One of the main challenges when setting up a business is deciding whether to incorporate a limited company or be self-employed. Although there are other legal forms, these are usually the most chosen among those who start a business. The decision for one or the other depends on the personal needs of each entrepreneur which are based on economic and commercial reasons. Knowing the differences between creating an SL and becoming self-employed will help you make a better decision. However, for those who still have doubts, Asesoria Madrid can provide more information and help the entrepreneur to make the right decision.
Main differences between
a limited company and being self-employedThemain differences between setting up a limited company and being self-employed can be divided into the following factors to be taken into account
- Incorporation: Becoming self-employed is a process that requires less investment than incorporating a company. In addition, the process is usually faster.
- Economic contribution: The creation of a limited company requires a minimum share capital of 3,000 euros; the self-employed person does not have to contribute this amount. However, the creator of the SL can dispose of this investment for any expenses that may be incurred.
- Liability: The self-employed person is liable with his own personal assets, while the company is liable with the assets contributed by his company.
- Accounting: The costs of operating a business as a self-employed person are lower than those of a limited company. In addition, the self-employed can probably benefit from certain discounts on their Social Security contributions.
- Tax burdens: Companies must pay Corporate Tax, which is set at 25%; the self-employed person pays Income Tax, which, unlike Corporate Tax, is not a fixed percentage and depends on the personal situation of the entrepreneur.
- Image: The limited company provides a more serious and professional image than being self-employed because it is backed by a greater investment and responsibility.
So, which is more convenient?The main differences between incorporating a limited company and being self-employed should serve as a starting point for making a decision. However, it will also depend on the professional activity you want to develop and what will be the turnover of the enterprise.
Many times, when starting from scratch, it is recommended to start as a self-employed person and, as the company grows, assess whether it is more convenient to incorporate a limited company. At the same time, starting directly with the limited company could have greater benefits to face a possible expansion of the business. Ultimately, it all depends on the project to be developed and the scope of it. Deciding between being self-employed or incorporating a limited company requires considering the differences of each legal form based on the fundamental aspects involved when starting a venture. On the other hand, it will depend on the project itself and future expansion plans.
If there are still doubts, consulting a professional will be the best thing to do.