Starting to work for yourself can raise a number of questions. One of them is whether to choose the sole trader regime or “recibos verdes”.

To make the best decision, it is important to understand the characteristics and specific features of each of these regimes.

This will allow you to weigh up the advantages and disadvantages of each option and choose the one that makes the most sense for you.

To help you make this decision, we explain the main characteristics you need to know about each of these regimes.

“Recibos verdes” or sole trader: Which regime should I choose?

Working with “recibos verdes” means registering your activity and operating as a self-employed worker. The sole trader regime, on the other hand, involves setting up a business.

Both options have advantages and disadvantages. Therefore, it is not possible to say that one is more advantageous than the other.

The choice will depend on individual circumstances and should therefore be made following a case-by-case analysis.

We explain the main information about each regime to help you make the decision that will guide your steps as a self-employed professional!

1 – Self-employed worker

We have already shared, on other occasions, a great deal of information about what needs to be taken into consideration when choosing to work with “recibos verdes”.

In short, a self-employed worker is an independent professional who can provide services to different companies. To do so, they issue an invoice (“recibo verde”) so that the company can make the corresponding payment.

To work under this model, it is necessary to register the activity with the Tax and Customs Authority. This is a relatively quick and straightforward process and does not require any minimum share capital.

Self-employed workers are exempt from Social Security contributions during their first year of activity.

In addition, they can opt for the simplified accounting regime. They may also benefit from VAT exemption when their annual turnover is below €12,500.

2 – Sole trader regime

Within the sole trader regime, there are essentially two types of business structures: the Individual Entrepreneur (ENI) and the Single-Member Private Limited Company.

Below, we explain each of them in greater detail.

2.1 Individual Entrepreneur (ENI)

If you intend to set up a business, this is the simplest way to create a business operated by a single person.

It is therefore suitable for small businesses requiring little investment and involving limited risk.

The business name must consist of the full or abbreviated name of its owner. It is very important to bear in mind that, under this structure, there is no separation between the business assets and the owner’s personal assets.

This means that, where necessary, your personal assets may be used to meet certain obligations.

As regards taxation, namely the accounting regime, VAT, IRS and Social Security, this structure is governed by the same rules as “recibos verdes”.

2.2 Single-Member Private Limited Company

A single-member company, on the other hand, has different characteristics. This type of company is established by a single shareholder, who owns all of its share capital.

Unlike the previous case, there is a separation between the company’s assets and the owner’s personal assets.

As a result, the business owner benefits from greater protection, since, in the event of debts, their personal assets are safeguarded.

Another important point concerning a single-member company is that its incorporation requires the definition of share capital (from €1). It is also necessary to have a company bank account and a Certified Accountant (CC).

As you can see, sole trader structures are more complex when compared with “recibos verdes”.

However, this does not mean that they are less advantageous. On the contrary, this option may be the best choice in certain situations.

To make sure you are making the right choice, it is essential to seek advice from a Certified Accountant. This way, you will gain a more detailed understanding of the taxation, obligations and responsibilities associated with each regime.

Contact us and we will help you determine which option, working with “recibos verdes” or through a single-member company, makes the most sense for your business!