Buying a business in Spain is an excellent way of settling in Spain. In this article, you will find more information on buying a business in Spain.
Why buy a business in Spain?
If you are thinking about settling in Spain or just want to enjoy some time off, there is no better way than by acquiring your very own business. Buying any type of business has the benefits of taking on an existing revenue stream and giving you stability as well as flexibility at the same time.
This means that you will still have money coming in, even if you do not feel like working. It is also an excellent way to settle into Spanish life because it allows you to take on a new project and work towards making something that is better than before.
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Spanish Business Market
The Spanish business market is best known for its booming real estate and tourism sector. This means that it would be a very good idea to buy a business in either of these sectors if you want to settle into the country quickly and easily. It would also give you an excellent chance at success because there are always opportunities arising in these two markets.
Real estate businesses in Spain
The real estate market is definitely an interesting sector in Spain. After the crash in the market that was caused by the recession, many such businesses were forced to lower their prices and therefore, there is a lot of opportunity for anyone who wants to invest in this sector.
Another great thing about the real estate business venture is that you will be able to enjoy a new country and lifestyle while you enjoy returns from your investment at the same time making for an excellent opportunity.
When buying property in Spain, there are a few things to keep in mind. The first thing is to get a property lawyer involved when you are ready to buy. This will ensure that you do not end up spending a lot of money on a property that is not worth it. Property scams and property pitfalls are very common in Spain, so do not forget to get a Spanish lawyer involved with the actual property purchase.
Tourism businesses in Spain
The tourism industry is another great avenue to take for those looking at buying a business in Spain. This is because the country attracts many tourists every year and this also means that there are plenty of opportunities available to create new and exciting ventures within this sector.
Buying hotels, bars and restaurants in a tourist area in Spain is still very popular among foreigners. It gives them access to a great lifestyle and a chance to settle fast.
Other popular businesses in Spain
Spain’s economy is still largely underdeveloped. This means that there are plenty of opportunities for those looking to take industries that are already saturated in other countries and make them work for themselves in Spain.
- Manufacturing and Industry
- Technology and Internet
- Financial and Legal
- Customer service
What is the process for buying a business in Spain?
The process of buying a business in Spain is complex. It is therefore a good idea for business buyers to get the help of a lawyer. They can guide you through the legal steps you need to take, and give you specialist advice. Below we explain the basic steps in the purchase procedure.
Consider the type of business and market
You need to know what type of new business you want to own. There are many types of companies and markets you can be in, so it is important to figure out what drives you and what you want from your company. Knowing this will help you to guide yourself in a specific direction and help you target the type of business you want to buy.
Another thing to consider is the company entity you want to own. Most people choose for the sole trader (Autonomo) or limited company (S.L. company) when buying a business in Spain.
Consider your immigration goal
What you want to do with your residential status is an important consideration when buying a business in Spain. If you want to be an ex-pat and live here, then it is best to find a way of obtaining residency before starting the process. This will ensure that you have a stable position in the country and can move forward with your business ventures without any problems. Owning a business can also give you access to a Spanish residency. So it can be an important reason for buying a business in Spain.
You can of course also own a business without a residential status, but your doing so may put you in a situation where if something goes wrong, you might have to run it from abroad. Spain offers business visa’s that
Consider own tax position
When you are staying more than 183 days in Spain, you will be seen as a tax resident in Spain, which means you will have to pay a different amount of taxes than when you are non a tax resident. Next to this, there are different tax rates depending on the income of your business.
It is important to understand what these are, otherwise, you might end up underpaying taxes or overpaying. Make sure to determine your tax position when buying a business in Spain so you know what you are getting yourself into.
Search for businesses that are for sale
Businesses may be purchased in a variety of ways. On the internet, you can look for firms that are for sale or inquire about them with friends and family. You may also consult with a business broker or an agency to discover what kinds of businesses are available on the market.
When you have found a company you like, ask for NIF/CIF number, which is the number for the company registration. You can then check if the company is still active in the business registration office. If it’s not, don’t bother further as you can’t buy a closed down company.
When you find that the company is active you can search for it online to see what it does and if it is the right business for you. If not, keep looking and don’t forget to be persistent and patient.
Searching in an agency or with a business broker can be very helpful. You will get advice from people that know the market and who have access to the best businesses on the market at all times.
Question the current owners
When you have found a company that you want to move ahead with, you want to question the previous owner before you make your investment. Make sure you ask them about the current situation of the business and what they like and dislike about it. You can do this by sending a questionnaire or conducting an interview that you prepare before meeting with the previous owner. Questions you can ask include:
- What are the most important things to do with this business?
- Who is your target group/market?
- Does it have a good reputation with its clients?
- Is this market growing or declining, and what effects does it have on the company?
- How does new technology impact your client’s behaviour towards your company?
- What were the major failures/successes?
- What are good opportunities/risks?
- What were the major weaknesses/strengths?
- What do you value about the company?
- Why are you selling the company?
- Did you buy the company, and what did you pay for the company?
- What are the financial results of the company?
- Do you have all the necessary licenses and permits?
- Are there any pending litigation, claims or lawsuits?
- How many employees does this company have?
- Which contracts does the company have in place.?
- Are they willing to agree to a non-competition clause?
- Who are the key customers, suppliers, and staff?
- Does the business have any outstanding debts?
- Is the business keeping up with tax payments?
Value the business: doing your own due diligence
After questioning the owners you will get an idea of what the company does and what its value is. This value is based on the current situation of the company, but also on what you can change to make it perform better.
Now it’s time to check the accounting, contracts, and investments the company is currently in. As a buyer you want to know everything about the company, so you don’t have any expensive surprises ahead. When doing your due diligence, you will look into the financial records of this business, and look for red flags that are worrying for you. It is always a good idea to get help from an accountant in Spain for this, so you can be sure that everything is in order.
It is also a good idea to do legal checks on work contracts, social security, and the companies market. Doing your due diligence is very important because when you become the legal owner of the business you will be paying for any failures.
Negotiate contract terms and purchase price
When you have found a business that you want to buy, it is important to understand the terms of the agreement. You need to make sure that everything is clear and transparent so that there are no surprises when it comes to the purchase.
Bear in mind that the purchase price you are willing to pay will be based on how much money you can make with this company, and not only what it is worth today. You should therefore try to negotiate for a lower price if there are problems with the company that you can fix once becoming its owner.
Submit a Letter of Intent (LOI)
When you are ready to submit a Letter of Intent (LOI) you will make an official declaration of your interest in buying the company. A Letter of Intent is usually non-binding and it can be changed later when signing, but most importantly it shows how serious you are about the purchase.
This letter is very important because when you submit one, the seller can be sure that you are there to negotiate and not just waste their time.
Complete due diligence
When you and the seller have agreed on all terms and conditions of the sale, it is now time to complete your due diligence. You want this process to be as smooth as possible since there should not be any changes that would stop the purchase from taking place.
Close the deal with the appropriate documents
Once you have completed your due diligence, you can sign the purchase agreement and transfer the payment.
Ensure that all legal documents are in order before finalizing the sale. If everything is fine, make a final payment to the seller and get a title deed of the company transferred into your name.
Buying a company or setting up a new company in Spain requires certain documentation, notary procedures, and drafting of relevant contracts. Therefore, it is recommended that you consult a Spanish corporate lawyer that specializes in company formations. He or she will be able to guide you through the often local process and prevent any problems with your registration.
Running your new business
After the buyout is completed and you own a business in Spain, it will be time to make your dreams come true. However, there are also practical matters that should be taken care of such as:
When you are a business owner you will have to make sure you pay the taxes that you and your company owe. If you don’t, the Spanish authorities will come after you and take action against you.
Taxes include VAT, capital gains, social security, and corporate income tax. Our accountants in Spain can help you make the right declarations and submit your tax returns.
Finding employees that fit with your company can be a little difficult as a new owner. However, it is very important that the company’s workforce has the right knowledge and skills for doing their job. We can help you with the recruiting in Spain, whether you are looking for Spanish or international workers.
Next to the recruiting, we can also help you with
Pros and cons of purchasing an existing business
Below we have listed some of the pros and cons of purchasing an existing business.
Pro’s of buying a company
Some benefits of buying a company in Spain:
- Market tested products: When you buy an existing company, the product has already been on the market for some time. This means that it is possible to receive positive feedback of customers and you will not have to invest significant time or money in the research of creating a new product.
- Reduced startup time: If you purchase an existing business, you will be able to enter the market immediately. The company itself is already operational which means that you can receive revenue straight away.
- The business is already established. There’s also a pre-existing relationship with trained staff members and suppliers. Furthermore, you can get easier access to loans and business financing.
- Immigration options: Under certain circumstances, you can get a work or business visa when you have enough income generated in Spain.
- Established brand: If you buy a company that has been in the market for many years, this means that it is possible to reach customers by simply using its network.
- Less work: In general, your workload will be reduced because you can rely on the work that has been done before.
- You have a better chance of success: Providing the business is doing reasonably well, it should continue to do so. After all, it means you are taking over an established brand and therefore do not need to invest as much time in research.
Con’s of buying a company
While there are many Pros to buying an existing business, there are also certain disadvantages involved.
- You will get what you paid for: An existing business can be sold at a low or hefty price. Whatever the case may be, there’s always a risk if the market has rejected the products or if the brand is tinted.
- Significant changes may be necessary: Some warning signs could be existing debts or cash flow issues—staffing problems, such as frequent turnover or unhappy employees. Equipment’s prone to issues or even outdated.
- You could be cheated or scammed: In addition to the existing issues, it is possible that the previous owners misrepresented some data or didn’t provide the complete documents to the overall operations of the business.
- It is not always stress-free to make it your own: Buying an existing business means you are stepping into someone else vision. So, there’s always more effort needed before you can make it your own.
- Bad reputation: If the business has experienced production problems, it will negatively affect sales going forward. From legal issues to bad customer service, if patrons already have a negative impression about the business, they might not return for your outputs.
Buying a business in Spain with SpainDesk services
Our agency can help you with a variety of services related to buying a business in Spain. Our specialists can help you with buying a business in Spain as well as affairs after you bought it.
- Proper valuation of the business: inventory, a sales record, tax returns, etc.
- Drafting and submitting offers with conditions to the seller
- Assistance with review of the financial statements of the business
- Purchase guidance and advice
- Patents & Trademarks
- Incorporation and purchasing
- Legal backup
- Shareholder Contracts & Agreements
- Payroll administration and recruiting services
Do you have any specific requirements? We can handle your ideas and give top-notch solutions to the challenge. Get in touch with us to get a quote.
Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommended seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.
SpainDesk makes your company formation easy, fast, and worry-free