Guide to Self-Employment and SMBs in Spain

In the Spanish business sector, understanding the differences between being self-employed and establishing an SMB (small or medium business) is essential for making informed and appropriate decisions for your business. From the legal framework to tax and commercial implications, each option has its own characteristics and unique considerations. In this article, we delve into what it means to be self-employed and what it entails to establish an SMB in Spain, as well as the main differences between both business forms.

What is considered self-employment in Spain?

In Spain, "self-employed" refers to a person who works for themselves, meaning they carry out an economic activity independently and are not bound by an employment contract to any company. Self-employed are responsible for their own business or professional activity and are required to register with the Social Security self-employed regime to contribute and access benefits such as healthcare and retirement. Self-employed can own small individual businesses, provide professional services or work in various economic sectors such as commerce, hospitality, consulting, among others.

What is considered an SMB in Spain?

In Spain, an SMB stands for Small and Medium-sized Enterprise. It refers to companies that are relatively small in terms of employees, revenue, and assets. Typically, an SMB is a company with fewer than 250 employees and annual revenue below 50 million euros, as defined by the European Commission. SMBs are vital to the Spanish economy, contributing significantly to job creation and economic expansion.

Legal differences between a SMB and self-employed professionals

In legal terms, one of the main differences lies in the legal liability of each business form. While in an SMB, owners can choose structures such as the Limited Liability Company (LLC), which protects their personal assets in case of debts or issues, self-employed people assume unlimited liability, meaning their personal assets are at risk in case of financial difficulties.

Tax differences between SMBs and self-employed professionals

Tax differences are also significant. SMBs are subject to corporate tax and must file the corresponding declaration each year. On the other hand, self-employed individuals must manage their taxes through the income tax return, in addition to making quarterly and annual VAT self-assessments. Additionally, tax deductions vary between both business forms, with self-employed individuals being able to deduct 50% of expenses related to their activity, while SMBs can deduct 100% of their business expenses.

Commercial differences between SMBs and self-employed professionals

Regarding commercial differences, SMBs are required to register with the Commercial Registry, which provides greater security and reliability to their company. Self-employed individuals, on the other hand, are not subject to this requirement, which may affect their perception of credibility among clients and business partners.

Additional considerations when choosing a business form

When deciding between being self-employed or establishing an SMB, it is important to consider a variety of factors, including legal, tax, and commercial aspects, as well as the specific needs and objectives of your business. Additionally, it is essential to evaluate the type of company you want to build and how you would feel most comfortable operating within the corresponding legal and tax framework.

In conclusion, self-employment and SMB establishment in Spain entail distinctive opportunities and challenges, necessitating a thorough understanding of each entity's nuances. By leveraging the expertise of our partner, Entre Trámites,  in bureaucratic processes, freelancers and SMBs can navigate regulatory complexities seamlessly, positioning themselves for success in the Spanish business environment. Contact Entre Trámites today for expert guidance on bureaucratic procedures and immigration matters. Schedule a free consultation or reach out at
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