If you have a business idea or want to work as a professional in your sector, you are in the right place. Whether you have previous experience as a self-employed person or if it is the first time that you encourage to take the step and create your own company, we will briefly explain what the different types of small and medium-sized companies are, their tax obligations and their advantages.
What is an SME and what are the most common types?
In the United States, professionals and SMEs (Small and Medium Enterprises) can become different types of companies.
Each one with its own characteristics, benefits and tax obligations. In all of them risks are assumed and will entail costs. When we talk about the self-employed we know that we are referring to the profile of a professional who works alone or with less than 5 workers in charge. But when we talk about SMEs and taking into account the annual and total turnover of workers, we must consider these three types:
- Micro-business : it ranges from the self-employed to a small business with less than 10 workers and an annual turnover below 2M of us dollars
- Small business : a business with between 10 and 50 workers and an annual turnover of less than 10M US dollars
- Medium company : a business between 50 and 250 workers with an annual turnover of between 10 and 50 million us dollars.
From here, we find up to 16 different types of company in the United States and we explain the 5 most common , leaving aside the agricultural companies.
- Civil society
- Limited society
- Anonymous society
- Cooperative Society
Except in the case of the self-employed, all of them must pay corporation tax and the contribution (IRPF) of each worker, whether they are self-employed or salaried.
The self-employed worker is one of the great pillars of the economy in Europe and it is a person who performs personally, directly and outside the exclusive scope of a company, a lucrative professional activity. This formula allows to have workers in charge. To register as a freelancer, no initial capital is required, just fill out a form and we can start working.
Among the obligations of the self-employed we have the payment of the monthly self-employed fee that entitles us to universal health coverage, benefit for cessation of activity or common illness. The other obligation is the declaration of VAT and personal income tax on a quarterly basis. On our website you will find a ranking dedicated exclusively to loans for freelancers that you can use to pay periodic taxes in the absence of cash.
One of the changes introduced by the Entrepreneurs Law in the United States was the creation of the Autonomous Limited Liability (ARL). This is a modality in which liability limitations are created to avoid having to respond with the self-employed assets to the debts or obligations contracted. Of course, in this mode you must register the accounts in the commercial register.
It is the simplest and cheapest formula to create a company between two or more freelancers because it is not necessary to contribute initial capital, nor to register in the Mercantile Registry, with the exception of having to contribute real estate to the constitution. Only a private contract should be made that includes the activity of the company, the participation of the partners in cost and benefit or what happens when the contributions of each partner are not met.
This company is subject to Corporation Tax and to keep an accounting book like that of a limited company, with annual registration of accounts in the commercial register. It also has some disadvantage, such as that the responsibility of the partners is unlimited and, as in the case of the self-employed, they respond with their assets to the debts contracted with third parties due to the activity.
From a certain level of annual turnover, the Limited Company is a very interesting type of company both individually and with various partners.
The main advantage is that the liability is limited. The partners should not contribute private capital to deal with the debts . As with civil society, at the time of its constitution, the objective, the contribution of each partner and the distribution of benefits must be clear.
You must register and keep an accounting book to present in the Mercantile Registry and you must pay the Corporation Tax.
Among its disadvantages we find that the initial contribution must be at least € 3,000. In addition, the corporation tax can be higher than the personal income tax payment, especially if the turnover decreases. If you do not have the capital for the initial contribution, you can request a loan of 3000 us dollars of immediate concession.
This is the other great type of limited liability company most associated with companies of a certain size. Again, the partners contribute an initial capital that must be a minimum of € 60,000. This must be available at the time of incorporating the company.
In addition, the corporation is fragmented into shares and these can be transferred freely, allowing the entry of more partners.
In this mode, the liability of the partners is also limited. The number of partners must be 2 or 3 according to each autonomous community. In Andalusia it is only 2, but in Catalonia it can be 2 at the time of registration with the obligation to reach 3 after 2 years from its constitution.
The cooperative establishes the equalization of political and economic right between the partners without distinguishing the capital contributed. This should be fixed in the statutes. In addition, the partners will have the right to quote by the General Scheme or as autonomous, but by the RETA.
The main disadvantage lies in its greatest advantage. By dividing the decision-making power equally among the partners, it is more complicated than in a Limited Company or Limited Company to reach agreements. Another disadvantage is that the procedures to undo this company are quite long.
What type of company is right for you?
We have summarized the 5 large blocks of companies both by level of turnover and by legal constitution . Except in the case of the self-employed, each company has different subtypes such as Limited Labor Company, Limited Labor Company, New Company Limited Company, Community of Assets ... or agricultural worker societies or agricultural cooperatives, which have their own particular characteristics.
In Taichi Arts you will find very valuable information on: the different types of taxes, how much it costs to register as a self-employed person and other articles that we will be adding in our blog on economics.
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