The Billing Cooperatives, a solution for new self employed

If you have just started to work as a freelance you may be considering to avoid to register as a self employed in order to reduce the expenses that this procedure involves.

Is it posible to invoice without registering? How to avoid the fees for registering as a freelance until you start invoicing more? And above all, any of these options are legal? If you are arising this questions to yourself, you are in luck. Not only because we are about to answer all your questions, but also because all of these options are legal and really easy to implement.. Get a pen a some paper get prepared to solve all your invoicing headaches. The associated work cooperatives are here.

What are the invoicing cooperatives?

The working cooperatives are a organised working model quite common in other countries. In UK for instance, the so called umbrella companies are nothing new. For a while they have been protecting self employees in the first invoices. This is until they reach a certain level of invoicing that will allow them to pay for the fees stablished by the government.

The arrival of these kind of cooperatives in Spain is something recent. Up to this point, everybody that wanted to invoice a job had to register as self employed. Every new self employed had to deal with the annoyance of, not only the payment of all the taxes that goes with it, but also with all the inconvenience of burocracy and paperwork.  IVA (VAT) declarations every three months, calculating IRPF (Personal Income Tax), fees payments…if you are not familiar with all this, it may all be a bit overwhelming to start with.

How do cooperatives work?

Cooperatives are groups of workers. To be part of one of them, each member pays a fee, which can vary depending on the chosen cooperative. Once a member, the associate will be able to bill anything through the cooperative. That is, the cooperative will proces the bill and send it to the client. By doing so, the freelance worker won’t have to register as a self employed. Once the bill is paid, the cooperative transfers the money to the worker minus the admin commission fees.

Depending on the chosen cooperative, the commissions can vary from a 7% to a 10% of the total invoiced. Are you doing the numbers? Yes, depending of how much you invoice, this option is definitely cheaper than paying for the self employed fees.

Are they definitely legal?

Of course! The working cooperatives concept is widely recognised in Spain so you can rest assured. All the procedures that you will deal with through one of these cooperatives, are hundred percent legal.

How can I start using their services?

To become a member of a cooperative is very easy. To register they will ask you for a fee-often this fee is reimbursed depending on the services you use-and this will be your only worry. It will be the cooperative the one that will register you with the Seguridad Social(National Insurance Contributions Office) so that you can contribute for the working days/hours. They will deal with invoicing your client and once they receive the money they will transfer it to your account. That easy.

So what is the point of registering as a self employed?

Good answer! If you know anyone working as self employed, you’d have heard about the astronomical fees they have to pay. That is why if you are starting as a self employed your best choice may be to invoice through a cooperative. It is assumed that on the first few monthsworking as self employed you’ll generate small amount of invoices and of a quite limited value. Although later on your situation may change. Let’s explain it with an example;

You have decided to work as a freelance journalist. On your first active month you only manage to get a client and you are invoicing pretty much the same amount that you need to pay in self employed fees.  

In this case your best option would be to join a cooperative and invoice through them. They will charge you for the initial registration fees, admin fees for that invoice and the National Insurance fees forthat job, lets say as example, would be of 18 euros. As a cooperative member you’ll  of that working day and not for a whole month as you would do if your were registered self employed.

But, if your work load increases in few months and you start to invoice around six invoices in a month, bear in mind that the cooperative fees will also increase. Not only you’ll have to pay more in National Insurance fees but also in admin fees as you pay these based on the number of issued invoices.

In this case it would be better to register as self employed. This would be even better if you have never been registered before and you could benefit from the flat rate that government has just announced. That flat rate reduces the usual monthly fee of 267 euros down to 50 euros for the first six months.

Which cooperative shall I join?

If you have finally decided to go for the cooperative invoicing option, you need to know that there are specialised cooperatives for different working areas and also more generalised ones, in which they deal with most of professional fields.

The benefit of selecting a specific cooperative for your profession is that these associations work as connecting point between professionals. Often in their web sites they have advert sections were you could get in contact with other professionals from your same working field. Who knows, you may found more work and end up having to register as self employed.