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Individual Entrepreneur (Sole Trader)

A sole trader is a natural person who carries out a commercial, industrial or professional activity in his own name and by means of a company.

This concept involves the complete control of the company by its owner, who directs the management personally and who is liable for all debts incurred with respect to third parties with all of his assets, as there is no division between his business assets and his personal net worth.

There is no preliminary formal step conditioning the acquisition of the status of a sole trader, although persons wishing to establish themselves as such must be of full age, free to make use and dispose of property and to engage in a business activity on their own and in an ongoing manner.

Minors and disabled persons may continue with the business of their parents, through their legal guardians. In the event of the legal incapacity for engaging in trading operations on the part of the guardian, or if the situation of the latter in incompatible with such activities, one or more agents must be appointed who meet the legal requirements and who will replace the guardian in the exercise of the business activity.

When a married person engages in business, it must be kept in mind that the trader’s property will be tied to the business, together with all assets acquired as a result of the commercial activity carried out. If there is no opposition to this activity on the part of the trader’s spouse, the joint property of both will be affected, being liable to be disposed of and mortgaged. The property belonging to the spouse not involved in the business may only be committed to the business through the express consent of that spouse. The opposition of the non-trader spouse to the exercise of the business activity must be formalised by means of a deed registered in the Mercantile Registry, where the marriage contract, if there is one, should also be registered.

Individual entrepreneurs pay tax through the Personal Income Tax system ("Impuesto sobre la Renta de las Personas Físicas", or IRPF). For certain activities carried out by sole traders, the possibility exists of electing a tax regime that involves fewer accounting and reporting obligations. This is the case of the objective estimate regime under IRPF and the simplified VAT.

With respect to the Value Added Tax (VAT), merchants are subject to the Equivalence Surtax regime.

The choice of this legal form can be based on tax considerations and the simplicity of the formal obligations, however, the high risk involved must be kept in mind.

Sole traders are not obliged to register in the Mercantile Registry, although they are free to do so if they wish. Spanish solicitors in London

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