Being one of the largest markets in the European Union for conducting business, Spain is a country of choice for investors who’d like to set up a company in South Western Europe.
Spain is also a strategic location for investors from Africa and Europe, enabling easy transactions for individuals to and for these continents.
Company Registration in Spain is quite simple, however, it is crucial to acknowledge the rules of local law for company registration in Spain.
Benefits of setting up a company in Spain
There are several benefits for Spain’s corporations including:
- 100% foreign ownership of shares is permitted
- Spain has a low minimum share capital requirement
- Spain offers political and economic stability.
- As a member of the European Union, Spain provides opportunities to do business with other EU member countries.
- The Spanish business sector is very generous to small businesses with around 90% of the companies set up in Spain being small and hiring fewer than ten employees.
- Spain has different forms of DTAAs (Double Taxation Agreements) with other countries such as the UK, India, and America. Thus an investor wouldn’t get taxed twice.
- There are plenty of government incentives offered for foreign companies incorporated in Spain.
Business Structures in Spain
The type of business entity required is a vital consideration when starting a business in Spain. Each business structure has a different set of legal and fiscal responsibilities. But without further ado, Spain offers the following business entity options for companies :
Sole Trader in Spain (Empresario Individual)
This is the easiest and most common business entity to set up in Spain. This business is legally regarded one and the same as the individual running it. For this reason, the business owner doesn’t have to file any special tax forms and is responsible for all debts incurred by the company.
Jointly Owned Company in Spain (Comunidad de Bienes)
This Business structure is almost identical to the Sole Trader business in Spain, except that the business is comprised of more than one individual and these members share ownership of common property. The members of the Comunidad de Bienes are personally liable for debts, but there is no minimum financial investment, and tax is reported on each individual’s IRPF tax form.
Partnership in Spain (Sociedad Civil)
The Partnership in Spain is a business association formed by two or more individuals who contribute money, equipment, or labor and divide the profits amongst themselves according to their predetermined agreement. Accordingly, any debts or financial responsibilities will also be divided amongst the parties. Anything not expressly agreed upon will be governed by Spain’s Civil Code.
Public Limited Company or Corporation in Spain (Sociedad Anónima)
As a stock company, the Public Limited Company in Spain is highly structured and regulated. Important decisions are decided by the majority and annual audits are required. This type of company in Spain is an autonomous legal entity and its shareholders are not responsible for debts incurred by the company.
Limited Liability Company in Spain (Sociedad de Responsabilidad Limitada)
The Limited Liability Company in Spain is another type of Spanish stock company. Similar to the Sociedad Anónima, this is an autonomous legal entity and shareholders are not responsible for debts incurred by the company. All LLCs must pay Corporate Income Tax. The LLC minimum required investment is considerably less than for a Sociedad Anónima.
New Enterprise Limited Company in Spain (Sociedad Limitada Nueva Empresa)
The New Enterprise Limited Company in Spain is regarded to be a simplified form of the Limited Liability Company and as such is an autonomous legal entity, but it has its own set of requirements, including a set of specific naming requirements: the company name must contain a registration number, one of the founders’ names and the words “Sociedad Limitada Nueva Empresa or S.L.N.E.”
Steps To Company Formation In Spain
This article provides some guidance on key legal aspects for foreign investors interested in incorporating a Company in Spain. The following steps are required:
Obtain a Foreigners’ Identity Number (NIE)
Citizens from European Union countries who want to be directors or partners of a Spanish company must have a foreigner identity number which can be requested either by initial appointment at the Spanish Consulate in the country of residence of the interested individual or, in Spain, in person or through a representative with notarial powers.
Obtain a Spanish tax number (NIF)
To create a subsidiary in Spain, the parent company that will own a stake in the new company has to first obtain a Spanish tax number.
For such purposes, the parent company must submit the following documentation to the Spanish tax administration:
- An authorized power of attorney to a third party so that the latter can request the NIF.
- The company’s good standing certificate procured at the Business Register that must state its governing body, name, incorporation date, and registered office.
- The company’s bylaws.
All the documents above must be translated and apostilled.
Steps involved in creating a company in Spain
Once the above formalities are met, the company can then be incorporated. The steps involved are outlined below:
Obtaining clearance certificate for the company name.
The first step when establishinging a company in Spain is to check the Central Business Register to see if the selected corporate name is available. It’s recommended to provide five corporate names in order of preference when applying. The Register will approve one of the corporate names requested unless none of them are adequately different from the corporate names already registered in Spain.
Capital and legal form.
The company founders must select a legal form and assign the required share capital. The company’s capital will depend on the legal form selected.
Opening a bank account.
Once the corporate name is reserved, a bank account needs to be opened in the name of the company and the required capital must be deposited to obtain a bank certificate stating the capital deposited. However, the certificate does not have to be included in the company’s incorporation deed, given that this requirement is replaced with a distinct statement from the founding partners that they will be jointly liable for the contributions in relation to the company itself and its creditors.
Drafting the bylaws.
The bylaws must be drafted by considering the partners’ needs and concerns. The bylaws must include the company’s registered office, governing body, corporate objective, and the governing body’s income.
Appointing the directors
Depending on the company’s administrative structure, a single director, several directors acting in a joint way, or a board of directors can be chosen. Foreign investors will also need to assign a representative resident in Spain.
Signing the incorporation deed before a notary
The company’s incorporation documents must be signed before a notary by all the partners of the company (both Spanish and foreign). Once the incorporation deed signed before a notary is obtained, the provisional tax number can be then obtained. If one of the partners is a foreign legal person, proof of its existence must also be submitted.
Filing at the Business Register and obtaining the NIF.
Once the NIF is obtained, the company must be filed at the Business Register and the final tax number can be requested thereafter.
Depending on the company’s activity and the registered office’s region, some additional formalities may be needed.
Residency in Spain through the Company Formation
Through an Investors Visa, it is possible to obtain legitimate residence in Spain when the creation of the new company is accompanied by an investment in a business project of interest to Spain (e.g., the Creation of jobs or contribution to scientific or technological innovation).
Are you interested in setting up a business in Spain? – Let’s go ahead and contact your Damalion expert now.
