In the EU there is the freedom to set up a company. This means that any natural or legal person in the EU can set up a limited company in Spain. However, some essential characteristics must be taken into account when setting up an SL (Sociedad Limitada):
- The cost of incorporation.>
- Various liability issues.>
- Tax regulations.>
- Reporting requirements. >
The right choice of the form and structure of a company during the start-up phase can influence its future success from the very beginning.
What is a limited company in Spain?
An SL in Spain is a limited liability company. It represents the most common form of company, both for local and foreign investors. A limited liability company is characterised by a high degree of flexibility, as the shareholders themselves can set their own rules in the company.
In Spain, setting up an SL is normally used for small and medium-sized companies. Our Barcelona team of company formation specialists can advise you on the registration of this type of company.
Each type of company formation in Spain must take into account the advantages and disadvantages of the different legal forms and their consequences for shareholders and directors. There is not only the question of liability but also the particular tax aspects which may affect each shareholder and which must always be considered on an individual basis. In Spain, it can take between 30 and 40 days from the formation of a company to its registration in the commercial register.
However, the company can already be active as soon as the notarial deed of incorporation is drawn up and a tax identification number is assigned to it. The application for a free company name and the preparation of the notarial deed take between three and five days.
Costs of setting up an S.L.
The costs for founding an S.L. in Spain are 1,500 euros for the preparation of all documents and approximately 500 euros for the notary, the registration and the activation of the company. The consultation of the individual partners and directors, the preparation and the accompaniment to the notary appointment are already included in the price.
Maintenance costs of an S.L. company
Depending on the complexity and the turnover of the partners, an annual amount of between 3,000 and 5,000 euros should be calculated.
The process of setting up an S.L. company
An application is made to the central register of company names to find out whether the desired company name is available and can be used. Three to five alternative names can be requested.
- Opening of a business account. The share capital must be paid into a Spanish bank account before the company is incorporated. At the appointment with the notary, the bank confirms the balance using a certificate (3,000 euros for an S.L.).
- Granting of powers of attorney. In case of necessity, such as the absence of the partners, the incorporation of a company in Spain can be done by granting powers of attorney. If you are unable to attend the appointment with the notary in person at the time of incorporation, we can act as your representatives using a prior power of attorney.
- Drawing up the Memorandum and Articles of Association. The Memorandum and Articles of Association set out all the legal circumstances of the company, such as location, purpose, shareholders, share capital, rules between the shareholders, management, etc. The Memorandum and Articles of Association form the legal basis for the company’s legal form. The articles of the association form the legal basis for the future activities of the company, both internally and externally. They can be of great importance for the tax treatment of the company and the shareholders. For this reason, the articles of association should always be drawn up with the help of tax advice.
- Notarial certification. The incorporation and articles of association of the company are certified before a Spanish notary. All founding shareholders and directors must be present or represented by a proxy.
- Registration in the commercial register. After notarization and payment of the registration fee, which is approximately 150 euros, the company is registered in the commercial register. The shareholders remain anonymous, the managing directors are published.
- Assignment of a (provisional) tax identification number. Once at the notary’s office, the company can be assigned a provisional tax identification number (CIF/NIF) by digitally transmitting the incorporation to the tax office. From this point onwards, the company can start to operate (business premises).
After registration of the company, the following steps are taken:
- Registration and activation of the company at the tax office.
- Application for and activation of the tax identification number (NIF).
- Application for a VAT identification number for international trade.
- Possible application for operating licences and permits, depending on the type or sector of the company.
- Registration of the company with the Social Security, register of employers and employees.
- Registration of the directors with Social Security.
Founders and foreign investors
If the founders, shareholders, partners, members of the board of directors or managing directors are foreigners, the following complementary processes must also be carried out:
- Each shareholder and director needs a Spanish NIE (tax identification number). This can be applied for at the local immigration office in Spain or any Spanish consulate abroad.
- Optional residency application, if desired, for managing directors and members of the board of directors.
- In the case of major investments with foreign capital, permission must be obtained from the Ministry of Foreign Affairs.
- In case large sums of money are to be transferred from abroad for the foundation or operation of the company, these transfers are subject to the regulations of the Money Laundering Act. An unannounced transfer of large sums of money may result in a blocking or even confiscation of the transferred funds.
What is the minimum share capital?
The minimum share capital to create an SL in Spain is 3,000 euros and must be paid into a national company account at the time of formation.
When is equity capital available?
Once the company has been notarised and entered into the commercial register, the share capital can be freely disposed of.
Who is responsible for social security and what are the costs?
In general, the directors of a Spanish limited liability company (S.L.) are subject to social security contributions. The minimum amount to be paid for managing directors is 318 euros per month. Partners are not obliged to pay social security contributions as long as they are not active in Spain.
Common mistakes when setting up an S.L. in Spain
To avoid later costly problems and irregularities in the company’s lifespan, it is advisable, even before setting up the limited liability company, to consider the planning according to company law not as a problem but as an opportunity.
To avoid major mistakes, the following points, among others, must be taken into account:
- Shareholders’ agreement.
- Types of business licences and permits.
- Business planning.
If you have any further questions about setting up a limited company in Spain, GM Tax Consultancy – lawyers and tax advisors in Barcelona – will be happy to help you. Our law firm will analyse your specific situation, plan and set up your limited company in Spain and prepare your annual financial statements and tax returns. Please contact us by email or by telephone.