When you’re researching what kind of business premises you need, you may also wish to consider which kind of company might be the best option for your business.
There are several different types of legal business which you can set up in Spain. You should seek the advice of a qualified professional to find out the most economical and beneficial solution for you and your business.
We have summarized the five options which are most likely to be helpful to foreign entrepreneurs. With all of these options, it is important to decide early on, where the registered office of your business will be located. This could be the address of your financial adviser and a benefit to this would be that all your financial documents will be delivered directly there.
Sole Trader (empresario individual)
For people without much capital, who wish to begin small, this is a good option as it’s the simplest legal business entity. The only fiscal obligations are for you to register for tax, VAT and social security as a self-employed worker. You must also register for tax on your business activities. As a sole trader, you are not obliged to make any specified investments in your company – whatever you can afford is sufficient.
A disadvantage of being a sole trader is that you’re personally liable for all company debts and are liable to be sued.
Limited Liability Company (Sociedad de Responsabilidad Limitada) (SL))
This is similar to a British or an American limited liability company (LLC) and is the most common form of a small to medium-sized company. It is popular because it is simple to set up and requires a relatively small investment. An advantage is the fact that your liability is limited and will protect you if someone sues you. A disadvantage is that you’re liable for corporation tax and VAT as well as the personal tax and social security contributions you would pay as a sole trader.
In order to set up a Limited Liability Company, you must invest a minimum capital of €3,005.06 and have between 1-50 shareholders. It is recommended that you seek help from a lawyer and a financial adviser to ensure that your company is legally incorporated and you’ve gone through all the required procedures correctly.
Sociedad Limitada Nueva Empresa (SLNE)
In April 2003, Spain made available a modified version of the SL. This was to encourage the incorporation of small to medium-sized businesses and have simpler fiscal requirements than those of an SL. An SLNE differs from an SL in terms of the number of both shareholders and permissible company names. You are allowed between 1-5 shareholders in an SLNE company. The company name must comprise of one of the founder’s names, including a registration number and the letters SLNE. The minimum capital required to set up is €3,012 and this must be in cash, the maximum is €120,202.
Public Limited Company (A Sociedad Anónima (SA))
This is the equivalent is of a British public limited company (plc) or an American corporation. It is one of the most popular types of business entities in Spain. It requires a much larger investment than the previous types so it is usually used by big businesses. The minimum investment €60,101 and 25% of that must be paid into the company bank account before incorporation. There is no limit to the number of shareholders in a SA and they don’t need to be resident in Spain.
There is an exemption from personal liability for all shareholders, and the added option to float the company on the Spanish Stock Exchange (Bolsas de Valores). A disadvantage to a SA is the large investment and the professional accounting required, which includes annual auditing.
Partnership (sociedad civil)
This is a way to make your business arrangement official but legally avoid paying corporation tax. It is for those who but don’t want to start a business as such but establish a partnership. There is a minimum requirement of two partners and although there is no minimum investment, the partners must agree to invest the same amount of money. Work and profits must be shared equally. This business type has unlimited liability for partners, which will be equally shared. You must pay 1 percent of the total capital deposited in the transfer tax. In addition, you must register for tax on economic activity, income tax as self-employed workers and register with social security.
Small to Medium-sized Businesses (pequeñas y medianas empresas/PYME)
These dominate Spain’s economy and account for 99% of Spanish businesses. The Spanish government actively encourages both their formation and growth. Many grants are available for PYMEs and there are further incentives and reduced corporate tax rates. There are three categories of PYME:
Mediana Empresa – Medium-sized business:
50-250 employees and annual turnover < €50 million
Pequeña Empresa – Small business:
10-49 employees and an annual turnover < €10 million
Micro Empresa – Micro-enterprise:
< 10 employees and an annual turnover < €2 million.