Establishing a business in Spain is a significant step for entrepreneurs looking to enter the Spanish market. Choosing the right legal form is a fundamental requirement for success. Spain offers a variety of legal forms for companies that differ in terms of liability, capital requirements, and administrative complexity.
In this article, we explain the most important Spanish legal forms for companies, outline the associated costs, and describe the process of setting up a business. Finally, we delve into tax considerations and explain how you can benefit from professional support.
Content
- What Spanish legal structures are available?
- What costs should you expect?
- How does the company formation process work?
- What should be considered regarding taxes and social security?
- Successful company formation with professional support
What Spanish legal structures are available?
Like most European countries, Spain distinguishes between partnerships and corporations. Depending on your business model and personal circumstances, different Spanish legal structures may be suitable.
Sole trader or freelancer (Empresario Individual / Autónomo)
Becoming a sole trader is the simplest and quickest route to self-employment. The individual operates directly in their own name and at their own risk, acting as the direct contracting party with suppliers and customers.
This Spanish legal structure is similar to the sole trader in the UK. Registration is carried out with the Spanish tax authorities and social security. A major disadvantage is the unlimited personal liability for all debts, which can quickly become a challenge for larger operations.
Advantages:
- No minimum capital required
- Quick and easy registration
- Low administrative burden
Disadvantages:
- Personal liability for all debts
- Mandatory social security contributions
Civil partnership (Sociedad Civil)
The Sociedad Civil is one of the simplest forms of a partnership, requiring no minimum capital. It is established by at least two partners, both of whom have unlimited and joint liability. While straightforward, it is less suitable for businesses with high liability risks.
Since 2016, taxation has depended heavily on the purpose of the partnership. If the partnership engages in commercial activities, it is subject to corporate tax, which can create financial disadvantages. Exceptions apply to sectors like agriculture and forestry. There is no limitation of liability, and the disadvantages of a non-commercial partnership apply.
Key Features:
- No minimum capital required
- The partnership agreement forms the foundation
- Optional: Notarial certification for legal personality
Private limited company (Sociedad Limitada, S.L.)
The Sociedad de Responsabilidad Limitada (S.L.) is similar to the private limited company (Ltd.) in the UK but requires a significantly higher share capital of €3,000.
A single shareholder is sufficient (in which case it is called an S.L.U.), and there is no upper limit on share capital. The company is subject to corporate tax and has a disclosure obligation with the commercial registry.
For entrepreneurs looking to benefit from tax advantages in Spain, the Lex Beckham offers significant perks. This model is particularly appealing to highly skilled professionals in senior positions and can be combined with the formation of an S.L.
Sie ist die beliebteste spanische Rechtsform und eignet sich besonders für kleine bis mittelgroße Unternehmen.
Advantages:
- Liability is limited to the company’s assets
- Suitable for various business models
- Simple administration
Disadvantages:
- Mandatory notarial certification
- Obligations for annual financial statements and bookkeeping
Public limited company (Sociedad Anónima, S.A.)
For larger businesses, the Sociedad Anónima (S.A.), equivalent to the British plc, provides greater flexibility in raising capital. It is the preferred legal structure for large companies or those seeking to raise funds through the sale of shares. The minimum capital requirement is €60,000, of which at least 25% must be paid in at the time of incorporation.
Applications:
- Companies with many shareholders
- Businesses requiring external financing
- Holding structures
Key Features:
- Strict disclosure obligations
- Higher incorporation costs
Community of property (Comunidad de Bienes)
The Comunidad de Bienes is based on the shared economic use of assets. It does not require a minimum share capital, and its formation can be done through a private agreement. In some cases, such communities arise automatically, such as in the case of an inheritance. While initially offering favourable taxation, it lacks liability protection and carries all the disadvantages of a non-commercial partnership.
Professional civil partnership (Sociedad Civil Profesional)
This type of partnership is limited to professions requiring a university degree, such as doctors, lawyers, or architects. At least three-quarters of the ownership must be held by qualified professionals. Establishing the partnership requires a public deed and registration with the commercial registry. Unlike a simple Sociedad Civil, it is not subject to corporate tax. Professional liability insurance is mandatory.
General partnership (Sociedad Colectiva)
The general partnership requires at least two partners, who do not need to be actively involved in the business. Different types of partners exist, such as capital investors and active partners. Profits are subject to corporate tax. While no minimum share capital is required, the formation and administrative costs are relatively high. Partners have unlimited liability, and transferring ownership shares is difficult.
Limited partnership (Sociedad Comanditaria)
This legal structure includes two types of partners: limited partners with restricted liability and general partners with unlimited liability. There are two variations: the simple limited partnership, which has no minimum capital requirement, and the partnership limited by shares, which requires a minimum capital of approximately €60,000. Limited partners have very limited decision-making rights.
New enterprise limited company (Sociedad Limitada Nueva Empresa, S.L.N.E.)
The Sociedad Limitada Nueva Empresa (S.L.N.E.) is designed to simplify and accelerate the formation of small businesses and start-ups, enabling incorporation within 48 hours—an attractive option for innovative business models.
A maximum of five natural persons can act as shareholders, and the share capital ranges from €3,000 to €120,202. Tax benefits are available, but the company must convert to another legal structure within three years. The formation process is streamlined and uses standard templates.
Labour-owned limited company (Sociedad Limitada Laboral)
This legal structure focuses on collective self-employment. At least 51% of the shares must be held by active members, and no single shareholder may hold more than one-third of the shares. For companies with up to 24 shareholders, only 25% of the workforce may consist of employed workers. Shareholders can choose between employee and self-employed social security schemes.
Labour-owned public limited company (Sociedad Anónima Laboral)
In this structure, at least 51% of the shares must be held by active shareholders. For companies with up to 24 shareholders, only 25% of the workforce may consist of employed workers. Shareholders can opt for either employee or self-employed social security coverage. The minimum share capital is €60,000.
Cooperative society (Sociedad Cooperativa)
A cooperative requires at least three members, with no single member holding more than one-third of the shares. At least 70% of positions must be filled by members. Each member has only one vote, regardless of their shareholding. There is no minimum capital requirement, and corporate tax is applied at a reduced rate
What costs should you expect?
The costs of setting up a business in Spain vary depending on the legal structure chosen. Here are the main expenses to consider:
Private limited company (S.L.):
- Document preparation: Approximately €1,500
- Notary fees and commercial registry registration: Approximately €500
- Share capital: Minimum €3,000
Public limited company (S.A.):
- Preparation and certification: €2,000 to €3,000
- Share capital: Minimum €60,000 (25% must be paid in at incorporation)
Sole trader / freelancer:
- Registration costs: Minimal, depending on the industry
Annual operating costs: Especially for accounting and tax consultancy, these range between €3,000 and €5,000, depending on the business model.
How does the company formation process work?
The process of establishing a company in Spain is structured but manageable with proper planning and support.
1. Choosing a company name
The company name must be unique and is verified with the central name registry. Up to five alternative names can be submitted for approval.
2. Opening a bank account
The share capital is deposited into a Spanish bank account. The bank issues a certificate confirming the deposit, which is required for the notary appointment.
3. Preparation of incorporation documents
The company statutes outline the rights, obligations, and internal structures of the business. Support from a legal or tax advisor is highly recommended.
4. Notarial certification
The incorporation is certified by a notary. All shareholders or their representatives must be present.
5. Registration with the commercial registry
Registration grants the company legal personality. The directors are made public, but shareholders remain anonymous.
6. Assignment of tax identification number
After registration, the company receives a provisional tax identification number (CIF/NIF), which is later converted into a permanent number.
7. Registration with authorities
These include:
- Tax office
- Social security
- Business and operating licences
What should be considered regarding taxes and social security?
Tax obligations
Businesses in Spain are subject to various types of taxes depending on their legal form and activities:
- Corporate Tax (Impuesto sobre Sociedades): 25%
- Value-Added Tax (IVA): Standard rate of 21%, reduced rates for certain products and services
- Income tax: For sole traders and shareholders in companies
Social security
All entrepreneurs, regardless of legal form, are required to contribute to social security. Autónomos, in particular, must pay monthly social security contributions, the amount of which depends on their income.
Successful company formation with professional support
Choosing the right Spanish legal structure and successfully navigating the company formation process in Spain require comprehensive legal and tax advice. Global Tax Saving offers you full guidance and support in these areas and beyond.
Our service begins with an analysis of your situation and plans, followed by the selection of the optimal legal structure. We assist you every step of the way, from obtaining necessary documents such as the NIE to registering with the commercial registry.
We also take care of ongoing accounting and tax consultancy, allowing you to focus on building your business. Rely on our extensive experience and local network to professionally implement your business idea in Spain.
Our service includes:
- Personalised advice on choosing the right Spanish legal structure
- Preparation and review of all incorporation documents
- Legal and tax consultancy for international investors
Contact us and let’s lay the foundation for your success in Spain together!
