Company Formation in Spain
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Who can Start a Business in Spain?
Whether you’re a foreigner or a Spanish citizen, anyone can initiate their business in the country, provided they are a legal resident. However, the process may become more intricate based on your country of origin.
The actual legal steps for business constitution remain the same for both foreigners and locals. The distinction lies in the requirement to attain legal residency in the country, adding an additional prerequisite.
Let’s explore the two potential scenarios:
For individuals from any European Union country, the process is not complicated. Obtaining your NIE and EU registry certificate allows you to proceed directly to the constitution phase. Further details on relocating to Spain as a European citizen can be found here.
However, if you are a non-EU citizen, securing a working visa is necessary before commencing your business in the country.
How to get your business visa: work permit to set up a company
Obtaining your business visa, specifically a work permit for establishing a company, involves two distinct working residencies: the entrepreneur visa and the work permit for self-employed individuals. These permits provide the specific type of residency required to initiate a business.
The choice between the two depends on the nature of your business idea.
Entrepreneur Visa:
If your business concept revolves around innovation, with technology playing a central role, the entrepreneur visa is the suitable option. While the requirements are more stringent, and not every business idea qualifies for residency, this option offers numerous advantages.
The application process is notably swift, providing a response within 20-30 days. However, it’s crucial to thoroughly understand the prerequisites beforehand. A comprehensive business plan, demonstrating sufficient skills and financing methods for sustainable growth, is mandatory. For a detailed guide, we recommend visiting our article on the legal process for obtaining the entrepreneur visa.
Self-employed Worker Visa:
Consider a scenario where your business idea involves a traditional brick-and-mortar establishment, such as a cafe or local supermarket.
In these cases, where the project lacks technological innovation (as it’s something that already exists), the appropriate residence permit for setting up the business is the self-employed worker visa, essentially a regular work permit. Even though the project doesn’t have to be technological for the self-employed worker visa application to be accepted, not every business will meet the criteria. Determining the suitable type of business to start requires careful consideration.
What Type of Business Structure to Use
Before embarking on the process of establishing a company, the initial decision revolves around determining its legal structure, distinct from the business model or specific project. In Spain, various company structures, outlined by the Commercial Code, come with their own characteristics, making it crucial to comprehend their different purposes. The main ones are briefly discussed below:
1. Sole Trader:
- Ideal for small companies due to a simple creation process and no initial investment requirement.
- Disadvantage: No distinction between company and personal assets, resulting in full personal liability for any company debts.
- Suitable for freelancers like painters, web designers, or those whose activities don’t necessitate a formal company structure.
Sole Trader Taxes:
- As a sole trader, you pay income tax (IRPF) annually.
- Potential for paying an unnecessary amount of taxes if incomes exceed €50,000–€60,000 per year.
- Advisable to opt for a limited liability company if expecting higher earnings.
Sole Trader vs “Autónomo” (Self-Employed)
A prevalent misconception requires clarification.
Many assume that the terms “autónomo” and self-employed are interchangeable, but this is inaccurate. While you may possess a work permit as a self-employed worker, it doesn’t automatically categorize your established company as an “autónomo.”
An “autónomo” embodies two roles: a freelancer and the administrator of a company. Conversely, a freelancer or self-employed individual may not necessarily be the company administrator.
Why is this distinction significant? Because the constitution process is identical for both. When completing the model 036 or 037, depending on the case, the form queries whether you are a sole trader (“empresa individual”) or a self-employed individual (autónomo). In this context, you should select the former.
2. Limited Liability Company (Sociedad Limitada, SL):
- Most popular firm structure in Spain due to flexibility and a straightforward registration process requiring a minimum capital investment of €3,000.
- Recommended for those anticipating incomes over €60,000 to establish a company instead of being self-employed, or if one wants to create a more profesional structure to have in front of future clients and opportunities.
- Advantage: Limited liability to the capital investment made, with taxation under corporate tax (25% on profits) and required VAT returns.
3. Stock Corporation (Sociedad Anónima, SA):
- Reserved for large companies involved in stock trading, characterized by a more rigid structure.
- Requires €60,000 for constitution.
- Advantages include external financing through stock market shares.
- Suggested to begin with an SL and transition to a stock corporation if considering an IPO.
4. Branch Office:
- Suitable for companies expanding into Spain with an existing company in another country.
- Requires a notarized power of attorney, a copy of the company’s public deed of incorporation, and, if necessary, a certificate of good standing.
- The individual opening and running the branch in Spain must be a resident in the country.
How to set up a company in Spain as an expat
To establish your business in Spain, you’ll need to follow these steps:
Get Your NIE Number:
- Obtain your NIE (Número de Identificación de Extranjero) number, a crucial identification for various activities in Spain.
- EU citizens can acquire it in 3 to 5 working days, while non-EU citizens’ timelines vary by the Immigration Office.
- Obtain it either from your country’s Spanish consulate or in Spain through a police office appointment.
Define Company Names and Check Validity: Certificate of Uniqueness:
- Compile a list of three potential company names.
- Submit them to the Corporate Register of Spain to verify availability.
- Upon acceptance, one name is chosen, and a certificate of uniqueness is issued.
Get Your CIF or Tax ID Number:
- Acquire your CIF (Código de Identificación Fiscal) or tax ID number for your business.
- Necessary for tax identification and business operations.
Open a Business Bank Account:
- Use your NIE to open a business bank account.
- For Limited Liability Companies, contribute €3,000 in cash or equivalent assets.
- This generates a bank certificate to be presented at the notary.
Establish Shareholders and Create Shareholder Agreement:
- Decide on the number of shareholders and appoint the company director.
- Two types of directors: corporate director and director with corporate and working functions.
- Create a shareholder agreement, crucial for future contingencies.
Go to the Notary and Sign the Public Deed of Incorporation:
- Present NIE, bank certificate, and certificate from Registro Mercantil at the notary.
- Define the company’s address, activities, and establish shareholders.
- Register the company in the Company Registry (process may take up to 3 weeks).
Visit the Tax Agency:
- Stamp the deed with the Spanish Tax Agency.
- Obtain the final Tax Identification Number (CIF) for the company.
Get Your CIF (Tax ID Code):
- Download the application form from the tax agency’s website.
- Fill out the form and schedule an appointment with the local tax agency office.
- Present the form, NIE, and other required documents to get your CIF.
Register with Social Security:
- Visit the local social security office.
- Sole traders must adhere to the RETA regime.
- Submit the necessary forms and documents during your appointment.
Following these steps ensures that your business is legally established and compliant with Spanish regulations.
Deciding on the right type of company for your business can be challenging, but our experienced team of lawyers can help guide you through the process and ensure that your company formation in Spain is successful.
If you’re ready to start your business journey in Spain or have any questions about company formation in Spain, please don’t hesitate to contact us. Our team of lawyers is ready to assist you and provide the legal support you need to succeed.
How can a lawyer help me with company formation in Spain?
A lawyer can help you by providing legal advice and guidance throughout the application process. Some ways a lawyer can assist you include:
A lawyer can help you with the company formation process in Spain by providing valuable support in the following ways:
Choosing the right business structure: A lawyer can advise you on the best legal structure for your business, whether it’s a sociedad limitada (limited liability company), autónomo (self-employed), or another entity. This choice impacts your taxes, liability, and the amount of capital you need.
Navigating legal requirements: They can help you meet the legal requirements, such as registering with the Spanish Commercial Registry, obtaining a CIF (tax ID number), and ensuring your company complies with local regulations.
Drafting and reviewing documents: A lawyer will draft and review essential documents like the company’s articles of incorporation, contracts with partners or investors, and any agreements necessary for the business.
Handling tax and employment law: They can assist in ensuring your company complies with Spanish tax laws and employment regulations, helping you avoid costly mistakes.
Representing you in legal matters: If any disputes or legal issues arise during or after the formation of your company, a lawyer will be there to represent you.
If you are interested in opening a Company in Spain, don’t hesitate to contact us today.
Our team of experienced lawyers is ready to assist you and guide you through the entire application process. Let us help you make your dream of living and working in Spain a reality.
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Company Formation in Spain with Madeleine Cadwell
“Opening a company in Spain can be complicated, but Madeleine will help you understand the process.
- Getting the NIEs for both shareholders and directors of the company.
- Drafting the bylaws
- Send documents to Commercial Registry
- Open a Spanish bank account”
Quality Life for You and Your Business
Why Spain?
Opening a Company in Spain offers numerous advantages. Firstly, it opens an opportunity to live in one of Europe’s most captivating countries, with its vibrant cities, stunning coastline, and rich cultural heritage. Secondly, it enables access to Spain’s thriving digital and tech ecosystem, fostering networking opportunities and professional growth. Lastly, the visa allows digital nomads to immerse themselves in the warmth of Spanish hospitality, savor its delectable cuisine, and explore its diverse regions while maintaining a flexible work-life balance.
Cultural immersion
Experience the rich Spanish culture.
Location
Explore Europe without visa restrictions.
Stable economy
Spain has a stable and growing economy
Delicious cuisine
Taste world-renowned Spanish food and wine.
Affordable living
Cost of living is lower compared to other European countries.
Healthcare access
Access to high-quality healthcare facilities and services.
Skilled workforce
Spain has a highly skilled and multilingual workforce.
Travel Opportunities
Explore diverse regions within Spain.
Frequently Asked Questions
How easy is starting a company in Spain as a foreigner?
Starting a business in Spain as a foreigner can be a relatively straightforward process, although it may require some additional steps and paperwork compared to setting up a business as a Spanish citizen. You will need to obtain a foreigner identification number (NIE) and register your business with the Commercial Registry, among other requirements.
What are the most profitable business types in spain?
The most profitable business types in Spain can vary depending on various factors, including market demand and trends. However, some sectors that are currently doing well in Spain include technology, tourism, renewable energy, and healthcare.
Is it easy to set up a company in Spain for US nationals?
Setting up a business in Spain for US nationals is generally easy and follows the same process as for other foreign nationals. However, you may need to consider tax implications and other legal requirements that may differ from the US. Contact us for a free case evaluation!
How easy is to set up a company in spain after brexit?
After Brexit, setting up a business in Spain may require additional steps and considerations, such as obtaining a work permit and meeting new regulatory requirements.
How can international companies enter Spanish Market?
International companies can enter the Spanish market through various means, including establishing a subsidiary or branch in Spain, partnering with a local company, or exporting goods and services directly.
What is the tax system in Spain, and what are the tax obligations for businesses?
The tax system in Spain is complex and includes several taxes, including corporate income tax, that is 25% (15% for new companies with for the first 2 years), value-added tax (VAT), that is 21% at standard rate, 10% at reduced and 4% at super-reduced, and local taxes. Businesses are required to comply with tax obligations, including filing tax returns and paying taxes on time.
What are the labour laws and employment regulations in Spain?
Labour laws and employment regulations in Spain are extensive and provide strong protections for employees. Employers must comply with requirements related to contracts, wages, working hours, and other employment conditions. Our Legal Labour team can guide you through the requirements.
What funding options are available for starting a company in Spain?
Funding options for starting a business in Spain include bank loans, venture capital, government grants, and crowdfunding.
What are the cultural and language barriers that I may face while doing business in Spain?
Cultural and language barriers may exist when doing business in Spain, but many Spanish professionals speak English, and there are several resources available to help foreigners navigate the cultural differences. It is important to understand and respect local customs and business practices.
Lexidy has experience guiding foreigners through all the steps involved in forming a company. With our legal team you would not feel the language barrier in Spain.
Our Team
For us, Lexidy is a way of life and what excites us the most is to be able to deliver the happiness and satisfaction of a successful corporate process. We want to help you achieve your goals and dreams, whether it’s opening a company in Spain or simply an investment.
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