Self-employed or limited company: what really changes
There are many ways to organise a business, from a cooperative to a public limited company (sociedad anónima). The most widely used is the limited company (sociedad limitada, or SL), because it is simple and flexible. The choice always depends on what you need and what you want to achieve.
The big difference is liability. As a self-employed person (autónomo) you are liable for the debts of your business with all your assets, present and future, as laid down in Article 1911 of the Spanish Civil Code. In a limited company, in principle, the partners only risk what they contributed to the share capital. Properly run, the company is a shield for your home and your savings.
In return, it demands more: bookkeeping in line with the Código de Comercio (Commercial Code), corporation tax, annual accounts, statutory books and general meetings. Running a company is more complex than working as a self-employed person, but the self-employed are more exposed to risk and, in principle, find it harder to grow, bring in partners or raise finance. There is no single answer: we look at it with your figures and your plans.
When the shield stops protecting you
Limited liability only works if the company is set up and run properly from a legal, tax, employment and accounting point of view. Otherwise, all it brings you is stricter obligations. These are the most common situations in which your personal assets become exposed again:
- Personal guarantees. If you guarantee a loan, a lease or a credit line for the company, you are personally liable with your own assets.
- Directors’ liability. The Ley de Sociedades de Capital (the Spanish Companies Act) allows claims against a director for damage caused through negligence. In addition, if the company falls into a ground for dissolution, for example because of heavy losses, and the director does not call a general meeting or seek dissolution or, where appropriate, insolvency proceedings (concurso de acreedores) within the legal deadline, the director may be personally liable for the debts incurred afterwards.
- Debts to Hacienda and the Seguridad Social. The Ley General Tributaria (General Tax Act) provides that, in certain cases, the company’s tax debt can be passed on to its directors.
- Mixing assets. Mixing personal and company accounts, or using the company to avoid obligations, can lead the courts to “lift the corporate veil” and look at who is behind it.
Minimum share capital and other recent changes
Since Ley 18/2022, on the creation and growth of companies, you can set up a limited company with share capital of one euro. However, while the capital is below €3,000, the law requires part of the profits to be set aside for the legal reserve and, if the company is wound up without enough assets to pay its debts, the partners are jointly and severally liable for the difference between €3,000 and the capital they subscribed.
There is also online incorporation with standard articles of association, which speeds up the process. It is useful when there is a single partner and a simple business. If there are several partners, it is usually advisable to draft your own articles.
Day-to-day management: where protection is usually lost
Many companies are set up properly and then neglected: meetings without minutes, accounts not filed, directors whose term has expired. The ordinary general meeting must be held within the first six months of each financial year to approve the accounts, and the accounts must be filed at the Registro Mercantil (Companies Registry) within the month following their approval. If they are not filed, the Registry closes the company’s record and will not register most new documents, and fines may also follow.
That is why I offer a complete service: I keep the minute books, act as secretary at general meetings, handle contracts with customers, contractors and employees, and assist in administrative and court proceedings. I work closely with you, as one more part of your business. You can do this through comprehensive legal advice or start with an online consultation to tell me about your project.
