There are different ways to do business in Spain: as a sole trader (also known as self-employed professional) or as a trading company. The main differences between both forms are determined by the limitation of liability, the type of business to be developed and the term of the business.
For self-employed professionals and some companies which are not subject to a limitation of liability, it is particularly relevant that they may be held liable by their creditors with all present and future personal assets.
However, for Sociedad Anónima (SA) and Sociedad Limitada (SL) the investor's liability is limited to the amount contributed to the company. Due to this limitation of liability, Sociedad Anónima SA and Sociedad Limitada SL are the most frequent forms of business in Spain.
Criteria to choose between SA or SL for starting business in Spain
The type of business to be developed: some business activities can only be developed under an SA by Law (e.g. banks, leasing companies, insurance firms, etc.)
Number of shareholders: SAs are intended for companies with a large number of shareholders, where the capital contributed by each shareholder is more important than their personal skills. This is why shares can be transferred more freely. However, the personal skills of shareholders are more relevant in SLs. Therefore, the transfer of shares is more restrictive.
Start up capital: for SAs the minimum capital is €60,100 and €3,010 for SLs.
Degree of flexibility in control over shareholders and directors and in the company's operating conditions: operating conditions for SAs are more stringent and expensive than for SLs.
According to the above, an SL is most suitable if shareholders are limited in number, are not willing to contribute €60,100 or more in capital and prefer to have lower operating costs. This type of company is optimal for small and medium enterprises and family businesses.
Steps to establish a company according to the Spanish Law
The administrative procedure to incorporate differs for SAs and SLs. Generally speaking, the steps to be taken in both cases are:
Request a business name certificate (certificación negativa de denominación social) proving that the business name chosen is not already taken by an existing company
Open a bank account under the company's name where contributions to the corporate capital can be made and actually make those contributions to the corporate capital
Obtain a bank statement certifying such contributions to the corporate capital
Draw up the corporate bylaws
Execute the deed of incorporation before a notary public
Pay the relevant tax for the contribution to the corporate capital (currently exempted)
Register the company with the Commercial Registry
Obtain a Tax Identity Number (NIF, número de identificación fiscal)
Notarization of the Shareholders Registration Book.
The costs of incorporation are mainly that of the notary and the register. Those are set according to several parameters: For an SL with a corporate capital of €3,000, notary and register costs should add up to a total of €500.
The time it takes to incorporate a company in Spain is also determined by several circumstances. Currently, the process takes about 45 days.
To obtain further tax and legal advice about the Spanish legislation and how to operate in Spain do not hesitate to contact us. Meanwhile, you can also download our White Paper "What we do well".
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