Freelancer to Limited Company: When Should You Switch?

The question usually arrives as a turnover figure: “I invoice about €50,000 a year. Should I create a company?” It sounds precise, but turnover is the wrong number on its own. Two freelancers can invoice the same amount while one has €8,000 of profit and the other has €42,000. They do not face the same tax choice, cash needs or commercial risk.

There is no statutory turnover level at which a Spanish freelancer must become a limited company. The Corporate Enterprises Act defines the SL through its capital, legal personality and limited shareholder liability rather than an invoicing threshold. Corporate Enterprises Act, Articles 1–4 The familiar €40,000–€50,000 range is not a legal threshold and it is not a reliable tax answer. It is a sensible moment to run the figures because the business may now have enough profit, people, contracts or retained cash for the legal form to matter.

The decision should compare two complete systems. On one side, the individual declares business income through Personal Income Tax (IRPF) and owns the contracts, assets and liabilities directly. On the other, a Spanish sociedad limitada (SL) is a separate legal and tax person with its own accounts, Corporate Income Tax, governance and filing obligations. The owner then has a second tax question: how money moves from the company to them.

This guide is for an autónomo whose activity already works and may be outgrowing its original structure. It is not individual tax or legal advice. Residence, Autonomous Community, family circumstances, the nature of the activity, ownership, existing contracts and the way the transfer is documented can all change the result.

Start with profit and cash, not turnover

The useful figure is sustainable profit before deciding how to remunerate the owner. A strong quarter, a one-off project or invoices raised but unlikely to recur should not determine a structure that brings annual costs and formal duties.

Build a twelve-month comparison with these inputs:

• revenue that can reasonably recur;
• deductible operating costs;
• the owner’s necessary personal cash withdrawals;
• planned hires, finance and investment;
• company setup and annual administration costs;
• the tax treatment of salary or director remuneration, dividends and retained profit;
• assets, debts and contracts that must move; and
• the cost and risk of running two taxpayers during the transition.

The owner’s personal cash requirement often decides the result. If nearly every euro of profit must pay the mortgage and household bills, incorporation may add a company layer without leaving much capital inside the business. If a meaningful part can remain available for equipment, staff or working capital, the comparison starts to change.

The following are decision-making examples, not tax estimates:

“SL from €50,000” is weak advice. It substitutes one visible number for the figures that actually change the outcome.

What changes in the tax calculation

An autónomo includes net business income in their IRPF calculation. The general IRPF calculation applies the state scale in Article 63 and the Autonomous Community scale in Article 74; the actual result depends on the taxpayer’s complete return. Personal Income Tax Act, Articles 63 and 74 A company instead calculates its own taxable profit and pays Corporate Income Tax. Even so, neither description tells you which route leaves more spendable cash.

For tax periods beginning in 2026, a qualifying company with prior-year net turnover below €1 million applies 19% to the first €50,000 of taxable profit and 21% to the remainder, unless a different rate applies. Corporate Income Tax Act, Article 29 and transitional provision 44

Those are rates on the company’s taxable base, not on its invoices and not necessarily on accounting profit. Take an eligible micro-company with a taxable base of €60,000 in a 2026 period, assuming no deduction or special rate changes the calculation. The gross company charge would be €9,500 on the first €50,000 plus €2,100 on the remaining €10,000: €11,600. That does not include the personal tax payable when the owner receives remuneration or dividends. It also changes if deductible owner remuneration has already reduced the company’s taxable base.

The 15% rate is frequently modelled when it should not be

The Corporate Income Tax Act grants a 15% rate to qualifying newly created entities carrying on an economic activity for the first profitable period and the following period. The same provision says an activity is not treated as newly started where an individual carried it on during the year before incorporation and that person will own more than 50% of the new entity. Corporate Income Tax Act, Article 29

That exclusion directly affects the common case in this article: one freelancer transfers the existing business to an SL they control. A forecast that simply applies 15% because the company has a new tax number may understate the bill. The activity, previous operator, ownership and group position must be checked first.

Company money is not personal money

Once the SL invoices the work, those receipts belong to the company. The owner can receive money through a properly documented route, such as employment or professional remuneration where appropriate, remuneration for the office of director, expense reimbursement, loan repayment or dividends. Each route has its own corporate, personal tax and company-law treatment.

The company’s articles are not a decorative formality here. Under Article 217 of the Corporate Enterprises Act, the director’s office is unpaid unless the articles provide otherwise and state the remuneration system. Corporate Enterprises Act, Article 217 Transactions between the company and a shareholder or director may also fall within the related-party rules and must be valued at market value for Corporate Income Tax. Corporate Income Tax Act, Article 18

A misleading model compares an autónomo’s top marginal IRPF rate with one Corporate Income Tax rate and calls the difference a saving. Follow the cash all the way instead: company profit, company tax, owner remuneration, dividends if any, personal tax, Social Security, annual compliance and the amount left inside the SL.

A limited company becomes more plausible when profit is stable, part of it can remain in the business, commercial risk is growing and the owner is ready to maintain separate company governance and accounts. This is a decision inference from the separate legal, capital and governance framework in the Corporate Enterprises Act, not a statutory test. Corporate Enterprises Act, Articles 1–4 It becomes less compelling when profits are volatile, almost all cash must be withdrawn or the decision is driven solely by a headline rate.

What it costs to create and maintain the SL

Spanish law allows an SL to be incorporated with capital of €1. Until capital plus the legal reserve reaches €3,000, at least 20% of profit must go to the legal reserve. If the company is liquidated without enough assets to pay its obligations, shareholders are jointly liable for the shortfall between subscribed capital and €3,000. Corporate Enterprises Act, Article 4

The €1 is capital put into the company, not a professional fee or tax saving. Choosing €3,000 avoids that special sub-€3,000 regime and gives the business actual opening funds. It does not guarantee that €3,000 is enough working capital.

The official PAE Virtual DUE guide publishes two CIRCE tariff cases. With standard articles and capital no higher than €3,100, the notarial and registry tariffs are €60 and €40 respectively, plus VAT. If capital is above €3,100, the guide states €150 and €100 plus VAT; it also gives the €150 and €100 tariffs when standard articles are not used. These figures cover CIRCE processing and not other concepts. PAE Virtual: DUE guide for limited companies, pp. 12–13

So the lowest published notary-and-registry pair is €100 plus VAT, not an all-in price for a working company. A realistic incorporation budget may also need the corporate-name certificate, bespoke articles or shareholder arrangements, professional analysis of the transfer, employment work, contract amendments, licences and tax treatment of contributed assets. Those items vary because the businesses differ.

The annual cost matters more than the deed. Company directors must formulate annual accounts within three months after the year end, and the approved accounts are filed with the Mercantile Registry under the statutory timetable. Corporate Enterprises Act, Articles 253 and 279 An incorporated company remains liable to file Corporate Income Tax even if it is inactive. AEAT: inactive companies

Ask for an annual quote that identifies bookkeeping, periodic tax returns, annual accounts, registry filing, Corporate Income Tax, payroll or director remuneration, legal secretarial work and advisory time. A cheap incorporation followed by an unclear annual service is not a useful comparison.

Old autónomo debts do not disappear

Creating an SL draws a boundary for business conducted by the company after it begins operating. It does not rewrite the past.

A supplier invoice, loan, lease, tax assessment or other obligation incurred by the individual remains that individual’s debt unless it is paid or legally transferred. Under Article 1205 of the Civil Code, substituting a new debtor requires the creditor’s consent. Civil Code, Article 1205 Changing the name on the next invoice or paying an instalment from the company bank account does not by itself release the original debtor.

Create a debt schedule before the transfer. For each item, record the creditor, debtor, balance, security, personal guarantee, maturity, direct debit and whether consent to assignment or novation is required. Tax and Social Security debts need their own public-law review; they should not be treated as ordinary supplier balances.

Limited liability protects a shareholder from ordinary company debts, but it does not erase personal debts, personal guarantees or liabilities that the law can impose on directors. The Corporate Enterprises Act can make directors liable for damage caused by unlawful acts or breaches of duty, and Article 367 addresses liability for later company obligations where statutory duties after a dissolution cause are not performed. Corporate Enterprises Act, Articles 1, 236 and 367

The legal separation is still valuable. It works when the business respects it: contracts identify the right supplier, invoices and bank accounts match, the company is adequately funded, decisions are documented and the owner does not treat company assets as personal property.

As an operating control, once the SL is the actual supplier under the contracts and performs the activity, its invoices, expense records and collections should reflect that same supplier. This recommendation follows the SL’s separate corporate identity and the VAT taxpayer’s invoicing duties; it does not prevent the individual from carrying on a genuinely separate activity. Corporate Enterprises Act, Articles 1–2 VAT Act, Article 164

Decide what the company is actually acquiring

An SL cannot take over an existing activity by implication. List what makes the activity operate:

• cash and receivables;
• equipment, stock, vehicles and software;
• domain names, intellectual property and customer data;
• premises, leases and licences;
• supplier and client contracts;
• finance and guarantees;
• employees and accrued obligations; and
• open tax periods, claims and disputes.

Each item needs a route: sale, non-cash capital contribution, assignment, licence, novation, employee succession or no transfer. As a transition control, treat every contract as requiring an assignment check: verify whether it permits transfer and whether counterparty consent is needed before scheduling it. Article 1205 specifically requires creditor consent when a new debtor replaces the original one; other assignment limits depend on the contract and the rules governing it. Civil Code, Article 1205 Regulated permissions may follow their own procedure. Receivables need debtors to know where valid payment should be made.

The tax treatment also depends on what moves and how. Article 7 of the VAT Act treats the transfer of a set of tangible and, where relevant, intangible elements capable of forming an autonomous economic unit as outside the scope of VAT, subject to the provision’s conditions and exclusions. A mere transfer of assets does not receive that treatment just because the parties call it a business. VAT Act, Article 7.1

A non-cash contribution to a company can produce a personal capital gain or loss calculated under the specific valuation rule in Article 37 of the Personal Income Tax Act. Personal Income Tax Act, Article 37.1(d) This is where fiscal and legal work have to share the same asset list. The lawyer needs to know what title and consent are required; the tax adviser needs the transfer form and values; the accountant needs the opening entries and supporting documents.

Existing employees may transfer by law

Closing the individual employer’s payroll and issuing new contracts from the SL is not always a free choice. If the transaction transfers an economic entity that keeps its identity, Article 44 of the Workers’ Statute treats it as a business succession. The change of employer does not end employment, and the new employer is subrogated into the existing employment and Social Security rights and obligations. Workers’ Statute, Article 44.1–2

For an inter vivos transfer, the previous and new employers are jointly liable for three years for unpaid employment obligations arising before the transfer. Article 44 also regulates continuity of the applicable collective agreement and information to worker representatives or, where there are none, to affected workers. Workers’ Statute, Article 44.3–8

The practical file should reconcile employee identity, seniority, contract, working time, salary, collective agreement, leave, variable pay, Social Security status and any pending claim. Payroll cut-off, bank payment and accounting dates must agree. Starting the legal analysis after the old employer has already processed a termination can turn a planned reorganisation into a dispute.

You may still be in the autónomo regime

Owning an SL does not necessarily remove the owner from the Special Scheme for Self-Employed Workers (RETA). The General Social Security Act includes people who habitually and personally direct or work for a capital company for profit while holding effective control.

Article 305 treats effective control as established when the worker owns at least 50% of the capital. It also creates a rebuttable presumption where at least half the capital is distributed jointly among shareholders with whom the worker lives and to whom the worker is linked by marriage, blood relationship, affinity or adoption up to the second degree. The other rebuttable presumptions apply where the worker owns at least one third, or at least one quarter while also performing management and direction functions. General Social Security Act, Article 305.2(b)

The percentages are classification rules, not a complete answer for every shareholder. Functions, remuneration, control and family ownership all matter. Check the Social Security position alongside the articles, administrator appointment and remuneration plan before the company starts paying the owner.

The transition needs one cut-off date

The overlap is especially vulnerable to costly inconsistencies. The company exists, but some clients still receive personal invoices. The individual pays company costs. Employees move in one system but not another. The opening balance contains assets with no transfer document. Both bank accounts collect the same activity.

A controlled transition fixes a cut-off date, maps every asset, contract, debt and employee, documents each transfer, activates the company, reconciles the two taxpayers and only then closes the individual activity that has actually ended. This is an advisory sequence inferred from the official CIRCE incorporation steps and the transfer rules cited above, not a statutory checklist. PAE Virtual: DUE guide for limited companies

A practical sequence is:

1. Model both structures with a full year of profit, owner cash and recurring compliance.
2. Choose ownership, governance, administrator remuneration and suitable articles.
3. Reserve the name, complete the deed and registration, and obtain the company’s tax identity. AEAT allows a provisional NIF to be requested through Form 036 and requires the pending incorporation and registration documents for the definitive number. AEAT: NIF application for an entity
4. Approve one transfer schedule covering assets, contracts, debts, employees, data, licences and tax treatment.
5. Obtain required consents and complete employee information or consultation before the effective transfer.
6. Activate company invoicing, banking, accounting, tax, payroll and document controls for the agreed date.
7. Reconcile the final autónomo period and the company’s opening balances. Keep evidence for both.
8. File the individual’s census change or cessation only for the activity that has genuinely stopped. If a separate personal activity continues, document that boundary.

This is more than incorporating a shell. The company must become the real contracting and operating party.

Errors caused by splitting the advice into separate conversations

The transition is unusually sensitive to hand-offs. A fiscal adviser may calculate company tax without seeing that a lender will not release the individual. A lawyer may draft an asset contribution without knowing its tax basis. Payroll may change the employer without reviewing business succession. Bookkeeping may post an opening balance that the deed and transfer agreement do not support.

Five errors deserve an explicit stop:

One forecast applies 15% automatically, although transferring last year’s individual activity may fail the new-activity condition. Another uses €1 of capital simply because the law allows it, leaving the company subject to the sub-€3,000 protections and short of cash for normal bills.

Payment movements can hide a different error. The company pays an old personal loan, but the creditor never consents to a debtor change and nobody documents the accounting treatment. On the employment side, new paperwork resets seniority or other rights that may continue under Article 44.

The untidiest version leaves two suppliers on one job. The proposal names the individual, the invoice names the SL and the client pays a personal account. Revenue, VAT, contract performance and debt collection no longer tell the same story.

Use one transition schedule owned jointly by tax, accounting, employment and legal advisers. For every material line, record the legal act, tax treatment, accounting entry, responsible person, evidence and effective date.

TaxFactory’s tax and accounting team and legal advisory team work from the same transition file. The first meeting should answer two questions: what must move or remain, and what do the two complete twelve-month calculations show?

A decision you should be able to explain on one page

Before giving the go-ahead, ask for a written comparison that answers:

• What recurring profit has been used, and what volatility was excluded?
• How much money will the owner withdraw, by which legal route and with what tax and Social Security treatment?
• How much profit can remain in the company?
• Which 2026 Corporate Income Tax rate is being used, and why does the 15% rate apply or not apply?
• What are the incorporation fees, opening capital and recurring annual costs?
• Which debts, assets, contracts and employees move, through which documents and on what date?
• Which risks remain personal because of prior debt, guarantees or director duties?
• What happens if revenue falls by 20% in the first year?

If the recommendation cannot survive those questions, the answer is not ready. A sound result may still be “remain an autónomo for another year.” It may also be “incorporate now for contractual, staffing or risk reasons even though the first-year tax saving is modest.” Choose for the business you actually have, with the transition cost visible before anything is signed.

Frequently asked questions

At what turnover should a freelancer create an SL in Spain?

There is no statutory turnover threshold. The often-mentioned €40,000–€50,000 range is only a prompt to model the decision. Use sustainable taxable profit, how much cash you need personally, payroll and financing plans, risk, and the annual cost of running the company.

Does the 15% new-company Corporate Income Tax rate apply when I transfer my existing freelance activity?

Not necessarily. Article 29 excludes the reduced new-entity treatment where the activity was carried on in the previous year by an individual who will own more than 50% of the new company. The ownership and activity facts must be checked before using 15% in any forecast.

Do my old autónomo debts move to the SL?

No, not automatically. A debt remains with the person who incurred it unless it is paid or legally transferred. Replacing the debtor requires the creditor’s consent under Article 1205 of the Civil Code. Guarantees, public debts and each contract need separate review.

What happens to my employees when the SL takes over the business?

If an economic entity is transferred and retains its identity, Article 44 of the Workers’ Statute provides for business succession: employment does not end, and the new employer assumes the relevant employment and Social Security rights and duties. The facts and communication obligations must be reviewed before the transfer date.

Can I keep invoicing as an autónomo after creating the company?

Only where the individual and company activities are genuinely defined and operated as such. Clients, contracts, invoices, expenses, bank flows and delivery must follow the real supplier. Splitting one activity on paper without commercial substance creates accounting and tax inconsistencies.

Sources

• BOE: Corporate Enterprises Act
• BOE: Corporate Income Tax Act
• BOE: Personal Income Tax Act
• PAE Virtual: DUE guide for limited companies
• AEAT: application for a provisional NIF for an entity
• BOE: Civil Code
• BOE: Workers’ Statute
• BOE: General Social Security Act
• BOE: Value Added Tax Act