Editor’s note: This article was first published in June 2011. It cites 2011 figures, including a minimum self-employed contribution of about 180 euros a month and a minimum share capital of 3,012 euros for a limited company, which was cut to 1 euro in 2022.
We’ve already covered the basics of what a commercial contract (contrato mercantil, a contract for services rather than an employment contract) is, the kinds of work it tends to suit and some factors to keep in mind. You can read it here: Commercial contracts: definition and the risks of this type of contract.
Since questions keep coming up, and more and more people are asking about this type of contract, here we explain a few points that I hope will clear up any remaining doubts.
The basic legal principle
Any paid work must be done while registered under some social security scheme, either the general social security scheme or the scheme for self-employed workers (autónomos). However, the law leaves a gap: you don’t need to register if you don’t earn more than the national minimum wage (salario mínimo interprofesional). So at a given point you could have a commercial contract with a company without registering as self-employed at first, as long as your income doesn’t reach amounts that would catch the tax authorities’ eye.
Can I claim unemployment benefit and work on a commercial contract at the same time?
You can, although you really shouldn’t. Let me explain. When you start with a company without a fixed salary and your income depends on sales, there’s the uncertainty of not knowing whether you’ll earn a lot, a little or anything at all. It’s logical to think you need a financial cushion (in this case, unemployment benefit) in case things don’t go as planned.
If a labour inspector caught you claiming benefit while working, you could be in trouble, even with a commercial contract. Normally, if you keep this up for only 2 or 3 months, nothing should happen, as long as the ultimate aim is to work legally and stop claiming unemployment benefit.
One way to avoid problems is to agree with the company that payments won’t be made by bank transfer or cheque. The money should be collected in cash. That way, you wouldn’t attract the tax authorities’ attention.
If the company declares the payments it makes to me, could I get into trouble?
Yes, you could run into problems at the end of the first quarter, which is when the company declares its expenses and income. That’s why we say you shouldn’t keep up an “illegal” commercial-contract situation for more than 3 months.
If I get a commercial contract and will only earn €500, is it worth registering legally?
It isn’t worth registering, and you aren’t obliged to either, since you don’t exceed the minimum wage. That said, if you earn commissions on top of a fixed salary, there will come a point when you’re required to register as self-employed.
What is the minimum I have to pay as a self-employed worker?
Under the self-employed workers’ scheme, you decide how much to pay according to the contribution base you want. If I remember correctly, the minimum is around €180.
The advantages of paying self-employed contributions
The advantages are obvious. You’re covered as a business, these days you’re entitled to a benefit if you stop trading, and you also pay into social security for the future. Of course, if you only earn €500, paying the self-employed contribution isn’t worth it.
Which is better: being self-employed or setting up a company?
Personally, I’m in favour of setting up a company. As a self-employed person you are the business, so your liability is unlimited, which puts your present and future assets at risk. If you register as a company instead, your liability is limited to the capital you’ve put in, which is usually €3,012. You can read: Which legal structure to choose for my business
Further reading
- How to start a business with no money
- Business ideas to start this year
- Freelance contracts: definition and differences from commercial contracts
Featured image: Wendy Berry, CC BY 2.0, via Flickr.
