Sole Trader vs Limited Company in Spain: When to Incorporate in 2026

The Most Important Decisión for Independent Professionals in Spain

The question "should I register as a sole trader (autónomo) or set up a limited company (SL)?" faces almost every Spanish professional who crosses a certain income threshold. There's no universal answer: it depends on your earnings, personal assets, sector, and long-term goals. This guide breaks down the real differences in 2026 with current figures.

Sole Trader (Autónomo / RETA)

2026 RETA Contributions

Spain's 2023 reform (consolidated in 2026) links monthly contributions to actual net earnings:

Income Tax (IRPF)

Self-employment income is taxed at the general personal income tax scale. With €80,000 net profit, the effective rate is approximately 38-40%.

Personal Liability

The sole trader is personally and unlimitedly liable for all business debts. Your home, savings, and other personal assets are at risk. Spain's ERL scheme offers partial protection for the primary residence (up to €300,000), but its use is rare in practice.

Limited Company (Sociedad Limitada: SL)

Setup Costs

• Minimum capital: €3,000 (or €1 with dividend restrictions)
• Notary + Registry: €700-1,200
• Accounting/admin: €100-300/month (mandatory)
• Annual accounts filing: €200-300/year
• Total setup: ~€1,000-2,000; 2-4 weeks

Corporate Tax (IS) 2026

• General rate: 25%
• SME rate (turnover < €1M): 23% on first €50,000
• New companies: 15% for first two profitable years

Extracting Money: The Salary Trade-off

The critical point most overlook: profits in the SL cannot be withdrawn freely. Options:

1. Director's salary: deductible by the SL; taxed as employment income in your personal IRPF
2. Dividends: taxed at savings rate (19-28%); the SL already paid IS → effective double taxation
3. Legitimate business expenses: deductible by the SL

The optimal strategy combines a reasonable salary (covering personal needs + solid social security contributions) with annual dividends on remaining profits.

The Break-Even: When Does the SL Make Sense?

Rule of thumb: above €50,000 net profit per year, the SL typically becomes tax-efficient. Below that, fixed maintenance costs (accounting, annual filing) usually offset the savings.

Example with €80,000 net:

• As sole trader: ~€35,580 in taxes → ~€44,420 net available
• As SL (€40K salary + €40K retained in SL): ~€25,100 in taxes → ~€54,900 net available
• Annual saving: ~€10,480

Beyond tax: the SL shields your personal assets from business liabilities, especially important in sectors with significant contract or professional liability exposure.

Calculate your autónomo contribution →