When starting a business in Spain, you will have to choose the types of company entities you want to establish. There are five general types of legal structures in Spain, and each one has its own set of benefits and drawbacks. In this article, we will give an overview of each type of Spanish legal structure that can help you make an informed decision when starting your business.
Business entities in Spain
The following business entities exist in Spain:
- Autonomo or Empresario Individual – Sole Trader/Sole Proprietor
- Sociedad Limitada (SL) – Private Limited Liability Company
- Sociedad Anonima (SA) – Public Limited Liability Company
- Sociedad Limitada Nueva Empresa (SLNE) – New Private Limited Liability Company
- Sociedad Cooperativa (S. Coop.)
Sole Trader/Sole Proprietor – Empresario Individual or Autónomo
The Autonomo or sole trader is the simplest entity. The Autonomo is an individual person, (single owner). For tax purposes, the Autonomo is ideal for freelancers with limited startup capital and income below 50.000 euros.
However, the sole proprietor is responsible for all business activities and for all of the company’s liabilities. Registration is simpler than the other business entities. In general, no VAT registration is needed to start trading as an Autonomo.
Many people start with the Autonomo entity but later switch to a more professional business structure, due to the liability.
Sociedad Limitada (SL) – Private Limited Liability Company
In Spain, the most common limited company is the SL company. SL stands for Sociedad Limitada. It is similar to the US limited liability company (LLC) and the German GmbH, but it has some additional requirements to its structure.
A VAT number is required for the SL. The company must be registered with the Commercial Registry.
Only one person is required to be appointed as a director of the company, there is also an administrator needed. Other characteristics are:
- The number of shareholders the SL can have ranges from 1 to 50.
- The minimum share capital is 3,000 Euros.
- The fiscal domicile of an SL Company is in Spain.
- The 25% Spanish corporate income tax applies to an SL Company.
- Shares can be freely transferred.
Disputes between the shareholders can be managed by setting up proper articles of association. A general meeting of the members is required to be held at least once a year. The annual accounts have to be submitted to the trade company registry.
Sociedad Anonima (SA) – Public Limited Liability Company
Just like the S.L company the SA company has limited liability for the shareholders. The S.L however is made for larger corporations (with larger investments), whereas the Sociedad Anonima is meant for smaller companies.
The minimum share capital is 60.000 Euros. 25% of the minimum capital needs to be contributed to the business at the beginning. There should be at least one director and an administrative body present for this type of company.
The public limited company or SA is the business entity most commonly used for public trading. This type of company has an open structure, which means reports need to be made public. This sort of structure is typically constructed to entice investors to do large projects.
Sociedad Limitada Nueva Empresa (SLNE) – New Enterprise Limited Company
The maximum number of partners is restricted to five, and they must be natural persons rather than legal entities. Similar to the other limited entities, there should be a General Meeting of partners and an administrative body.
The Sociedad Limitada Nueva Empresa is simpler than the SL. A drawback of this type of company is that the corporate name will consist of the full name of one of the partners, following the SLNE.
The advantages of this type of company are that it is easier to manage and it is easier to create.
A partnership comprises two or more people and no money is necessary. In general, the members of the partnership are responsible for any financial obligations and the company’s debts. Partners divide the company’s expenses equally among them according to their investment.
In general, civil society is a pact between the participants in which they combine their money, property, and other assets to achieve a shared objective.
To start a partnership, both parties need to make a civil pact before the notary. They will also need to register their economic activity and form a new entity before a notary. In addition, the name of the firm must contain the words “Cooperative Society” or its abbreviation “S. Coop.”
Both parties will carry equal losses and profits, in other words, there is a liability for both parties.
With the collaboration, each party is taxed as an individual and as a self-employed person, not the company. This means that you will be taxed through your personal income tax.
There are many types of partnerships possible, and you can find more information on the IPYME website about these types of legal entities.
A word from SpainDesk
You can choose from a few different types of company entities in Spain. We’ve outlined the most common ones above. If you need assistance determining which one is best for you or want to outsource the formation of your company to us, our corporate attorneys can assist.
In addition to company formation services, we can also offer accounting services to help you keep track of your company’s finances. Our team can help you stay on top of your business’s financial health, so you can focus on growth.
Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal or financial advice. We highly recommend seeking guidance from a legal or financial expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.