Freelancers, freelancers and SMEs: how are they different?
In a context in which remote work is gaining strength, concepts arise that are often used as synonyms. This is the case of freelance professionals and self-employed workers, two similar figures, but with some differences. We also take the opportunity to examine the characteristics of SMEs, another business formula separated by a thin line from the figure of the self-employed.
Freelancer vs. autonomous: the main differences
Both freelancers and freelancers are professionals who provide their services, either to a natural person or to a company, on their own. That is, they perform paid work without an employment contract.
With this starting point, we find the first difference. Freelance work is normally based on sporadic collaborations, which is why it is common for these tasks to be combined with paid employment, for example. In the case of the self-employed, the provision of these services to third parties is part of their usual economic activity, which means that they are not one-off jobs, but rather they are carried out continuously.
For a freelance professional, it is quite possible that doing these jobs does not represent their main source of income. For a freelancer, yes. In the latter case, the professional must register with the RETA (Special Regime for Self-Employed Workers) and declare all the income that corresponds to their economic activity.
Autonomous vs. SMEs: when is one or the other appropriate?
Having clarified the concepts a little more, we now refer to two other figures that are also very close. When starting a business, a fundamental question arises: is it better to establish yourself as a self-employed person or as an SME? A self-employed person is a natural person, while an SME, as a company, is a legal person. Tax obligations and responsibilities are different in both formulas.
The most common is that SMEs are incorporated under the legal form of a Limited Company, in which case they must have a share capital of at least 3,000 euros. When responding to clients or creditors, an SME does so with the assets of their company, while a self-employed person must assume their debts with their personal assets.
As for taxes, the self-employed must pay IRPF (Personal Income Tax), while SMEs will pay at the rate of IS (Corporate Tax). Regarding deductions, self-employed professionals can only deduct 50% of the expenses linked to their economic activity, while an SME, 100%.
In short, you will have to assess the characteristics of each formula to decide if it is better for you to make the leap to a company or remain self-employed for a little longer.
Whether you are a freelancer, freelancer or SME, at Algri Coworking we offer you a collaborative workspace to facilitate the expansion of your business to the next stage.