The SL Company in Spain is the most chosen limited liability company for the Spanish market. The reasons why are pretty understandable since this legal entity provides many advantages. In this article, you will find the basic information about the structure, benefits and restrictions, registration and tax obligations that come with this business form in Spain.
What is the Spanish SL?
SL stands for Sociedad Limitada. It is a legal form of business in Spain and provides entrepreneurs with a simple and easy-to-start company structure. It is similar to the US limited liability company (LLC) and the German GmbH, but it has some additional requirements to its structure.
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The main purpose of this business form is to provide limited liability protection to its owners (shareholders) since they are not personally liable for the company’s debts or obligations.
What are the main characteristics of SL Company?
The most significant features of the SL are the following:
- It is the leading limited liability company for start-ups and medium-sized companies.
- Its minimum founding capital is 3,000 Euros.
- The maximum number of shareholders is 50.
- The capital of an SL company is divided into shares.
- The minimum requirement for the founding members is one person, which can be natural or legal.
- The shareholders can freely trade the shares of the company.
- It is possible to create an SL company through a sole shareholder.
- The company’s articles define the decision-making and shareholder percentages.
- An SL Company has its fiscal domicile in Spain.
- An SL Company is subject to Spanish Corporate income tax of 25%.
- The legal form requires a separate VAT (IVA) number registration.
- The General Meeting of Partners, the administrators, and member rights are components of a Limited Company.
- The Spanish Mercantile Registry holds the company registration (Registro Mercantil).
The benefits of the SL limited company in Spain
The main reason why the SL Company Spain is so popular for many entrepreneurs and investors. Because it offers many benefits that other business models do not provide. The main benefits are:
- Low share capital required.
- Limited liability for directors.
- Not personally responsible for any debts.
- No social security necessary for owners.
- International recognized corporate form.
- The sole director and administrator can run it.
The disadvantages of an SL limited liability company in
There are a few disadvantages with going for the SL Company in Spain. Some of the disadvantages are:
- For the final documentation, a public notary in Spain is required.
- A registered office in Spain is necessary.
- A share capital of 3.000 euros is required.
- In some cases, fiscal monthly tax return.
- Must adhere to corporate governance requirements.
- Shares can not be traded or capitalized on the open market.
- For shareholders who do not work for the company, no dividends are permitted.
- SL Company can not have more than 99 shareholders.
The initial investment of shareholders
The initial shareholder investment is a minimum of 3.000 euros. The cash capital is paid to the companies bank account when the company is registered. After incorporation, the directors/management of the company can use the money to invest in the companies activities.
Corporation tax for SL companies
The main corporate taxes involved with the SL entity are corporate income tax and VAT (IVA). The corporate income tax applied to this business form is 25%, while the VAT (IVA) applies to all of the company’s transactions.
There are also other taxes involved related to your business activity. For example, you will need different fillings for real estate, vehicle ownership, employees, import-export, construction, transport, tourism.
The risk associated with this type of limited company
Loss of initial investment: The shareholder of limited liability will lose his initial investment/capital contributed to the company.
Loss of limited liability: By not keeping separate bank accounts, following the Spanish law, and keeping accurate records, companies may fail to properly keep a gap between the company’s business assets and the members’ personal belongings. Consequently, in the course of litigation, a court might find grounds to pierce the veil and target personal belongings.
Time waste on tax declarations: The corporate tax regime and form filing obligations involved need to be done. If you need to do this yourself, you might waste a lot of time figuring out the proper processes.
Disputes between shareholders: Because this Spanish limited liability company often has multiple managers, the members may come into conflict. While these disputes can be healthy for the business and help the business grow, some arguments might be more severe and irreconcilable. It is good to have the bylaws checked by a corporate lawyer, so everybody knows their responsibility before signing it at the public notary.
Frequently asked questions
Below you can find some frequently asked questions about the SL Company in Spain. To provide you with an even deeper understanding of the SL limited liability company.
How to form the SL limited company?
How long does the company formation of an SL Company take?
The registration process for an SL Company can take up to 90 days. However, all necessary documents need to be submitted correctly to make this timeline. The Registry Office may impose an additional term if required papers are missing or incomplete. However, three months is often the registration time for foreigners.
What is the minimum required share capital for an SL Company?
There is no minimum capital requirement. However, it must be at least 3,000 Euro. It can be more than that amount or even less if preferred by
What are the differences between the Sociedad Anónima entity and the Autonomo entity?
The Sociedad Anónima is a limited liability entity, while the Autonomo is not. Furthermore, Autonomo can only be sole traders (freelancers), while the SA company can have multiple shareholders.
What do I need to hire someone in Spain?
When you want to put someone on payroll in Spain. You will have to register with the social security office, and request a social security ID for each employee you hire. When you hire someone, withholding of payroll taxes and social security contributions are necessary. Contact us for more information on our payroll services in Spain.
Can I use the Spanish SL business structure as a self-employed person?
Yes, there are no restrictions for individuals to use the SL Company as a business entity. Because you can operate as both director and administrator, you may have a single owner.
What are the differences between a Sociedad Anónima and the Sociedad Limitada?
The Sociedad Anónima is a limited liability company that follows similar rules as those for a Sociedad Limitada Company. Large public companies will use the Sociedad Anónima because they have numerous shareholders and partners.
- Minimum Share capital: The minimum capital required is 30,000 Euros for an Anónima, while 3,000 euros for an SL Company.
- Shareholder limit. There is no limit on the number of shareholders for an SL Company, while it is 50.
- Registration process. The registration process takes longer than it does with the SL company.
- Fiscal returns. The fiscal returns are more complex for a SA company.
- Headquarter: as its place of business in Spain while the SL Company does not have to do so.
In general, starting with an SL Company is recommended, and you can always change to a Sociedad Anónima if you prefer. If you would like to learn more about the differences, you can read them in our dedicated blog about the SA company in Spain.
How does the decision-making process work within a Spanish SL?
By default, a majority of shareholders will make the decisions. However, the shareholders can change the articles of incorporation to increase the required level of majority.
Do I need a lawyer to set up this company?
While Spanish law doesn’t require you to set up a limited company with the help of a lawyer, most of the time, people use a lawyer to set up an SL Company in Spain. It is common to use a lawyer if you do not experience Spanish corporate law.
Can I register the company without going to Spain?
Yes, that is fine. You can employ a lawyer or law firm in Spain to register for you.
Are there any restrictions on foreign shareholders?
No, foreigners and non-residents can own shares of a limited liability company in Spain.
An SL Company is your leading choice if you want to set up a business in Spain. In comparison, it is similar to the Sociedad Anónima company on paper. However, it has fewer costs and responsibilities and is perfect for medium-sized companies. Furthermore, the registration process for an SL Company does not take as long as that of a SA company. Finally, there are no restrictions or requirements on who can be a shareholder or a director of an SL Company. If you want to form an SL company, we can take care of the accountancy and company formation.
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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