# Sole Trader vs Company in Portugal: Which Fits You?

> Freelancer (recibos verdes) vs Unipessoal Lda in Portugal, 2026: tax, liability, cost and the visa angle, with two worked scenarios at €40k and €100k.

- Source: https://www.growinportugal.com/sole-trader-vs-company-portugal
- Publisher: GrowIN Portugal (https://www.growinportugal.com)
- Published: 2026-08-22
- Last reviewed: 2026-08-28
- Language: en

> **In short — as of August 2026:** A **sole trader** (freelancer on *recibos verdes*) pays IRS on **75%** of income under the simplified regime plus **21.4%** Social Security on **70%** of income (first 12 months exempt), needs no accountant, and carries **unlimited personal liability**. A **Unipessoal Lda** pays corporate tax (**IRC**) at **19%**, reduced to **15%** on the first **€50,000** of taxable profit, must have a certified accountant by law, and limits liability to the company's assets — but a further **28%** flat tax applies if you later pay yourself dividends. Below roughly **€40,000–€50,000** of income, freelancing usually wins on simplicity and net take-home; above that, and once liability, hiring or the **D2 visa** are in play, a company usually wins. There is no universal answer — only the right answer for your income and plans.

Portugal gives you two honest ways to work for yourself: [register as a freelancer](/how-to-register-as-a-freelancer-in-portugal/) and invoice on *recibos verdes*, or incorporate a **Unipessoal Lda**, Portugal's single-shareholder limited company. Both are legitimate, both are common, and the internet's advice tends to default to one or the other without asking what actually applies to you. This guide compares them properly — cost, tax, liability, credibility, and the visa angle — with two worked scenarios so the numbers, not vibes, do the deciding. If you've already registered and want the operational playbook rather than the decision itself, see [operating as a freelancer in Portugal](/operating-as-a-freelancer-in-portugal/).

## The Two Structures, Side by Side

| | **Sole trader (freelancer)** | **Unipessoal Lda (company)** |
|---|---|---|
| Setup cost | Free — *início de atividade* at Finanças | ~€220–€360 state fee (or [full setup service](/company-setup/)) |
| Setup time | Same day, online | Same day to a few business days |
| Mandatory accountant | No | **Yes**, by law from day one |
| Ongoing running cost | Minimal — optional bookkeeping only | Accountant (~€60–€250+/month), possible registered address |
| Tax on profit | IRS, **75%** of income taxed on the progressive scale | **IRC**: 19% general, **15%** on first €50,000 |
| Extracting profit personally | No extra step — it's already your income | **+28%** flat withholding if you pay yourself dividends |
| Social contributions | **21.4%** on **70%** of income (first 12 months exempt) | 11% employee / 23.75% employer, only on a salary you choose to draw |
| IVA | 23% above €15,000 turnover — same for both | 23% above €15,000 turnover — same for both |
| Liability | **Unlimited** — personal assets exposed | **Limited** to company assets, normal caveats apply |
| Annual filings | Quarterly Social Security declaration, annual IRS | Modelo 22 (IRC), annual **IES**, ongoing accounting |
| Credibility for larger contracts/hiring | Fine for direct and remote clients | Stronger for tenders, formal staff, enterprise clients |
| Visa fit | Suits the **D8** digital nomad visa | The usual vehicle for the **D2** visa |

## Scenario 1: A Solo Consultant at ~€40,000

> **Case study — Sofia, a Lisbon-based marketing consultant, €40,000/year.** Sofia works with a mix of Portuguese and foreign agencies, past her first-year Social Security exemption.
>
> **As a freelancer:** taxable IRS base = 75% × €40,000 = **€30,000**, run through the normal progressive scale. Social Security = 21.4% × (70% × €40,000) = **€5,992/year** (~€499/month). Combining IRS and Social Security, a mid-income freelancer typically keeps roughly two-thirds of gross once past the first-year exemption — for Sofia, that's a working estimate of around **€26,000–€27,000** net, with no accountant fee and no incorporation cost eating into it.
>
> **As a Unipessoal Lda:** she'd still need to draw a salary or dividends to actually spend the money, triggering the same IRS-and-Social-Security mechanics on whatever she pays herself, *plus* a mandatory certified accountant at roughly **€1,800–€3,000/year**, plus IES filing, plus — if she distributes any retained profit as dividends — a further **28%** on top of the 15% IRC already paid on it. At this income, the company adds real running cost and an extra tax layer without a matching benefit, since her liability exposure as a solo consultant is genuinely low.

**Verdict:** at roughly €40,000, freelancing wins on both simplicity and net income, unless a specific client, a hiring plan, or an approaching D2 application makes a company worth the overhead now rather than later.

## Scenario 2: A Growing Business at ~€100,000

> **Case study — Bruno, running a small web-development studio, ~€100,000 revenue.** Bruno subcontracts two developers and has real costs — subcontractor fees, software, a shared workspace — bringing taxable profit to roughly **€60,000**.
>
> **As a freelancer:** the simplified regime still applies under €200,000 turnover, but taxable IRS base = 75% × €100,000 = **€75,000**, pushing a meaningful slice of income into Portugal's higher marginal IRS brackets (reaching toward **45–48%** at the top). Social Security, uncapped in this simplified math, would be 21.4% × (70% × €100,000) = **€14,980/year** (~€1,248/month) before any contribution ceiling is applied — worth checking with an accountant at this level. He is also taxed on the full amount in the year he earns it, with no way to retain profit at a lower rate, and his personal assets carry the liability for two subcontracted developers' work.
>
> **As a Unipessoal Lda:** on roughly €60,000 of taxable profit, IRC = 15% × €50,000 + 19% × €10,000 = **€7,500 + €1,900 = €9,400** (before any municipal *derrama*, up to 1.5% where it applies — see the [corporate tax (IRC) data page](/data/corporate-tax-irc/) for the full rates and derrama brackets). That is a markedly lower rate than his freelancer marginal IRS band. He can also retain profit in the company rather than distributing it immediately, deferring the 28% dividend tax until he actually wants to take money out personally. The mandatory accountant (~€2,000–€3,000/year) is a rounding error against the tax difference, and limited liability meaningfully protects him now that he's subcontracting other people's work.

**Verdict:** at roughly €100,000, the company wins clearly — a lower headline rate on retained profit, the flexibility to defer the second tax layer, and real liability protection for a business with subcontractors and bigger clients.

## Liability: The Difference People Underweight

A freelancer's liability is genuinely **unlimited** — if a client dispute, an unpaid supplier or a mistake results in a claim, your personal assets are on the table. A **Unipessoal Lda** limits exposure to the company's own assets in ordinary trading (normal caveats apply around personal guarantees, mismanagement or mixing personal and company funds). This matters more as contract values, subcontracting and client risk grow — a €2,000 freelance design job and a €40,000 web-build with subcontractors carry very different downside.

## The Visa Angle: D2 vs D8

If immigration is part of your decision, the structure question partly answers itself. The [D2 visa](/portugal-d2-visa-guide/) is built around running a business or working self-employed inside Portugal, and most D2 applicants incorporate a Unipessoal Lda to evidence a real, funded venture — see our [company setup](/company-setup/) guide and the [D2 founder journey](/d2-founder-journey-portugal/) for how that sequencing works in practice. The [D8 digital nomad visa](/the-new-portuguese-digital-nomads-visa/), by contrast, is an income test for people already earning from foreign clients or a foreign employer, and it suits a straightforward freelancer registration — no company required. Choosing the wrong structure for your visa route wastes months, so settle the visa question before you settle the tax question if the two are linked.

## Things to Watch

- **Assuming a company always saves tax.** Below roughly €40,000–€50,000, the mandatory accountant and the extra dividend layer often make freelancing the better net-income outcome.
- **Ignoring your real liability exposure.** A freelancer's personal assets are genuinely on the line — fine for low-risk solo services, riskier once you subcontract or take on bigger contracts.
- **Incorporating purely for a visa, with no intent to operate.** Consulates and AIMA increasingly check for genuine activity, not a paper company.
- **Forgetting the 28% dividend layer.** A company's low IRC rate looks great until you actually try to spend the money personally — plan for that second tax bite.
- **Underestimating company admin.** IES, RCBE updates and ongoing certified accounting are real, recurring obligations a freelancer simply doesn't have.
- **Waiting too long to switch.** If you're already turning away larger contracts or hiring informally because you're "just a freelancer," that's usually the signal to incorporate.

## Short FAQ

**Is recibos verdes the same as being self-employed?** Yes — *recibos verdes* (green receipts) is simply the invoicing mechanism freelancers use once registered as self-employed at Finanças; it isn't a separate legal status.

**Do I pay IVA either way?** Yes, the €15,000 threshold and 23% rate apply identically to freelancers and companies once you cross it — structure doesn't change your IVA position. The [VAT (IVA) data page](/data/vat-iva/) lists the current rates and threshold.

**Can I have employees as a freelancer?** Not directly in the usual sense — hiring staff formally is far more natural, and often only really works, through a company.

**What if my income sits right between €40k and €100k?** Run both scenarios with your real numbers and your accountant — the crossover point depends heavily on your actual costs, whether you plan to retain profit, and how much liability risk you're carrying.

Neither structure is universally "better" — the right one depends on where your income sits today, where it's heading, and how much liability and credibility you actually need. Run your own numbers before committing, and revisit the decision as the business grows rather than treating it as permanent.

> Not sure which structure fits your numbers? Get a [company structure assessment](/services/company-structure-assessment/), or [talk to our company setup team](/company-setup/) about comparing freelancer registration against a Unipessoal Lda for your specific income and plans — or see the full [cost of starting a business in Portugal](/cost-of-starting-a-business-in-portugal/).

## Frequently asked questions

### Which is cheaper to run day to day, freelancing or a company?

Freelancing, clearly, at modest income. There is no mandatory accountant, no incorporation fee and no annual IES filing — just the free início de atividade, a recibo verde per invoice, and quarterly Social Security. A Unipessoal Lda adds a mandatory certified accountant (roughly €60–€250+/month), a registered address if you don't have one, and IES. That overhead only pays for itself once revenue, liability exposure or credibility needs grow.

### Can I switch from freelancer to a company later?

Yes, and many people do exactly that as income or client demands grow. You close your freelance activity (or keep it dormant) and incorporate a Unipessoal Lda, then move contracts and invoicing across. It's an administrative step, not a legal barrier, so there's rarely a reason to over-engineer your structure before you actually need to.

### Does a company always pay less tax than a freelancer?

No — it depends on income level. At modest income, a freelancer's simplified-regime IRS (taxed on 75% of income) plus Social Security often beats a company once you add the mandatory accountant and, if you extract profit as dividends, a further 28% withholding on top of IRC. At higher, retained profit, the company's 15%/19% IRC usually wins over an IRS marginal rate reaching toward 45–48%.

### Which structure do I need for the D2 visa versus the D8?

The D2 is built around running a business or working self-employed inside Portugal, and most D2 founders incorporate a Unipessoal Lda to evidence a real venture, though a strong self-employment proposal can also qualify. The D8 digital nomad visa is an income test for people who already earn from foreign clients or a foreign employer, and it suits a freelancer structure — no company required.

### Does a freelancer in Portugal need a certified accountant?

Not legally, while you're on the simplified regime. Many freelancers handle their own recibos verdes and quarterly Social Security declaration. A Unipessoal Lda, by contrast, must have a certified accountant (contabilista certificado) by law from day one — this is one of the clearest structural differences between the two.

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© GrowIN Portugal. Cite as: GrowIN Portugal, "Sole Trader vs Company in Portugal: Which Fits You?", https://www.growinportugal.com/sole-trader-vs-company-portugal