SETTING UP A LIMITED COMPANY OR BECOMING SELF-EMPLOYED

Accelerate your business with these expert tips "Creation of a Limited Company or Self-Employed". Analyse and discover this TIP!

To be eligible for the EOI subsidy and many other public subsidies, you must be registered for business tax, for which you must have been set up as a self-employed person (individual entrepreneur) or limited company (SL), always before applying for public subsidies.

Self-employed or SL; which decision is the right one?

Even if you are not going to apply for subsidies, as soon as you plan to make a lot of expenses or invoice clients, you have to make the decision and register. It is normal to start as a self-employed person and when you reach a volume of income of more than 30,000 euros, change to an SL in order to pay less tax and run fewer risks. Now we are going to give you more reasons why you should value starting as an SL. Being self-employed has its advantages and disadvantages, as does setting up an SL, so let's start this TIP by comparing each situation.

Initial contribution:

• A self-employed person does not have to make any initial outlay.
• An SL must contribute 1 euro (formerly 3,000 euros) plus the associated incorporation fees.

Thus, the new law creates and grows, and has made the differences disappear.

Economic protection:

A SL limits your liability for a possible financial problem (debts). In this case, you are only liable with the money contributed to the company in the capital, i.e. you are not liable with your personal assets, unless you have been negligent in your management!!! Something that does not happen in the self-employed, that, in a case such as the one cited, respond with their savings and personal assets (the second chance law brings some interesting protections that save your primary residence and the SMI part of your salary).

Formalities:

At the bureaucratic level, An SL is more cumbersome to set up than registering as a self-employed person. In addition, each of these procedures involves a cost, for example, payment to the notary and registration in the case of the SL 80? + 50?... in mentorDay we take care of helping you in the process.

Taxation and accounting:

The The self-employed are taxed with the personal income tax return where there are many expenses that are not deductible. A SL can deduct more expenses and therefore declare less profit. The requirements in terms of SL accounting are more demanding. In both cases it is advisable to hire an accountant, tax and labour advisor.

Brand image:

As a society, An SL conveys a sense of greater financial security, which is interesting for attracting sources of finance and growing the business. A freelance can be retire and dismiss its workers...an SL does not retire and if you want to close the SL you will have to pay severance to the workers. Interesting for entrepreneurs with grey hair, with years... close to retirement...!!!!

Does it cost more to be self-employed or to set up an SL?

Given the information presented so far, formalising the business as an SL is undoubtedly more expensive than doing so as a self-employed person. This is because, to the initial capital for its creation, we must also add that its management is more complex and, therefore, more expensive. At mentorDay, when we create a company we take care of everything, so you won't even have to worry about the company statutes, something that usually causes headaches when there are several partners.

However, if there are no financial or commercial reasons to the contrary, it is advisable to register as self-employed. In addition, you can now take advantage of the flat rate (80 euros per month), which will help you to take your first steps in a simple, convenient and cheap way. But if the success of the business is unstoppable and the numbers prove it, the right thing to do is to change to an SL or an SLU (limited company - one partner).

How much does it cost to set up a business as a self-employed person?

Self-employed or SL?

To choose one of these two options, let's see how much it costs to set up a company as a self-employed person and as an SL. Registering as a self-employed person does not involve any costs. It is only necessary to file form 036 or 037 with the tax authorities to register the activity. A company, on the other hand, involves more paperwork and more money, as the 036 form must also be added to the incorporation of the company before a notary.

THE COSTS OF INCORPORATION INCLUDE:

1. Company name in the Commercial Register.
2. Initial capital, which is blocked in the bank until the deed is formalised.
3. Notary fees.
4. Registration in the Commercial Register.
5. Consultancy fees.
6. In addition, there are the costs of setting up an SL over the course of a year. In this case, we are talking about the self-employed fee, corporate tax and tax and accounting advice.

Is it better to become an SL or to remain self-employed?

We could say that the ideal is to be self-employed and, above a certain amount of income, it is advisable to change to an SL. This amount can be set at 40,000 euros of annual income. The reason for this is that an SL does not have to pay personal income tax, but only corporation tax, which is 25% and in the case of the start-up certificate only 15%.

SL without registering as self-employed

An SL is a commercial company in which the liability of the partner(s) is limited to the capital contributed. Most of the time, the incorporation of an SL is nothing more than the evolution and success of a self-employed person who has started a small business. In addition, this figure allows them to enjoy more favourable tax treatment.

For this reason, many people think that it is not possible to work as an employee in an SL and that it is necessary to become self-employed. However, current regulations state that it is compulsory for the company to have an administrator, chosen from among the partners, and that this administrator must be self-employed.

Who should be self-employed in an SL?

THIS OBLIGATION IS DETERMINED BY 2 CRITERIA THAT MARK THE INVOLVEMENT IN SOCIETY:

1. The percentage shareholding.
2. Whether or not the partner in question is a manager.

A SHAREHOLDER OR WORKER OF A SL IS OBLIGED TO REGISTER AS SELF-EMPLOYED IN THE FOLLOWING CASES:

1. It holds more than 50 % of the capital, even if it does not exercise management functions.
2. Holds less than 50 % of the capital, but lives with immediate family members who are partners and the sum of the shares exceeds 50 %.
3. It holds at least 25 % of the shares and exercises management functions.
4. In the other cases that are not reflected here, it is not necessary for a working partner to be registered as self-employed. If a partner does not have 25 % of capital and performs managerial tasks, he/she can opt for the assimilated general regime.

On the other hand, a director of an SL with a 33 % shareholding who is not a manager will pay contributions under the General Workers' Scheme.

WHY DO THEY HAVE TO BE REGISTERED BEFORE APPLYING ELECTRONICALLY TO THE EOI?

The new law "create and grow" foresees the creation of a type of company for 1 euro, but I have confirmed with a notary that they have not yet prepared the application so that it can be done... and that the CIRCE (MINECO) application competes with the notary's application. The entrepreneur has to pay the flat rate of 80 euros per month and must cancel at the end of the programme. (see+)  (see+)

TO REGISTER YOU CAN USE OUR FREE PAE SERVICES OR THE DISCOUNTS OFFERED BY COLLABORATING COMPANIES:

• Infoautonomists (+).
• Qonto (+).
• mentorDay is a PAE point (+).