Spanish companies offer various competitive advantages compared to many other business entities in other countries. With many incentives for foreign investors, establishing a company in Spain can be a tax-efficient and profitable way to conduct business in the EU and beyond. As much as S.A companies (or Sociedades Anónimas) and S.L. companies (or Sociedades Limitadas) have many similar characteristics, the two most common types of Spanish business entities are not quite the same.
Sociedades Limitadas is the most commonly used business entity option due to organizational flexibility and minimal capital requirements. That being said, the most preferred choice for an investor primarily depends on the expected business activities in Spain. Let’s explore the ins and outs of Sociedades Anónimas and Sociedades Limitadas in Spain.
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Share capital difference between SL and SA
Share capital contributions can be in a wide array of assets including cash, credit rights, and real estate property, among others. S.A companies (or Sociedades Anónimas) are designed for medium to big enterprises. In this regard, they have a minimum share capital of 60,102 Euros, 25% of which must be paid up during incorporation. The remaining 75% may be settled within a timeframe stated in the company’s bylaws.
For SA companies, owners are free to transfer shares. However, the company bylaws may establish some additional requisites. On the other hand, Sociedades Limitadas require a minimum share capital of at least 3,006 Euros. This must be fully paid before company formation. When it comes to share transfers for SL companies, Spanish law provides some limitations concerning the transfer of company shares to third parties. Such limitations may vary depending on the bylaws.
Company bylaws difference between SL and SA
One of the profound differences between SL and SA in Spain is with regards to company laws. SL usually have flexible bylaws. In this regards, the company can contain some variations from the legal regime. On the other hand, SA companies have rigid bylaws in that there are minimal possibilities of having variations to the legal regime.
The company bylaws dictate the attendance and majorities at shareholders or partners’ meetings for both S.A and S.L. It’s worth mentioning that S.A usually has several calls while there is only one call for S.L.
Sociedades Anónimas and Sociedades Limitadas both require a minimum required appointments of 1 director and 1 shareholder, who can be of any nationality and residence. One of the profound benefits of Spanish S.L is that the shareholders are liable for the company’s debts only to the extent of their share capital contribution. Also, the business entity allows registration with 100% foreign shareholders.
It’s worth noting that the legal structure and mechanisms to establish and operate an S.L are less complicated than those of an S.A. It’s thus not surprising that S.L is more ideal for small or family-run enterprises.
Who can start a company in Spain?
Regardless of whether you are a foreigner or a Spanish citizen, you are allowed to start your business in the country. That being said, you have to a Spanish legal resident. The process can get complicated depending on your region of origin.
When it comes to foreigners, the process of starting a business in Spain is especially straightforward for persons from the European Union. You are legally required to have NIE and EU registry certificate and then you can start the registration process. Non-EU citizens need a working visa to start a business in Spain.
If you are a foreigner looking to establish a Sociedades Anónimas or Sociedades Limitadas, you might want to consider some business factors including the industry and kind of business the company will conduct, nationality of the owners and employees, and existing trade agreements or relationships.
Every Spanish company is legally required to maintain proper books of accounts. Also, companies must prepare audited financial statements. However, Sociedades Anónimas don’t need to submit to an internal audit. Following Spanish tax laws, every company has to file annual corporate income tax returns.
As a company operating in Spain, you are subject to Spanish social security requirements. Also, you might need particular permits depending on your business activities. More often than not, company compliance is handled by local advisers at a minimal cost.
Separate regions may have varying rules, costs and availability. In this regard, we highly recommend consulting relevant professionals, for example, business advisors, legal experts, accountants and others based on your needs. Get in touch with SpainDesk and we’ll go through your specific situation, so you know exactly where you stand in terms of legal compliance.
The Spanish tax regime is similar for both SL and SA companies. Taxation for companies in Spain primarily depends on the kind of enterprise you are running. Corporation tax in Spain is usually levied on the worldwide profit realized by the company.
It’s worth mentioning that new companies in Spain benefit from various tax breaks. For example, Spanish limited companies pay 15% tax on the profit below €300,000 within their first year of operation. The tax is usually 20% on all profits above the €300,000 threshold. After two years, limited companies are liable to pay a general tax rate of 25%.
Dissolution of Spanish Companies
In case the shareholders of Sociedades Anónimas(SA) decide to dissolve the company, the agreement of the company dissolution should be published in the Official Bulletin of the mercantile Registry and the newspaper. This is not necessary for the SL.
Steps to Registering a Company in Spain
So, what are the specific legal steps when forming a company in Spain? Let’s take a brief look:
First, you have to register a company name at the national Mercantile Register. At this point, the relevant authorities will make sure the name chosen is unique. In case the company name is taken, then you have to choose a different one.
After successfully registering the company name, you subsequently start drafting the company statutes and by-laws. You can choose to hire a professional to help with this.
Get a temporary tax ID number (CIF) for the company.
Communicate with the notary. At this point, you review all the necessary documents. Subsequently, all the shareholders or their representatives must sign the necessary documents at the notary’s office.
Making payment for transfer tax and stamp duty
Company registration process at the local mercantile registry. The company information is then published in the Mercantile Registry’s Boletín Oficial.
Finally, you can acquire a permanent tax ID number (CIF) for the company. The entire company incorporation process typically takes 3 weeks. For foreigners, you can choose to avoid the trip to Spain by giving a legal professional of choice the power of attorney.
Due diligence when starting a Spanish company
The majority of local and foreign investors in Spain prefer SL, primarily because of the lower investment needed. Also, the company management is much more flexible. That being said, large companies and multinationals may find an SA ideal for their business.
Are you ready to start your investments in Spain? SpainDesk can register the company on your behalf, without even the need to travel to Spain. As an investor, you want to make informed decisions, especially regarding the best corporate structure for your firm. We provide a one-stop-shop where you can get all the relevant formalities done professionally and hassle-free!
There are many steps involved with creating a company in Spain. We can make it easy for you with our company formation service. Next to this, we offer legal and accounting services. This way you can focus on your business. Contact us for an appointment with our team.
Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.
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