Company Formation In Spain: frequently asked questions
We solve all the doubts you may have about Company Formation.
- Setting Up A Company
- Funding for businesses
- Incorporation and cost
- Responsibilities of an SL
- Taxes payable by the company
- Share capital of a commercial company
- Capitalisation of unemployment benefits
- Bylaws and shareholders’ agreement
- Company Administration
- Types of shareholders
- Professional Limited Liability Companies
- Holding, branch and subsidiary
Setting Up A Company
If you are going to work alone, without shareholders, consider starting as a self-employed person and set up a company at a later date. If you intend to have shareholders, you will need to set up a company.
If you are self-employed, you will be liable for all your current and future assets in relation to the debts arising from your activity, unless you are a limited liability entrepreneur and protect your habitual residence.
If you set up a limited company, the share capital will be liable for the debts of the company.
There are various types of commercial companies:
- Limited partnership.
- Limited company.
- Limited liability company of successive formation.
- New limited liability company.
- Public limited company.
- Limited partnership by shares.
- Employee-owned limited liability company.
- Worker cooperative.
- Professional partnership.
- Agricultural processing company.
- Venture capital company
The most commonly used are the limited liability company (SRL or SL) and the public limited company (SA).
- Activity. Some activities such as insurance or banking have to be carried out by an SA.
- Number of shareholders. Setting up an SL is more appropriate when the company has only a few shareholders. However, if they are numerous shareholders, setting up an SA is more advisable.
- Minimum share capital. This is €3,000 for SLs and €60,000 for SAs.
- Transfer of shares/holdings. The transfer of shares is free for SAs, whereas a number of requirements must be met with SLs.
- Company name. The acronym ‘SA’ must appear in the public limited company’s name and the acronym ‘SRL’ or ‘SL’ in the limited liability company’s name.
Incorporation and cost
The steps are as follows:
- Request a non-registered company name certificate from the Trade Registry.
- Open a bank account in the company’s name and pay the minimum share capital of €3,000.
- Draft up the corporate bylaws.
- Draft the deed of incorporation of the SL before a Notary.
- Obtain the company’s provisional tax identification number (NIF).
- Register the deed in the Trade Register.
Currently, a limited company can be incorporated online within 24 hours through the CIRCE by using the Single Electronic Document (DUE). Model bylaws will have to be used.
The CIRCE is the Information Centre and Business Creation Network, which consists of a system that helps to carry out the procedures for setting up of certain commercial companies and businesses online:
- Individual entrepreneur (self-employed).
- Limited liability company.
- Limited liability company of successive formation.
- New limited liability company.
- Joint ownership agreement.
- Civil society.
The DUE is a document that enables the creation of companies online, through a single procedure. It can be used for:
- Incorporating an SL.
- Registering limited liability entrepreneurs with the Trade Registry.
- Complying with tax and social security obligations related to the commencement of a company’s activity.
The cost of setting up a simple SL starts at approximately €600, to which a further €3,000 of minimum share capital must be added.
If you decide to work as a self-employed person, you must register with the RETA (Special Regime for Autonomous Workers) and pay the monthly fee. For 2020, the minimum fee is €286.15 per month. The fee could be reduced to €50 for one year if you are entitled to the flat rate.
Responsibilities of an SL
- Registration and accounting responsibilities. The legalisation of corporate and accounting books must be carried out before the Trade Registry.
- Tax responsibilities. When the company’s activity commences, the company must register with the Spanish Tax Agency, using Form 036.
- Employment law. These relate to workers and the payment of social security.
Taxes payable by the company
In general, a commercial company must pay Value Added Tax (VAT) and Corporate Income Tax (IS) and a self-employed person must pay VAT and Income Tax.
Share capital of a commercial company
The minimum share capital of an SL is €3,000 and of a SA, €60,000.
For self-employed persons, there is no minimum share capital to set up the company.
In the case of an SLNE (New limited liability company) or SRL (Limited liability company), the share capital must be contributed in full at the time of incorporation. In the case of a Limited liability company of successive formation, it is not necessary for the share capital to be paid in full.
The share capital can be contributed as:
- Movable or immovable property (a computer or an office, for example)
- Rights (a patent or a credit right).
- Work (in the case of the employee shareholders).
Capitalisation of unemployment benefits
Yes. It can be used to:
- Become an employee stakeholder in cooperatives or worker cooperatives.
- Carry out business activity as a self-employed person.
- Contribute to the share capital of a newly incorporated commercial company or one that is incorporated within a maximum period of twelve months.
Bylaws and shareholders’ agreement
- Company name
- Company purpose (activities to be carried out)
- Share capital (number of shares or holdings, value of these, numbering and rights attributed to each).
- How the administration is organised (single director, joint and several directors, or board of directors). In addition, the term and the system of remuneration, if any, should be regulated.
- Adopting agreements.
The shareholders’ agreement is an agreement signed by all the company shareholders to regulate the internal relationships between them and to avoid conflicts.
- Rules concerning company management and decision-making.
- Entry and exit of shareholders.
- Competition between the shareholders and the company.
- Role of each shareholder.
Company administration
- Sole director.
- Joint and several or joint directors (depending on whether they can act alone or jointly)
- Board of Directors. You can delegate your powers to a managing director.
Yes, in the event that they fail to comply with their duties in the position of director, they will be liable to different responsibilities (tax, criminal, labour, commercial, etc.):
- Before the shareholders.
- Before the company.
- Before the creditors.
Types of shareholders
There are two types: employees and investors. The latter contribute their money and are aware of the company’s activity, but are not involved in it, unlike the employee shareholders.
Professional Limited Liability Companies
Professional limited liability companies are usually set up for professional activities that require a university degree and registration with the corresponding Professional Association. This is the case for architects, lawyers and dentists, for example.
Holding, branch and subsidiary
A branch is a secondary establishment that does not have its own legal personality, is permanent and has a certain degree of self-management, although it is subordinate to the guidelines of the parent company
A subsidiary is a commercial company that has its own legal personality, is self-managing and is controlled by the parent company.
- Legal personality. The branch doesn’t have one and the subsidiary does.
- Minimum share capital. The branch has no minimum share capital to contribute, the subsidiary does. If it is an SL, €3,000 and if it is an SA, €60,000.
- Representation. The branch is represented by a proxy from the foreign parent company. The subsidiary has a meeting of shareholders and a board of directors.
- The responsibility of the branch is unlimited and will be assumed by the parent company. The responsibility of the subsidiary is limited to its share capital.