Advantages Limited Company vs Freelance

At ACCOMPANY, we specialize in establishing and managing limited companies for foreign investors and entrepreneurs in Spain. Our goal is to assist you in selecting the right business structure to meet your needs and objectives.

Introduction

At ACCOMPANY, we specialize in setting up and administering limited companies for foreign investors and entrepreneurs in Spain. While we don’t assist sole traders or freelance professionals, we understand the importance of selecting the right business structure. Here’s a comprehensive guide to help you understand the differences and advantages between operating as a Freelancer and a Limited Company in Spain.


Legal Structure:

Freelancers operate as individuals, with no legal distinction between the owner and the business. This means that the owner is personally responsible for all aspects of the business, including debts and liabilities.

Limited Companies, on the other hand, exist as separate legal entities. This separation means that the company itself is responsible for its debts and liabilities, protecting the personal assets of the shareholders.

 

Taxation:

Freelancers are subject to personal income tax on all earnings. This means that the owner is taxed individually for the profits generated by the business.

Limited Companies are taxed separately from their owners. They have their own tax identity and are responsible for paying taxes on their profits. This can often lead to potential fiscal advantages, especially for higher income levels (over €60,000 annually).

 

Liability:

Freelancers have unlimited liability, which means that the owner is personally liable for all debts and obligations of the business. This includes any legal claims or lawsuits brought against the business.

Limited Companies offer limited liability to their shareholders. This means that the personal assets of the shareholders are protected, and they are not personally liable for the debts and obligations of the company.

 

Image and Financing:

Freelancers may face challenges in terms of image and financing. Operating as an individual may not convey the same level of professionalism as a registered company. Additionally, accessing finance and subsidies can be more difficult for freelancers.

Limited Companies often project a more professional image. Being a registered entity can instill confidence in clients, suppliers, and investors. Limited Companies also tend to have better access to financial resources and may find it easier to secure financing or attract investors.

 

Share Capital Transactions:

Limited Companies have the advantage of being able to engage in various financial transactions, including mergers, acquisitions, and share capital operations. This flexibility can be beneficial for growth and expansion opportunities.

 

Retained Profits:

Limited Companies have the ability to retain profits tax-free within the company. These retained profits can then be reinvested in the business for growth and development purposes. This tax advantage can be significant for companies looking to reinvest their earnings.

 

Tax Planning:

Limited Companies offer opportunities for tax planning that may not be available to freelancers . This includes strategies such as income splitting, which can help minimize tax liabilities. Limited Companies may also benefit from tax incentives and deductions, such as those related to research and development or investment in certain industries. Additionally, Limited Companies can often avoid paying inheritance and donation tax, providing further financial advantages.


How Can ACCOMPANY Help

At ACCOMPANY, we understand the complexities involved in choosing the right business structure. Our expert team is dedicated to providing comprehensive support and guidance to foreign investors and entrepreneurs in Spain. Our services include:

  • Legal advice and assistance with company incorporation.
  • Tax planning and compliance services tailored to your business needs.
  • Accounting and financial management support to ensure accuracy and compliance with Spanish regulations.
  • Assistance with share capital transactions, mergers, acquisitions, and other financial operations.
  • Ongoing support and consultation to help you navigate the complexities of operating a Limited Company in Spain.

Conclusion

In conclusion, the decision between operating as a Freelancer or a Limited Company in Spain depends on various factors such as taxation, liability, image, financing, and long-term business goals. At ACCOMPANY, we are committed to assisting foreign investors and entrepreneurs in making informed decisions about their business structures.

Our expert team provides comprehensive support and guidance, including legal advice, tax planning, accounting services, and assistance with financial transactions. With our help, you can establish and grow your business in Spain with confidence. Contact us today to learn more about how ACCOMPANY can support your business endeavors.

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The information contained herein is of a general nature, and subject to changes. Applicability to your specific situation should be determined through consultation with our tax or legal advisors.