When a person creates a business, they must decide if it is more convenient for them to register as self-employed or create some type of company. Therefore, so that you can make the best decision for you, we present the advantages and disadvantages of being self-employed, along with the criteria to consider when choosing the legal form of the company.
Benefits of being self-employed
You can be your own boss
In this case, your experience, criteria and knowledge are what count for the development of your work. You do NOT have a superior indicating how and when you should do your work, so you can make the decisions that you consider most appropriate for your career and lead your projects to where you are most interested. You will have total control of your activity, and being an entrepreneur gives you the opportunity to know your company from all its aspects.
Manage your time
When being self-employed, you can organize your schedule, holidays, and days off. Also, you can decide when and where to work, since new technologies allow you to manage your business online, automate processes and work from home.
With this, your business can be simplified, being able to save on materials, rent a place, and others. It allows you to reconcile your professional and personal life more easily.
Work on what you really like and with whoever you want
The advantage of self-employment is that you have total freedom to work on what you want and what you have always dreamed of. Persistence, commitment, and desire often make it possible for you to work on what you like and also give you the possibility to discard everything that does not interest you or you do not think is appropriate for your business. The same happens with clients since you do not have the obligation to do business with people or companies that do not follow your business vision.
Ease of registering in the public administration bodies
When you start an economic activity you must necessarily register with Social Security and Hacienda (Treasury). When creating a company, the procedures take more time due to the economic, registry, and notary requirements.
Registering as self-employed does not cost anything, just like deregistering, you can register and deregister unlimited times, taking into account that if you do so for periods of less than a month, you will be limited to doing so 3 times a year.
In addition, being self-employed does not entail any accounting obligation, contrary to what happens with companies, you only have the obligation to have a book of issued and received invoices and investment goods, and also have much fewer formal obligations.
Remember that by hiring our monthly consulting service for self-employed, we will register you totally free, just click on the link.
You can earn more money
As an employee, you can see that the company charges the client more than what you charge, for a job that you do completely. By being self-employed, you get the total profit (minus taxes).
Your income does not depend on the hours you take, the deals you close, or the ups and downs in your company. These will depend on how you work, how much you want to charge and the number of satisfied customers you get.
New improvements in the conditions for being self-employed
Now the self-employed also have the right to unemployment and sick leave, as long as they pay the minimum required contribution.
You also have the advantage of being able to deduct IVA from the invoices you receive, as long as your profession is part of the list of professional activities that DO NOT pay IVA, according to Law 37/1992, of December 28, on Impuesto sobre el Valor Añadido (Value Added Tax), in article 20, these are:
- Teaching: these services range from childhood and youth education to university and postgraduate levels. Also in languages, as long as they are within the government curriculum.
- Assistance to natural persons by doctors and health services: includes doctors and other health personnel. As well as psychologists, speech therapists, opticians and others recognized by the Administration.
- Professional services provided by visual artists: this group includes writers, composers or translators, as well as journalistic collaborations.
- Operations and benefits in relation to insurance: insurance agents are exempt, in turn, from this tax.
- The mediation provided to individuals in financial operations: deposits, money credits, transfers, checks or credit cards are exempt operations.
- Services provided to individuals who practice sports or physical education: these services refer to public law entities, sports federations, the Spanish Olympic Committee and the Spanish Paralympic Committee.
- Provision of services by cultural entities governed by public law: libraries, visits to museums, historical places, transport of sick people, theatrical or musical performances and organization of exhibitions and similar events.
Disadvantages of being self-employed
The balance between living and working
There are many self-employed workers who end up working twice as much as when they were employees. In addition, sometimes your working hours will be longer, since dedicating yourself to your business means that the more you work, the more profit you will have.
In the first months, you will have to spend more hours than you would like until your business begins to function and generate profits. Because of this, you may have less free time and that blurs the line between personal life and work.
Daily fight against customers
You may not have a boss in charge but you will have other “bosses” in the form of clients and sometimes the battles with them will be constant, you will have numerous meetings and you will have to travel.
Also, although you can work on what you like and with whom you want, it does not mean that clients are going to appear out of nowhere to hire you. You must find your own clients, then secure them.
You have to earn more money than as an employee
An employee receives their salary and does not have to worry about anything else.
However, the self-employed must worry about personal income tax (IRPF) and IVA. Because of this, you will have to increase your prices by 21% for IVA and lose approx. 19% of what you enter.
While the Corporate Tax remains at a constant 25% (the first two years from the incorporation of the company are 15%), the IRPF is variable as it is assigned by each province or autonomous community.
Forced to be an all in one
You will be forced to be an all-in-one worker, getting 100% involved, you will have to do tasks in which you are not an expert, so you will have to continually train yourself, face adverse situations, and show that you can handle everything.
That is, you are not only responsible for providing the service or delivering the product, but you will also have to do all the marketing, administration, and other work in the beginning.
When income begins to come in, you can delegate errands such as the accounting part. For that, you already know that Entre Trámites helps you with all your day-to-day procedures.
Criteria to consider when choosing the legal form of the company
- Money that we are going to invest.
- Responsibility towards potential creditors.
- The number of partners.
- Taxation.
- Administrative complications (and their cost).
- Cost / Share capital.
- The image that you want to have in the market.
- Legal requirements (banks, travel agencies, administration contracts…).
- Possibility of getting subsidies.
What’s next?
Finally, if you have finished reading about the advantages and disadvantages of being self-employed and you are still doubting what is best for you, in Entre Trámites we invite you to know about all our consultation services, where you can also contact us or schedule an online consultation to provide you with better advice.
Whatever your decision is, at Entre Trámites we have services for the Self-employed, SMEs, and for setting up your company. We want to listen to you and know what your questions are about the procedures you have to carry out. Count on the advice of our experts to clarify all your doubts.
However, if you feel that this is your career path, do not hesitate to contact us! We have various services for self-employed people, such as registering with Social Security and Hacienda, keeping your accounting up to date, and calculating how much you must pay in taxes.
