Starting a Business in Spain
Setting up a Limited Company in Spain
One of the most important decisions we make when embarking on a new business enterprise, is what legal form the business should take. In Spain, there are a variety of different legal structures through which we can do business, from the basic self-employed or freelance worker to the more complex and legally independent "Sociedad Anonima" or Company Limited by Shares. Along the way, we also come across such things as Cooperatives, "Comunidades de Bienes", "Sociedades Laborales" and "Sociedades Civiles". All of these have different legal structures and requirements and are more or less appropriate depending on the exact nature of our business and the resources at hand. But by far and away the most common form of business structure in Spain is the so-called "Sociedad Limitada" or Limited Liability Company.
When we refer to limited liability, we mean that our economic liability or responsibility in the company's affairs is limited to the capital we invest in it. The most important consequence of this is that our own private property cannot be touched or sold to cover debts of the company, which is considered to be a separate legal entity from the individual shareholders. This limitation, however, does not always apply to the company's directors ("administradores"), who can be held to account for company debts caused by their own negligence or lack of foresight.
In Spain, a Limited Company's capital is divided up into participations. The minimum capital requirement for an S.L. is 3,012€ which must be completely paid up on setting up the company. The capital can come in the form of money or goods and intellectual property that can be valued. Work is not valid as a capital contribution. The minimum number of shareholders (as and from June 1st 1995) is one.
The first thing we have to do before setting up the company is to decide on a name and make sure that that name or one similar is not being used by any other company. Once formally issued with a certificate from the Commercial Register ("Registro Mercantil" the equivalent of Company House in the UK) which acknowledges that fact, we may register the name for the purposes of setting up the company. Please note that there are different registration procedures for trademarks and logos.
The next step is to deposit the capital into a provisional bank account in the company's name (assuming we are making a money investment i.e. asset contributions are also possible). The bank will issue us with a certificate stating the exact amount of the deposit, its purpose and the name of the investors.
Spainwide is an official agent of one of Spain's leading banks and can assist you in opening a bank account for this purpose.
With this certificate, along with the aforementioned certificate of registration of the company name, we may go along to a notary who will draw up the statutes and memorandum of the company. This is a unified document which includes such information as the names of the company and shareholders, the capital investment made and in what form, the company address, the name(s) of the company director(s) with a list of responsibilities, as well as the commercial objectives of the company.
CIF & Capital Tax
Once the shareholders have signed this document in the presence of the notary, we may apply for a company tax number (C.I.F.). This will be assigned to us by the Tax Authority ("Hacienda") on presentation of the statutes and memorandum as well as other identifying documents. Thereafter, we have to pay a Capital Tax which constitutes 1% of the capital invested.
The next step is to register the statutes and memorandum in the Commercial Register ("Registro Mercantil" akin to Company House in the UK) and pay the corresponding duties. Overall, the registration process takes about a month as the Register must make sure that the statutes and memorandum include no illegal, misleading or contradictory articles. It is only on registration that we may formally recognise the company's existence as a legal business entity.
At this stage, we may consider the company to be set up. To put it in motion, however, requires us to carry out a series of other administrative procedures.
The first of these is to register the company for an activity in the Tax Authority. On registration, we are essential declaring the company open for business and therefore liable for tax purposes, as well as assigning the official activity code and tax and accounting obligations of our company (see Tax Registration).
Social Security and Contract Registration
The company will need to register in the Social Security Treasury nearest to the head office where it will be assigned a Social Security number. In the case in which we wish to employ workers, we must also register them in the Social Security Treasury, not forgetting, of course, the formal obligation to register the employment contracts in the Employment Office ("INEM"). At the same time, we must inscribe them in the so-called Personnel Register or Libro de Matricula de Personal, which must be at hand in the head office for official inspection along with the Visit Register or Libro de Visitas.
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If we are going to be using office or commercial premises, we will also have to make sure that they have a license issued for that particular function from the City Hall ("Ayuntamiento"). If not, we must apply for one. Depending on the nature of the activity you intend to carry out on the premises, the requirements that have to be met before a license is issued can vary considerably. Licenses for bars and restaurants for example are subject to more stringent conditions than office premises. Your local cuncil will be able to inform you of the specific requirements for different licenses as well as the existence or otherwise of a license for any particular premises.
Spainwide can assist you with all matters relating to Licenses for Commercial Premises
The company's ongoing legal and administrative obligations are essentially related to accounting, tax and social security. With regard to accounting, we must maintain our books in order along with the corresponding sales and expenses invoices. Our tax obligations are largely the quarterly VAT returns and the annual Company Tax declaration. If we have employees, then we must make the corresponding monthly social security payments on their behalf
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Updated March 2014