 101 of the Act | 23% |
| Newly created, in the first profitable year and the next | 15% |
The rates drop a bit further in 2027: 17% and 20% for companies with turnover under €1 million, and 22% for the other small companies. They don't apply to holding-type companies that manage assets rather than run a business (entidades patrimoniales).
The part people forget
Profit kept in the company belongs to the company, not to you. To spend it on your life you have to take it out, and that's taxed again in your income tax:
- If you pay yourself as a director, it's employment income.
- If you pay out dividends, they're taxed in your income tax too.
So the fair comparison isn't "19% versus my income tax rate". It's how much you pay in total on the money you actually need to take out.
Example
Example with made-up figures, simplified, just to show the scale.
A small company, with turnover under €1 million last year, has a taxable base of €60,000 in 2026:
- €50,000 at 19% = €9,500
- €10,000 at 21% = €2,100
- Corporate tax: €11,600
But the remaining €48,400 sits inside the company. Whatever you pay yourself from it goes through your income tax.
As a sole trader with a general taxable base of €60,000, the state scale alone would come to €8,950.75 before subtracting the personal and family allowance. The regional scale comes on top. Note that business profit isn't the same as taxable base: social security contributions, other expenses and reductions come off first.
You can't simply set one number against the other. What they do show is that if you leave a good part of the profit in the business, the company starts to make sense.
Social security
A sole trader pays into the self-employed scheme (RETA). Since 2023 contributions depend on the net income you expect, and are later adjusted to what you actually earned.
In a company, whoever runs it and has effective control also pays into the RETA. Spain's Social Security Act presumes that control in several cases, including:
- you own at least half the capital;
- you own at least a third;
- you own at least a quarter and have management duties;
- at least half the capital is held by partners who live with you and are your spouse or relatives up to the second degree.
In other words, setting up an SL doesn't usually get rid of your self-employed contributions if you're the one running it.
Paperwork
| Sole trader | Limited company | |
|---|---|---|
| Setting up | Register with the Tax Agency and the RETA | Public deed and entry in the Commercial Registry |
| VAT | Form 303 | Form 303 |
| Tax on income or profit | Form 130 each quarter (unless exempt) and the annual return | Form 202 in April, October and December, and form 200 in July |
| Books | Record books; full accounts under the Commercial Code for commercial businesses under normal direct assessment | Full accounts |
| Annual accounts | No | Prepared within three months of year-end and filed at the Commercial Registry within a month of approval |
The 202 payments on account are made in the first 20 calendar days of April, October and December. Form 200 is filed in the 25 calendar days after the six months following year-end; if the financial year is the calendar year, that's July.
When it's usually worth a look
Not a rule, but these situations tend to make the question worth asking:
- You earn well above what you need to live on and can leave profit in the business.
- Your work carries risk and you don't want your personal assets on the line.
- You're starting the business with other people.
- Your clients or suppliers prefer dealing with a company.
These tend to point the other way: you need nearly everything you earn each month, your turnover is low, or you don't want to keep full accounts and file annual accounts.
Before you decide, run the numbers with your accountant using your real figures.
How Factuly handles both
Factuly works for either. When you start, you choose whether you invoice as a sole trader or as a company, and you can change it later in your tax details.
- As a sole trader, your invoices carry withholding where it applies, and Factuly works out forms 303 and 130 each quarter, plus the 111 if you withhold from others.
- As a company, your invoices carry no withholding, and Factuly works out form 303, the 202 payments on account and the 200 at year-end.
Either way, it tells you every day how much is yours and how much to set aside. See Factuly for companies and Taxes and quarterly plan.
