A foreign investor who decides to open a company in Spain must choose a suitable business form. There are several types of companies in Spain that suit different business sizes and investment goals. Our team of specialists in company registration in Spain can assist foreign investors with more details on the types of entities that can be registered here, which are presented in this article.
| Quick Facts | |
|---|---|
| Main business forms in Spain | – limited liability company; – public limited company; – sole trader; – branch, etc. |
| Restrictions for foreign investors for any of the available forms | Not applicable |
| Most commonly used business form | Private limited liability company (S.R.L.) |
| Limited company – main traits | Public or private, the founder’s liability is limited to the extent of his contributions to the company. |
| Partnership | Set up by two or more people with the same business goals and who will share the profits. |
| Sole trader | Opened by an individual who has full legal responsibility. |
| Branch | An extension without legal personality of a foreign company |
| Representative office | Only used for marketing, promotional, or market research purposes, not for commercial activities. |
| Founder liability | Depending on the chosen business form |
| Minimum share capital | EUR 1 for the limited liability company and EUR 60,000 for the public limited company |
| Corporate bank account requirement | Yes |
| Residency requirements | Resident status is not required to open a company in Spain. |
| Mandatory presence in Spain for company formation | The registration steps can also be accomplished through a power of attorney. |
| Assistance for choosing the business form | Yes |
| Assistance for those who have additional questions after choosing the business form | Upon request |
Table of Contents
What types of Spanish companies are available for incorporation?
Foreign investors who want to start the procedure of company registration in Spain can choose from a wide range of legal entities, which are prescribed under the country’s national legislation. Our team of consultants can assist investors with advice on the characteristics of the following types of business forms:
- sole proprietorship – it represents the simplest way to start a business in Spain, and this type of business form is addressed only to natural persons;
- partnership – it is a simple business form defined by the fact that it is set up by two or more natural persons;
- new enterprise limited company – it represents a simplified form of the limited liability company, which is presented further down in this article;
- cooperative – it can be set up by a group of natural persons or a group of companies to accomplish a specific goal.
Our experts in company formation in Spain briefly discuss the main characteristics of each of these business forms below.
Please keep in mind that these are only general traits, and any choice for a future business set up in Spain should take into account not only the investor’s budget, but also the future size of the business, the number of founders, tax matters (please see below for more details), and issues such as shareholder liability.
The infographic below also provides a summary of the main business forms:
What is a private limited liability company in Spain?
Limited liability companies in Spain are the most popular companies chosen, especially by foreign entrepreneurs, due to their flexibility and simple registration procedures. The capital of this type of company in Spain is divided into shares, and the shareholders are liable only to the extent of their contribution. It is important to mention that the shares cannot be sold to the public. Foreigners can open subsidiaries of their company in Spain too. For example, if you have a cleaning firm in Romania and you want to expand in Spain, it takes only a few days to open a branch or a subsidiary in Spain.
What is a public limited liability company in Spain?
These are also known as joint stock companies (sociedad anonima), and they require at least one shareholder for company incorporation in Spain. At least EUR60,000 has to be provided for company formation in Spain, and a quarter of this sum must be paid up before registration. Members of the company are only liable to the extent of their own contributions. Our team of consultants in company formation in Spain can assist investors with more information on the procedure for opening this type of business form.
What are the characteristics of the Spanish general partnership?
The registration of a partnership can be completed provided there are at least two members to associate in the business. Partners have equal responsibilities and rights, as they hold the same status as general partners. Under the local legislation, the partnership has to be registered with the Spanish Commercial Register. Its founders must also observe the rules related to VAT registration in Spain.
If you are interested in incorporations in other jurisdictions, such as setting up a company in China, we can refer you to our local partners.
What are the characteristics of the limited partnership?
At least two partners must agree on setting up a limited partnership in Spain. The shareholders can be individuals or legal entities, with no minimum share capital. At least one member is a general partner and at least one is a limited partner, with limited liability to the extent of their own contribution for company formation in Spain.
What are the characteristics of the sole trader in Spain?
If an entrepreneur decides to set up a company in Spain on his own, then it is the simplest way to establish a sole trader entity. No minimum share capital is required, but he is fully liable for the company’s obligations. No legal distinction is made between the sole trade entity and the owner under Spanish law.
Below, investors can watch a video presenting the main types of Spanish companies:
If you want to open a company in another country and you are interested in company incorporation in Malaysia, we can recommend working with our local partners.
What to consider when choosing a business form in Spain
As seen above, investors have several options to choose from once they decide to open a company in Spain. The most suitable business structure can be selected by taking into account the following:
- Shareholding structure: a business can have one or more investors who partner up (like in the case of the partnership) or make joint contributions to the capital (like in the case of the LLC);
- Liability: the founder’s level of liability can be an important criterion, especially for those investors who do not want to have their personal assets combined with those of the business (like in the case of the sole trader);
- Capital needs: large companies, like the SA, require a substantial initial contribution (25% of the minimum EUR 60,000 capital). This should be taken into account and budgeted when choosing the type of company in Spain;
- Tax and administrative requirements: all business forms are subject to reporting and taxation in Spain. The business form you choose will have requirements for bookkeeping in Spain and in some cases, these are complex ones (such as in the case of the SA company, where certain auditing conditions apply);
- Other issues: investors might want to take into account matters like business longevity and growth when selecting a business form.
Taxation matters for the different types of companies in Spain
Choosing a suitable business form is only the first step for any entrepreneurial venture. Once the business is set up, and it starts engaging in commercial activities, it will be subject to ongoing tax and reporting obligations in Spain.
Working with a local team of accountants in Spain is the norm, since the requirements differ between legal entity types and are complex in the case of large business forms, such as the SA company.
Below, our tax experts list some of the most important current tax rates in Spain:
- 25% general corporate income tax rate, applicable to the worldwide income of a Spanish resident company;
- 15% corporate income tax rate applicable to newly-incorporated businesses (in some cases);
- 19% general dividend withholding tax (with some exceptions and subject to reduction under an applicable Double Taxation Agreement);
- 21% standard value-added tax, with reduced rates of 0%, 4%, 5% and 10%.
Choosing the business form is an important step in the incorporation process. This decision influences the following steps, some of these being the requirement to prepare constitutive documents, open a bank account to deposit the capital in, and others.
Our team can help you with more in-depth information about the types of companies in Spain so that your choice can be an informed one. Contact our agents specialising in company formation in Spain for complete assistance when registering any of the business forms mentioned in this article.