When you want to start a limited company in Spain, knowing the meaning will make you feel more prepared to take on business in Spain. We have compiled a list of 9 must-knows for when you want to start a limited liability company in Spain:
It takes time to incorporate a limited liability company in Spain
Foreigners often underestimate the amount of time it can take to start a limited liability company. There are many steps involved in setting up a limited liability company in Spain, and before you make the first sale, these must be correctly done.
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Spanish business administration is often more complicated than in other countries, and this is due to its history as a relatively new democracy. While this is a negative of starting a company in Spain, it also brings opportunities as the Spanish economy is still growing and giving way for your new company to grow.
Tasks when setting up the limited liability company
For example, you have to register your company name at the mercantile registry, establish a registered office, apply for a NIF with the tax authorities, sign up for your Social Security payments, get the deed of incorporation, and recruit your employees.
We recommend allowing at least one to two months before you open the doors of your business. Especially when incorporating from abroad, consult with a lawyer to see what the exact process will be for your company.
The minimum share capital for a limited company is €3.000
To start an SL company in Spain, you must have a minimum share capital of 3.000 euros, but most companies would be better off with a minimum of 6.000 euros to 12.000 euros to run it properly and hire the proper personnel.
Depositing your minimum share capital
It is recommended that the starting capital of shareholders be deposited in a Spanish bank account. While technically, the money does not have to be deposited with a Spanish bank. It must be available for drawing any time by the shareholders or managers at their request.
Banks have unique products and services for companies, and some of them also have payment portals that are translated into a variety of languages. Dealing with banks in Spain can still be a challenge since Spanish people tend not to speak many foreign languages.
Incorporate your company in Spain with the help of a lawyer
A specialised lawyer does the incorporation of companies in Spain typically. It is best to go with a law firm specialising in business rather than one that deals with civil and criminal cases, which could be the case if your lawyer only works for individuals. Some specialists also work through the internet and can provide you with all of the required legal documents via email.
Tasks a lawyer can handle
When you have given a lawyer the power to handle your company incorporation, they will cover the documentation and registration process.
Tasks the lawyer can handle related to the incorporation are, for example
- Tips on choosing the type of company
- Getting your Spanish personal tax identification number
- Dealings with notary
- Registering you at the mercantile registry
- Registering you at the social security office
- Getting your business tax identification number
- Setting up a bank account
- Registering you at the tax office
Additionally, the lawyer can manage business contracts and employment contracts tailored to your needs.
You need to present the company’s Spanish Articles of Association and Bylaws
The Spanish company’s Articles of Association and Bylaws must include a set of required provisions. The basic ones are the name of the limited liability company, its registered office, and shareholders. It also contains several chapters, dealing with various aspects of the corporate structure and management.
These include chapters about the rights and obligations of the company’s founders and directors. Both the Bylaws and the Articles of the Association are an essential part of your incorporation. It will explain the relationship between the partners involved in the company and their duties and rights.
Get a Spanish lawyer to write your Articles of Association and Bylaws
It is best to have a lawyer create the Articles of Association for your company. This way, you can be sure that everything is done according to Spanish law.
The lawyer can also advise you on any potential pitfalls you want to avoid when drafting your company’s Articles of Association. When written by a Spanish lawyer, they include all the needed provisions and will be prepared correctly in compliance with current company laws.
Companies must keep detailed accounting records
Every business in Spain must maintain a set of accounting records, which the business must keep records for a minimum period determined by the Spanish tax authorities. These should include a register of all your transactions and receipts from day to day, plus any legal or financial documents of the company. All businesses must keep these documents for five years. The tax office may request them during an investigation carried out by the tax office.
The Spanish public administration demands this information to prevent tax avoidance and fiscal fraud, among other things. Furthermore, annual statements need to be kept very well organised to fill in the tax return forms.
Get a Spanish accountant to take care of your tax obligations
Startups often overlook accounting records. We recommend hiring a Spanish accountant at the start. For medium and large companies settling in Spain, accountants are also essential to running the business smoothly. They will assist with paying out payroll, dividends, and avoiding tax penalties.
Hiring a Spanish accountant will free up your time and allow you to focus on what is essential: making decisions about the future of your Spanish business. In addition, accountants can keep track of all financial statements and keep invoices for you.
It’s also feasible to expand the services they provide tailored to the company’s growth. We offer services ranging from tax declarations, bookkeeping, cash flow forecasts, and payroll administration. This way you can scale your business with us accordingly.
The most popular limited liability company in Spain is the Sociedad Limitada (SL)
While there are other types of business structures and limited companies in Spain, The Sociedad Limitada (SL)is the most popular of them all. This is because it is easier to set up, but it does everything you would expect from a limited company to protect you from your business’s debts.
The minimum share capital of SL and SA
There is also another limited company in Spain that is popular. This is the Sociedad Anónima (SA). There are a couple of differences between the SL limited liability company and the SA limited liability company. For example, the SA has a minimum shareholder capital of 60.000€, compared to the SL’s 3.000€.
The corporate income tax rate in Spain is 25%, but newly created companies pay 15%
The Spanish corporate income tax (CIT) rate is 25%. Depending on the type of firm taxed and the kind of business it conducts, other tax rates may be levied.
You might need to pay only 15% corporate income tax for the first two years you are in business. After the first two years, this is increased to 25%.
Dates of filing your limited liability tax
The limited liability company must file quarterly and yearly corporate income tax declarations. These have to be submitted on the 15th day of the month following the quarter or yearly period that is being declared.
The yearly corporate income tax must be filed within the first 25 days of the six months following the year-end. Companies that operate on a calendar year basis (99%) must submit their tax between the first and 15th July in the following year. You must make the quarterly corporate income tax payments during the year, and they are due on the 20th of April, October, and December of the same year.
Every business in Spain also needs to declare its VAT (IVA). The general VAT in Spain is 21%. This also has to be declared on a quarterly and yearly basis.
Understanding how your business will be taxed in Spain can seem confusing, but it does not need to be an obstacle. Hiring a Spanish accountant from day one will allow you to avoid any unforeseen taxation issues and may
Spain can offer you cheap labour, but employment issues can arise quickly
Spain has some of the best talents in Europe. You can find highly skilled workers that speak English, French, Italian, and German. There is also unlimited access to clientele, with the largest consumer market in southern Europe.
However, you need to consider ‘how’ you hire new staff since the employment laws are more complex than in most other countries. When you are a starting, it is best to keep labour costs as low as possible, so you need to be extra careful about how you hire your first employees.
Your company must provide work contracts for all its employees that comply with Spanish labour law. You can hire a lawyer if you have any questions about employment laws in Spain.
Employment must-know in Spain
When you hire your first staff members in Spain, your company must adhere to employment laws. Some essential aspects of employment in Spain are:
- Both maternity and paternity leave is 16 weeks.
- There is a strong focus on social security contributions and social security benefits.
- Safety and health representatives should be in place at all businesses with more than five employees.
We suggest reading our article on employment law in Spain and contacting a labour lawyer if you have questions about hiring your first employees.
You can hire a Spanish lawyer from the outset, so there are no unexpected difficulties when starting your limited liability company in Spain. Hiring a lawyer will allow you to avoid any possible legal problems and is well worth the investment for peace of mind.
Business in Spain is booming
Since the European market has been united, the business has been growing in Spain, and it is currently (2021) the fourth biggest economy in the European Union.
While many large multinational companies are starting their limited European company in Spain due to Spain’s cheaper labour and attraction, small and medium-sized companies are also becoming more and more common.
It seems the Spanish market will continue to grow as more companies from other European countries find their way to Spain, and the government seems to encourage investment in the country’s business market.
Common sectors where limited companies are present
Companies in Spain are working in many different business areas. Some of the more common ones are:
- Tourism and restaurants
- Real estate
- Agriculture, farming, hunting, fishing, forestry
- Services (including technology, finance, and consulting)
There are also many other sectors where Spanish companies are working. If you have a business idea that can be developed in Spain, take into account the growing Spanish market. You could be part of the economy’s monetary growth, and there are a lot of opportunities to build a successful business.
Concluding the must-knows for setting up a limited company Spain
The limited company in Spain has some necessary legal requirements. Suppose you want to start a Spanish Limited company (Sociedad Limitada) or an SA (Sociedad Anónima). In that case, you need to carefully check the legal requirements and be aware of the consequences when not complying with them.
We recommend contacting a certified Spanish lawyer to help you with the limited liability company formation in Spain. Next to this, an accountant in Spain can help you with the tax requirements the company will have. We would be happy to provide you with these services and support you with the success of your business in Spain.
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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