Sole proprietor, IRAE or SAS: what to choose in Uruguay

Choosing between a Personal Services sole proprietorship, a sole proprietor paying IRAE and a SAS should not start with 'which pays less?'. First separate legal form, income-tax regime and the real nature of the activity.

Quick comparison

• Sole proprietor + Personal Services: a common starting point when one person mainly sells their own work.
• Sole proprietor + IRAE: still the same individual; income-tax treatment changes but no company is created.
• SAS: a separate company with shares, administrators and corporate obligations. Analyse it for business reasons, not merely an assumed tax discount.

Solo developer billing the United States

If you develop software independently from Uruguay, with no team and mainly sell your own work, start with Personal Services. A foreign customer does not require a SAS. Software can receive different treatment under IRPF, VAT and IRAE, so each tax needs its own analysis.

DGI allows personal-service earners to elect IRAE. If communicated within the first three months after starting IRPF-covered activities, it can apply from that fiscal year; later it generally takes effect from the following year. A voluntary election requires a minimum stay of three fiscal years.

Consultant with local and foreign customers

You do not need two companies merely because you have Uruguayan and foreign customers. Classify each transaction correctly: VAT export treatment and income tax are different questions.

Small shop, repair business or workshop

A shop, shoe-repair business or small workshop combining capital and labour should not automatically copy a freelancer structure. First check Monotributo, IVA mínimo or the general regime.

The first employee

Hiring the first employee does not automatically turn a sole proprietorship into a SAS. It does add employer labour and BPS obligations. This is a good moment to reassess risk, contracts, intellectual property, administration and growth.

A software company planning to grow

When the business stops being one person selling hours and starts building a product, hiring a team, adding shareholders or holding company IP, a company can become more natural. A SAS can have one shareholder; the digital natural-person route supports up to six shareholders and up to three administrators/representatives within its conditions.

The IRAE software regime cannot be reduced to 'SAS = tax-free software'. The exemption has its own taxpayer, activity, substance, cost and documentation requirements. A sole proprietor that merely elects IRAE does not automatically obtain it either.

Obligations a SAS adds

• Formation and bylaws.
• Corporate books.
• Beneficial-owner reporting to the BCU: the official digital procedure warns of a 45-day period from obtaining the RUT.
• Administrators and representatives with BPS treatment.
• Additional corporate and accounting administration.

Practical rule

• Mainly selling your own work: start with Personal Services.
• Small commercial or industrial activity: first compare regimes that legally admit the activity.
• Need shareholders, shares, investment, a separate entity, team structure or company IP: analyse a SAS.
• If the only reason for a SAS is 'someone told me it pays less', the analysis is not finished.