S.L. vs. autónomo
The Sociedad Limitada (S.L.) is the Spanish equivalent of a German GmbH or British limited company. It is a capital company - a separate legal entity with its own assets and limited liability.
S.L. (Sociedad Limitada):
- A separate legal entity (distinct from you personally)
- Minimum capital: 3,000€
- Liability limited to the company capital
- More complex to set up (notary, Registro Mercantil)
- Higher incorporation costs (2,000-3,500€)
- Higher ongoing costs (Gestoria, bookkeeping)
- Suited to larger businesses, companies with employees, and international operations
Autonomo (self-employed):
- You are the business
- No minimum capital
- Personal liability (your private assets can be at risk)
- Simple registration (online with a gestor)
- Low incorporation costs (300-500€)
- Lower ongoing costs (80-200€/month Gestoria)
- Ideal for sole traders, freelancers, and small service providers
When does an S.L. make sense?
- You have several employees
- Your business carries significant risk (e.g. construction, where liability exposure is high)
- You plan rapid growth
- You want to bring in outside investors
- Your turnover will be large (>100,000€/year)
Requirements and minimum capital
To set up an S.L. you need:
Minimum capital: 3,000€ This is the official minimum investment. The money must be paid into a bank account in the name of the new company. After incorporation you can use the funds for operating expenses.
Shareholders / founders:
- You need at least one shareholder (one person is enough)
- There can be multiple shareholders
- Each shareholder holds a share (e.g. 50%-50% with two founders)
- There is also an administrator (managing director) - that can be you
Company name (Denominacion Social): You reserve a unique name. The name must end with "S.L." Examples: "TechSolutions S.L.", "Consulting Mallorca S.L."
Business purpose: You define what the company does. This is important for tax classification and regulation.
Notary and Gestoria: You need a notary (for the notarial deed of incorporation) and a gestor (for administration and taxes). You can get recommendations or find them via Google or Facebook. A Spanish bank account is also mandatory.
Step by step: incorporation
Step 1: Prepare the shareholders' agreement and articles of association Your gestor drafts the shareholders' agreement and the articles of association. These are the rules that govern how the company operates. This is standard and does not take long. The gestor has templates.
Step 2: Reserve the company name (Denominacion Social) You contact the Registro Mercantil (commercial register) or your gestor to reserve the name. This can be done quickly online. The reservation is valid for 3 months.
Step 3: Pay in the capital You open a bank account in the name of the new company (before incorporation - the bank calls this a "cuenta previa"). You pay in the 3,000€. The bank gives you a certificate.
Step 4: Notarial deed (Escritura Publica) All founders go to the notary together. The notary reads out the articles of association, you all sign, and the notary certifies the incorporation. This is a legally binding document. It costs around 500-800€.
Step 5: Register with the Registro Mercantil The notary automatically sends the deed (Escritura) to the Registro Mercantil. The commercial register records your company. This takes 2-4 weeks. You receive an official confirmation of registration.
Step 6: Apply for the CIF (tax number) Your gestor applies for the CIF (Codigo de Identificacion Fiscal) from the AEAT (tax authority). This is your company's tax number. It is done online and takes 1-2 weeks.
Step 7: Register with Seguridad Social Your gestor registers the company with the Seguridad Social (if you have employees). This is mandatory when you hire people.
Step 8: Update the bank account Your bank account is converted from a "cuenta previa" to a full business account. The IBAN becomes official.
The entire process takes 4-6 weeks with a good gestor.
Costs and timeline
Incorporation costs:
- Notary: 500-800€
- Registro Mercantil (registration): 200-300€
- Gestoria (incorporation package): 1,000-2,000€
- Total: 1,700-3,100€
Plus: minimum capital 3,000€
Total start-up: roughly 4,700-6,100€
Ongoing monthly costs:
- Gestoria: 150-400€/month (depending on scope)
- Account fees: 10-50€/month
- Bookkeeping/software: 0-50€/month
- Seguridad Social (if employees): 500-2,000€/month (depending on salaries)
Taxes:
- IS (corporation tax): 25% on company profit
- IVA: 21% VAT (a pass-through item)
Timeline:
- Preparation (name, articles): 1-2 weeks
- Notary appointment: 1 week
- Registro Mercantil: 2-4 weeks
- CIF and Seguridad Social: 1-2 weeks
- Total: 4-6 weeks (with an efficient Gestoria)
Taxes and bookkeeping
As a company (S.L.) you pay different taxes than as an autónomo:
IS (Impuesto sobre Sociedades) - corporation tax 25% on your company profit. This is paid annually.
Example: your company has 100,000€ in turnover and 30,000€ in expenses = 70,000€ profit.
- IS (25%): 17,500€
- Your net profit: 52,500€
You can then pay dividends to yourself as a shareholder, but those are subject to withholding tax (19%) on top.
IVA (Impuesto sobre el Valor Anadido) - VAT 21% on your invoices. This is a pass-through item: you collect 21% from clients but also pay 21% on your own expenses. You pay the difference to the state (or receive a refund).
Bookkeeping: As a company you need full bookkeeping (contabilidad completa). This is more demanding than for autónomos. You need:
- Accounts and ledgers
- Profit and loss statement
- Balance sheet
- Cost centre accounting
This is usually handled by your gestor or an accountant. Cost: 150-300€/month.
Annual tax return: You file the IS declaration (similar to the German Korperschaftsteuererklarung) once a year. You make quarterly advance payments. Also keep in mind your personal tax residency in Spain as a shareholder.
Advantages and disadvantages
Advantages of an S.L.:
- Limited liability (only the company capital is at risk)
- Professional structure (important for large clients and investors)
- Easier to employ staff
- Easier to expand
- Better suited to complex contracts and partnerships
Disadvantages of an S.L.:
- Higher incorporation costs
- Higher ongoing costs (Gestoria, bookkeeping)
- More complex tax returns
- More administrative burden
- Corporation tax (25%) is higher than income tax for autónomos (19-21%)
When an S.L. is not worth it:
- You are starting out alone and earning fewer than 30,000€/year
- You have no employees and no plans to hire any
- Your business carries relatively little risk
In those cases: stay as an autónomo.
Conclusion
Setting up an S.L. in Mallorca is possible and sometimes the right move. The groundwork is more involved than for autónomos, but it is not overwhelmingly complicated. With a good gestor the process runs smoothly. Use the S.L. if you plan to grow or bring on multiple employees. Starting as an autónomo and converting to an S.L. later is also possible and often the more sensible sequence.