One of the most crucial things to consider when starting a business in Spain is the type of company you want to establish. There are several types of legal structures in Spain, each with its own set of advantages and drawbacks, making it a little challenging to choose the ideal entity.
This article will provide an overview of each Spanish legal structure and the key details you should consider when choosing one, allowing you to start your business with certainty.
Legal structures in Spain
There are more than 10 types of legal structures in Spain. Below we present the basic characteristics of each of them so that you can learn more about them:
Limited Liability Company (Sociedad Limitada/SL) – This legal structure is the most used figure for our clients and is the most used type of company in Spain. Due to the limited number of partners and minimal initial investment, they typically fall under the category of SMEs (PYMES). SL can have one to 50 shareholders. Only one person needs to be named as a director of the company. An administrator is also necessary, as well as a minimum investment of 1 euro. The transfer of shares is permissible.
New Enterprise Limited Company (Sociedad Limitada Nueva Empresa/SLNE) – This is a simplified form of SL and is designed to make the process of forming a microenterprise as swift as possible. There can be a maximum of five partners, and they must all be natural persons and not legal entities. Some benefits of this structure include easier creation and management, including the ability to conduct general meetings via email.
In case you already have your company abroad and would like to start operating in Spain, a branch office can be the right option. It does not require a minimum investment and to file yearly accounting statements (as the parent company will). The branch office is fully dependent on the corporate one, and hence has no responsibility for tax fines or employee payments.
Stock Corporation or Public Limited Liability Company (Sociedad Anonima/SA) – This legal structure in Spain is ideal for large listed companies and it also has limited liability for the shareholders. Meanwhile, the share capital must be at least 60,000 euros, given that this type of business demands a larger initial capital. Initially, 25 per cent of the minimum capital must be contributed to the business. Reports must be made public since the SA company is highly regulated and has an open, broad structure.
Private Partnership (Sociedad Civil Privada) – This type is formed when two or more people invest money, resources and/or labour into the venture while agreeing to divide the profits amongst themselves. The parties will also equally divide any debts or other financial liabilities in this manner and what has been agreed upon by the contract.
General Partnership (Sociedad Colectiva) – This is ideal for a business project with a small number of partners. All of them are involved in the management of the company, although if they only contribute with work (and not capital), they cannot participate in the management. But the responsibility for the partners is unlimited; so, the entire debt can be claimed by any/each of the partners.
Limited Partnership (Sociedad Comanditaria) – This can be personal, managed by the partners on a mandatory basis, or by shares, which is a capitalist society, in which the shares have more weight, and the management does not necessarily fall to the partners.
Co-ownership/Jointly Owned Company (Comunidad de Bienes/CB) – This structure is made up of two or more people who share ownership of a common property or right. CB requires no minimum financial investment and tax is declared on each individual’s personal income tax or IRPF tax form. However, the members or owners of the CB are personally responsible for any debts.
Cooperative (Sociedad Cooperativa) – You can use this legal structure in case you want to develop a business activity (non-profit) with social purposes. It is formed by a group of legal and non-legal individuals and profits are used to cover the needs of the company and its operation, and the surplus (not the profits) is distributed to its members, but once these common funds have been covered. Thirty per cent of the surplus is to be allocated to a mandatory reserve fund and a specific fund for education and promotion activities.
Sole Trader/Sole Proprietor (Empresario Individual or Autónomo) – This structure is ideal for freelancers with limited initial capital. It is a simple type of entity based on an individual person who is responsible for all business activities and all liabilities of the company. However, the high expenses paid for the maintenance of the figure after a few years and the liability are common reasons many people eventually decide to switch to a more professional business structure.
Selecting a company to start in Spain
There are a few procedures that you must follow and complete in order to set up your company. Depending on the type of company you wish to establish, the procedures will vary significantly.
As a result, it is crucial to work with a company formation solutions provider like Bolder Group. If you are seeking assistance in determining the best legal structure for your company, our team can help you. With the complexity of the procedures, outsourcing the formation of your company with a corporate service provider can also help you enter the Spanish market more efficiently and help you fully understand the set-up process and comply with the requirements.
Contact us today for more information.