You started out as a sole trader because it was the simplest way to get going, and it worked: you have clients, invoices and something that used to be just an idea. When that “something small” stops being small, the question of moving from sole trader to SL (sociedad limitada, the Spanish private limited company) shows up. It is not a cold formality: it is recognising that what you have built deserves a structure that protects it. At Tecem Abogados we walk you through that decision in Málaga and Benalmádena, with the real numbers on the table.
Not answering for your debts with everything you own is the real reason
While you work on your own account, article 1911 of the Código Civil (Spanish Civil Code) says it bluntly: the debtor answers for the performance of obligations with all present and future assets. Your home and your savings sit in the same basket as the debts of the business. That is the real driver behind the leap from sole trader to SL: the company is a legal person of its own, with separate assets, and it is the company that answers to its creditors.
It is worth understanding this without overstating it. Going from sole trader to SL separates two sets of assets, but it is no magic shield: the Ley de Sociedades de Capital (Spanish Companies Act) provides that directors are liable to the company, the shareholders and the creditors for damage caused by acts contrary to the law or to the articles of association. We go into it in our article on the personal liability of shareholders.
One euro of share capital, with two cautions until you reach 3,000
The minimum share capital of a sociedad limitada is today one euro. That figure removes an entry barrier to the change from sole trader to SL, but the law itself adds two rules for as long as the capital has not reached 3,000 euros:
- At least 20 % of the profit must go to the legal reserve until that reserve, together with the share capital, reaches 3,000 euros.
- In the event of liquidation, whether voluntary or forced, if the assets are not enough to pay the company’s obligations, the shareholders are jointly and severally liable for the difference between 3,000 euros and the subscribed capital.
Incorporating with one euro is legal and quick, but full protection arrives when the company has real equity. It is one of the first conversations we have with anyone considering the move from sole trader to SL.
What the company demands of you from day one
An SL comes into being through a public deed registered at the Registro Mercantil (Commercial Registry), and only with that registration does it acquire legal personality: until then there is no real separation of assets. From that point on, the company calendar is in charge:
- The directors draw up the annual accounts within the three months following the close of the financial year.
- The accounts are filed at the Registro Mercantil within the month following their approval by the general meeting.
- The company keeps its own books and minutes, and every relevant resolution leaves a documentary trail.
Organised from the start it is not dramatic, but it explains why the move from sole trader to SL also changes the administrative routine of the business, not just its tax treatment.
The tax bill changes its rules, not always its amount
As a sole trader you are taxed under the progressive IRPF (personal income tax) scale: the more you earn, the higher the bracket. The company is taxed under the Impuesto sobre Sociedades (corporate income tax), with a general rate of 25 %. For tax periods beginning in 2026, entities with a turnover below one million euros apply 19 % on the first 50,000 euros of taxable base and 21 % on the rest. Going from sole trader to SL does not automatically mean “paying less”: it depends on the profit and on how much you need to take out to live on.
There is one detail that catches people out. The reduced 15 % rate for newly created entities does not apply when the activity was already being carried out the previous year by an individual holding more than 50 % of the capital of the new company: exactly the case of someone turning their business from sole trader to SL. And if you are going to contribute the business as a going concern, the Ley del Impuesto sobre Sociedades (Spanish Corporate Income Tax Act) sets out a special regime for non-cash contributions with specific requirements. In a move from sole trader to SL it is worth studying before you sign.
How you pay yourself when you are both shareholder and director
The Ley General de la Seguridad Social (Spanish General Social Security Act) places under the RETA (the self-employed scheme) anyone who performs management and running duties as a director, or who provides services to a capital company on a habitual, personal and direct basis, provided they have effective control of the company. Effective control is understood to exist with at least half of the capital, and is presumed with a third, or with a quarter if you have management duties. In most cases, whoever goes from sole trader to SL carries on paying contributions as a company director within the self-employed scheme.
On top of that, the office of director is unpaid unless the articles of association say otherwise and set out the remuneration system. If you charge for running the company and the articles do not provide for it, you have a problem waiting to happen. Sorting out salary, invoices and dividends is part of accompanying the change from sole trader to SL.
Signs that it is not time to take the leap yet
Not every business needs a company. If you invoice steadily but moderately, work alone, do not sign long contracts and do not take on risks that could eat into your personal assets, the move from sole trader to SL can wait without any drama. The structure adds incorporation, accounting and filing costs, and that is offset by protection or by real tax savings. The decision is taken with your figures, not with the sector average.
How we accompany the change at Tecem
We have spent more than 30 years on legal, tax, employment and accounting matters for individuals and companies in Málaga and Benalmádena. When you call or write, someone from the team answers, with no queue and no automated message, and every document has a case analysis behind it, not a generic template. That craft is what we put into every sole trader to SL file.
In a sole trader to SL file that means going over your numbers, choosing the share capital and the articles of association, coordinating the notary and the Registro Mercantil, and settling from day one how you are going to get paid by your own company.
Frequently asked questions about the move from sole trader to SL
Does the company free me from the debts I already had as a sole trader?
No. The obligations you took on as an individual continue to be answered for with your present and future assets, under article 1911 of the Código Civil. The separation works going forward, for the debts the company takes on.
From what moment does the company answer instead of me?
From its registration at the Registro Mercantil, which is when it acquires legal personality. Before that moment the sole trader to SL separation you are after does not exist, however signed the deed may be.
Can I contribute my business as a going concern instead of incorporating from scratch?
Yes, and it is common. There is a special regime for non-cash contributions subject to requirements, so the way to structure it is decided before the deed, with the valuation of what you are contributing on the table.
Do I stay registered as self-employed after setting up the SL?
In most cases yes, as a company director within the self-employed scheme: whoever goes from sole trader to SL and keeps effective control stays under the RETA. Your shareholding percentage and your duties have to be reviewed case by case.