Freelancer vs Limited Company in Spain: When Does an SL Make Sense?

It's the question every freelancer asks when income grows: should I set up an SL (limited company)? The answer is mathematical, but also strategic.

The key difference: taxes

Freelancer (autonomo): you pay IRPF (progressive rate, between 19% and 47%) on net profit. SL: Corporate Tax (Impuesto de Sociedades) is 25% (or 15% for the first 2 years for new companies).

At what income level does an SL make sense?

General rule: when your net profit consistently exceeds EUR 40,000-50,000 per year, you start paying more IRPF than you would in Corporate Tax. Above that threshold, an SL can be more tax-efficient.

But an SL has fixed costs a freelancer doesn't

Notary and registration: ~EUR 1,500 to set up. Monthly accounting: EUR 100-200 with an accountant (mandatory formal bookkeeping). Annual accounts filing at the Mercantile Registry. If you pay yourself as administrator: same autonomo social security contribution as before.

Advantages of staying a freelancer

Less bureaucracy and simpler accounting. Invoicing is just as professional with good software. No setup costs or mandatory monthly accounting.

When an SL makes sense

Net profits consistently above EUR 40,000/year. You need partners or investors. You want to limit personal liability for debts. Your activity requires B2B contracts where corporate image matters.

Conclusion: Most freelancers don't need an SL until their income clearly justifies it. In the meantime, tools like k-factu make freelance invoicing as professional as any company.