Written by Fernando Maciá
Índice
If you are considering setting up an online store, before making the leap to e-Commerce you need to know your possibilities within the tax and labor framework. Is it better for you to register as a self-employed or as a company? In this article we will explore what it is to be a self-employed worker or entrepreneur, what types they can be classified into, and the advantages and disadvantages of being self-employed, so that you can make an informed decision and start your entrepreneurial career on the right foot.
What is being self-employed?
A self-employed person is a natural person who performs an economic activity for profit without being subject to an employment contract.
In other words: a self-employed person. Freelancers are in charge of organizing their own work and the time they spend on it. Unlike an employee, the remuneration they receive is not fixed, as it depends on many factors such as the type of service or product offered, the workload involved at any given time, whether or not there are other people whose services are used to carry out their tasks in exchange for a salary, among others.
Types of self-employed
All self-employed workers share an important particularity, and that is the fact that they all contribute to the same social security system. However, there are different types of self-employed that can be classified according to certain characteristics that we will see below.
Self-employed workers
They are usually entrepreneurs who have a small business in their own name. It could be said that they are self-employed people, although they may also have contracted workers in their charge. Within this group we find:
- On the one hand, the self-employed who pay the Economic Activities Tax (IAE) or by modules – cab drivers, electricians, hairdressers… fall into this category.
- On the other hand, people engaged in artistic activities such as cinema, theater, television and music; or sports activities.
Self-employed professionals
Self-employed professionals are those engaged in liberal professions that are also included in the IAE, and are divided into two groupings:
- Self-employed professionals, such as lawyers, architects, veterinarians, psychologists… Not all of them have to contribute to the self-employed regime, as some of them do it through their professional associations.
- Self-employed professionals, such as translators, programmers, make-up artists, painters, etc., who are not registered.
Many self-employed professionals work as freelancers, although they may also have employees and/or an establishment. They usually pay direct tax and must withhold personal income tax on their own invoices.
Self-employed companies
This type of self-employed person refers to individuals who are partners in, or decide to become partners in, a business partnership because their business and income are growing, and they have a larger number of employees under them. From a certain volume of income, it is more profitable to create a company, since you pay less taxes than if you are self-employed.
The corporate self-employed continue to be obliged to contribute to the Special Regime for Self-Employed Workers (RETA), and hold the position of administrator, in addition to carrying out other managerial tasks.
Self-employed collaborators
They are those who register as self-employed in order to work with a family member (up to second degree of consanguinity) or spouse on a regular basis. This type of self-employed person must live at the same address as the self-employed owner, and does not have to file VAT returns or income tax withholdings.
Economically dependent self-employed or TRADE
They are those who work almost exclusively for a single client (receiving 75% or more of their income from him). The requirements you have to meet to be a self-employed worker economically dependent, you must have your own infrastructure and material, you can not hire or subcontract third parties, or perform the same work of the customer’s employees.
Self-employed farmers
Self-employed farmers are exclusively engaged in activities related to the agricultural sector. They have a special contribution system (Special System for Self-Employed Agrarian Workers or SETA) and can hire other employees.
Advantages of being self-employed
One of the main and highly valued advantages of being self-employed is precisely the autonomy you can enjoy when working for yourself. But apart from the advantage of being your own boss and having full control over the company, we can also take into account the following points:
- Little initial bureaucracy. Registering your business as self-employed is the easiest and fastest way, and requires the least amount of paperwork and financial costs to get started.
- Time and organizational flexibility. You can set your own schedule and organize your time in the way that is most convenient for you.
- Choose your customers. Now you are the one who can choose who you want to work for and who you don’t want to work for. No more dealing with customers that you know in advance will not bring you profit. You can also spend more time pursuing those you would like to work with.
- Possibility of higher income. Being self-employed raises the possibility of higher income as the job grows. While in a conventional business organization, salary increases or incentives depend on multiple factors (many of which are not under your control), here you will decide when it is appropriate to raise your salary and when this surplus should be reinvested.
- Work on what you really like. If you’ve set up your own business, it’s probably because that market motivates you. Take advantage of the desire and energy provided by this motivation to improve your business.
Disadvantages of self-employment
However, not everything was going to be pretty. Being self-employed also has its disadvantages:
- Administration and troubleshooting. Full control over your company also includes having to take care of all the steps and problems that may occur at any given time. Be prepared to take on many responsibilities.
- Susceptibility and risks. When you are self-employed, there is no difference between business and personal assets, with your (and possibly your spouse’s, if you have one) present and future assets at stake in the face of debts.
- Having to do it all by yourself. If the business thrives, the workload can sometimes become overwhelming and time consuming, interfering with your personal life and free time. In addition, not having an established schedule can lead to serious organizational problems, resulting in no rest on weekends or sleepless nights.
- Payment of taxes. The self-employed pay more taxes than salaried employees. And if your business is generating enough profit, you are better off creating a partnership.
