Starting a business in Spain offers a gateway to a fast-growing economy and access to European markets, but it often seems wrapped in red tape.

Understanding the intricacies of Spanish corporate law can be daunting, especially for international entrepreneurs.

This article prepared by Quality Conta provides a guide to getting started on the road to registering a company and the nuances of Spanish company law.

Legal structure options for registering a company in Spain

Starting a business in Spain presents a host of opportunities, and deciding on the appropriate legal structure is a critical first step.

Entrepreneurs have several options, ranging from sole proprietorship if simplicity is key, to more complex structures like limited liability companies (SL or Sociedad Limitada and SLNE) and stock corporations (SA), for those needing a more sophisticated framework.

Jointly-owned operations offer partnership-like arrangements. The chosen structure impacts the company’s operations, taxation, and the extent of the owners’ liabilities.

The registration process usually involves drafting articles of association, detailing shareholder information, and providing specimen signatures, among other administrative steps.

Specific actions will typically include engaging a public notary, establishing a registered office, opening a business bank account, and quite frequently, the need for a local accountant.

In Spain, many entrepreneurs opt for a limited liability company, which balances convenience with limited financial exposure, making it a popular and practical choice.

Understanding Limited Liability Companies (Sociedades de Responsabilidad Limitada)

The Spanish Limited Company (SL) is favored for its high level of flexibility in company rule-setting, 1making it ideal for small to medium-sized ventures.

Formation of an SL is accessible with a minimum share capital of €1, and both individuals and other legal entities can establish an SL, regardless of their place of residence. Asset protection is key; the personal wealth of the business owners is generally safeguarded against company debt.

Ownership in an SL is via shares that are not traded publicly, thus allowing existing shareholders to maintain control.

However, incorporation entails complexities, such as notary and company registration fees. A tax identification number is another prerequisite, and corporate tax, set at 25% of profits, VAT, and social security contributions are part of the tax liabilities.

Considerations for foreign companies establishing business in Spain

The Spanish market beckons foreign investors, yet there are considerations unique to non-residents. Apart from professional qualifications or experience aligned with their business domain, non-EU entrepreneurs must be legally compliant and of age.

Residence and work permits are likely necessities for those planning a more hands-on management role.

A foreigner’s tax identification number (NIE) becomes essential for handling fiscal matters within Spain. Additionally, presenting a robust business plan, professional credentials, and a potential to boost local employment could all be prerequisites for setting up a business in Spain for non-national business owners.

By navigating through these considerations, foreign companies can effectively tap into the growing Spanish market and set a strong foundation for successful business operations.

Determining business activities and structures

When considering how to open a company in Spain, one of the first decisions you must make is regarding the type and range of business activities your company will engage in. This choice will not only determine the operational focus of your enterprise, but also the kind of legal structure best suited to your business needs.

Spain offers a broad range of legally permissible business activities, ranging from individual service provision to complex manufacturing processes. Legal structures in Spain are diverse and designed to accommodate businesses of varying sizes and scopes.

Entrepreneurs can choose from several business forms, the most commonplace being sole proprietorship for single-owner businesses, limited liability companies (SL) for enterprises with a few partners, and stock corporations (SA) for larger operations that may wish to trade publicly.

Each of these structures aligns with particular business activities and scales of operation, carrying distinct capital requirements and degrees of personal financial exposure for the owners.

Overview of different business structures in Spain

Spain’s business landscape features an array of structures tailored to the varied needs of entrepreneurs and investors. Here’s a look at some key options:

Individual Companies: Typically adopted by sole traders, this no-frills structure does not require initial capital, making it suitable for simple, small-scale business activities with complete owner control.
Limited Liability Companies (S.L.): The S.L. is the go-to legal form for many business owners due to its liability protection. It requires a minimum capital of EUR 1, and insulates personal assets from business-related debts.
Newly Created Limited Liability Companies (SLNE): SLNEs are a streamlined option for new enterprises, offering a simplified application process and reduced initial capital requirements, aimed at encouraging entrepreneurship.
Partnerships: Although they allow for shared responsibility and profits, partnerships place personal liability on the partners for the business’s debts, making it paramount to draft a very clear partnership agreement.
Stock Corporations (S.A.): Suitable for substantial business ventures, S.A.s demand a higher capital stock of at least EUR 60,000 and are subject to stringent regulations due to their public trading capabilities.
Non-Profit Organizations: Entities like associations, foundations, and cooperatives fall under this category and can benefit from tax advantages if specific conditions are met.

Each business structure offers different levels of risk, control, and complexity, and choosing the right one is a foundational step for any entrepreneur looking to open a business in Spain. These choices will also influence future scalability, investment opportunities, and operational flexibility.

Business owners should carefully consider the implications of each legal form, ideally with the assistance of legal and accounting experts who understand the nuances of Spanish business and tax law.

Combining a keen grasp of their chosen business activities with the appropriate structure will set owners on the path toward a robust and compliant business enterprise in Spain.

Necessary documentation and legal requirements for setting up a business in Spain

Before plunging into the Spanish market, prepare to gather several pivotal documents:

Foreign national’s tax identification number (NIE)
Certificate of No-name Coincidence for the company name
Tax identification number (CIF) for the business
Official bank account for the business dealings
Signed Deed of Incorporation
Registration for Social Security

The Deed of Incorporation is paramount, recognizing the shareholder’s intentions, capital commitments, and establishing the corporate framework.

As your business evolves, frequent updates to your shareholders’ agreements and company statutes may be required, ensuring all records stay current.

To navigate through these comprehensive procedures and regulatory frameworks, utilizing the expertise of legal and financial advisers is highly recommended, particularly for foreign entrepreneurs unfamiliar with the Spanish business landscape.

Role of power of attorney in registering a company in Spain

The process of opening a company in Spain, particularly for foreign investors or parent companies, often involves a critical legal mechanism: the Power of Attorney (PoA).

This document plays an essential role in ensuring that the business setup procedures can be carried out effectively, even without the physical presence of the company’s principals. The Power of Treaty is particularly vital for foreign companies wishing to expand into the Spanish market by establishing branch offices. In such cases, a power of attorney must be presented along with a copy of the deed of incorporation to the Mercantile Registry.

For entrepreneurs preferring to handle their Spanish business affairs remotely, utilizing a Power of Attorney is a standard and practical solution. It allows them to authorize a trusted representative to undertake all the necessary actions for establishing the company on their behalf.

This includes tasks like applying for a Spanish tax number (NIF) for a subsidiary, which starts by granting a PoA specifically for the NIF application. Such a PoA can be executed either in Spain or a foreign country, depending on the conveniences and location of the company’s directors.

When it comes to the role of PoA in the company registration process, the Mercantile Registry in Spain requires a power of attorney for various stages of the setup.

This indispensable legal document ensures that the appointed agent can perform tasks such as requesting a foreigner identity number (NIE) for foreign directors and partners, which is a divergence from the simpler self-employed worker registration.

In essence, the strategic use of a Power of Attorney streamlines the registration process, ensuring that all legal formalities are addressed promptly, particularly beneficial for those unable to be present in the country.

Considerations for foreign investors and non-EU citizens

Embarking on a business venture in Spain poses certain challenges for foreign investors and non-EU citizens. Despite these challenges, the process remains quite feasible, provided that the proper steps are followed, and legal prerequisites are met.

Non-EU citizens are subject to the same general requirements as EU citizens, including the need to obtain a Number de Identification Foreigner (NIE), which is an identification number for foreigners, and a Number de Identification Prosecutor (NIF) when a foreign corporation acts as a shareholder.

In Spain, non-EU citizens enjoy the right to be shareholders or even directors of a company. However, if they wish to be salaried, a valid work permit is a necessity.

These foreign entrepreneurs must be prepared to submit an array of documents such as a valid passport, their individual NIE, the company’s NIF, and proof of sufficient financial backing to ensure stability.

A notable path available for foreign investors who wish to not only open a business but also reside in Spain is the Golden Visa. This is attained by making significant investments, typically in real estate.

It’s important to be aware that legislative shifts could recalibrate the requirements, potentially steering investors towards alternative avenues like investing more substantially in Spanish treasury bonds.

Setting up a Spanish company: Initial investment and share capital

Setting up a Spanish company demands attention to financial details, especially concerning initial investment and share capital.

The share capital reflects the company’s financial foundation and credibility and is essential when registering the business with Spanish authorities.

Prospective business owners should also consider the timeframe for their company’s name reservation. In Spain, the reservation is valid for three months and can be extended once for another three months.

If the incorporation process hasn’t concluded within this period, you’ll need to reapply for the reservation.

QualityConta can help you save resources

Setting up a company in Spain can be a complex process, but you don’t have to go it alone. At Quality Conta, we are here to provide you with the professional support you need throughout this process.

F&Q on how to start a company in Spain

Does it take a long time to set up a company in Spain?

Setting up a company in Spain can take a few weeks to a couple of months, depending on the complexity of the business and the efficiency of the administrative processes.

Is it advisable to hire a consultancy to set up a company in Spain?

Yes, hiring a consultancy in Madrid for example is advisable when setting up a company in Spain, as they can navigate the administrative processes, ensure compliance, and expedite the setup.

Can I set up a company in Spain and run it from another country?

Yes, you can set up a company in Spain and run it from another country, but you must comply with Spanish regulations and may need a local representative.

Step-by-step guide on how to open a company in spain