There’s no rule that says “above this turnover, switch to an SL.” The decision depends on several things: how much profit you make, how much risk you carry, how much tax you pay under each structure, which autonomous community you’re in, how much money you need to draw each month to live on, and your family situation.
A rough figure
It usually starts to pay off somewhere between €40,000 and €60,000 of annual profit, though that isn’t a figure set by Hacienda or by law: it’s a practical reference, not an official threshold. Below that, the tax saving from switching to an SL rarely covers the added cost of running one (mandatory bookkeeping, annual accounts filed with the Companies Registry, a more expensive gestoría).
It’s not just about turnover
That rough figure starts from a “generic” profit, but your specific case has its own factors that push it up or down. Your autonomous community matters, because IRPF brackets and rates vary from one to another, and some offer their own tax breaks for the self-employed or for setting up a company. How much money you need to draw each month to live on also matters: the more you take out of the SL for personal use, the more the tax saving shrinks, because that money is taxed too, on the way out (via salary or dividends). And your family situation — dependants, other sources of income, your own social security contributions — changes the calculation just as it would on any other tax return. That’s why €40,000–€60,000 is a starting point for looking into it, not an answer for your case.
The reason that isn’t about tax: liability
As a self-employed worker, you’re liable for your business debts with your personal assets, present and future, with some protection for your main home under certain conditions, but as a general rule your personal wealth is exposed. With an SL, liability is generally limited to the capital contributed to the company. If your business carries a real risk of large debts (investment, suppliers, contracts with penalty clauses), that can matter more than any tax calculation, even at low turnover.
The tax difference, in raw terms
As a self-employed worker, you pay IRPF progressively: the more you earn, the higher the marginal rate applied to the top slice of your profit. With an SL, Corporate Tax (Impuesto de Sociedades) applies a flat rate, with a reduced rate for the first periods for newly created companies. The real comparison isn’t just “the SL’s rate vs. the IRPF rate”: you also have to count what it costs you to take money out of the SL for personal use (via salary or dividends, each taxed differently), so it’s not a calculation worth doing by eye.
How to decide in practice
If you’re close to that turnover range, or if the risk in your business already worries you even at low turnover, it’s worth sitting down and comparing your specific case with real numbers, not a general rule. We review it with you before it becomes a half-informed decision.
Want to know with your own numbers?
We offer a detailed study where we look at your specific situation and tell you, with real figures, at what turnover it would pay off for you to switch to an SL. The study costs €150 + VAT if you’re already a client, or €200 + VAT if you’re not yet. Email us at contacto@asesoriamadal.es if you’d like more information — we can set up a call to go over the details.