1. Sole proprietorship
2. Stock corporation
3. Limited liability company
4. Workers’ partnerships
5. Joint venture
6. Branches
1. Sole proprietorship
A foreign single person may start business in Spain, he must have legal capacity, according with the law of his home country, to carry on businesses activities.
If you are willing to set up your business in Spain as a sole proprietroship, be aware that your liability for debts is unlimited, and therefore you are personally liable for your business’ debts.
You may register at the Spanish Corporate Register (Registro Mercantil) as a sole ownership.You must follow the steps necessary to set up a business in Spain.
2. Stock corporation
Stock corporations (Sociedad Anónima – S.A.) are normally used in Spain for investments in major projects.
The deed of incorporation shall be signed before a notary and then registered at the Spanish Corporate Registry (Registro Mercantil). A single person can form this type of company.
Minimum share capital is € 60,101.21. Contributions may be made in the form of money, goods or intellectual property, which can be valued. Work is not valid as a capital contribution.
The capital must be fully subscribed and paid up to at least a quarter of the nominal value of each share. Each share gives its holder the right to vote, priority subscription rights, participation in the distribution of the company’s profits. Shares have to be registered in the name of the holder while they are not fully paid. Share may be listed on the Spanish Stock Exchange.
Shareholders may freely transfer their shares, unless corporate bylaws state restrictions on the transfer of shares.
The shareholders are not personally liable for corporate debts; they are only liable to the extent of their contribution to the corporate.
The deed of incorporation must include the company’s articles of association, which have been approved by its founders. The articles of association must state, among other provisions:
- The name of the company and description of its activity.
- The date on which it begins its operation.
- The registered office.
- The share capital, the capital part which is not paid-up and the period within the capital must be paid.
- Number of shares and the rights attached to them.
- Date on which the company’s financial year ends.
- Structure of the company’s management and special rights that founders may have…
The corporation must have a Board of Directors (Consejo de Administración) and a Shareholders’ General Meeting (Junta General de Accionistas). The deed of incorporation must identify the persons initially entrusted with the management and representation of the company. Any amendment to the by-laws must be approved at a Shareholders’ General Meeting.
3. Limited Liability Company
The Limited Liability Company (Sociedad de Responsabilidad Limitada – S.L.) is normally used in Spain to form small or medium sized businesses, it may be created by a single founder.
The deed of incorporation shall be signed before a notary and then registered at the Corporate Registry (Registro Mercantil).
The minimum capital requirements are € 3,005.06, which must be fully subscribed and paid-up at the time that the company is set-up. Contributions may consist of credit rights, real property… work is not valid as a capital contribution.
Partners are not personally liable for company’s debts, their liability is limited to their investment in the company. Only one shareholder is needed, however there is no limit on the number of shareholders.
Participations of a Limited Liability Company cannot be listed on a Stock Exchange, these are indivisible and cannot be freely transferred.
4. Worker’s partnerships
The share capital of Cooperatives (Cooperativas) and Labour Corporations (Sociedades Laborales) is owned by the workers.
- The Cooperative is a worker’s association developing an economic activity as these hold common economic needs. Minimum capital is not required, the deed of corporation shall be registered at the Cooperatives’ Registry of the Spanish Labor Ministry (Ministerio de Trabajo). Workers are not liable for company debts, unless otherwise is stated in the bylaws.
- Labour Corporations may take the legal form of a Limited Liability Company, or a Stock Corporation. The workers are liable for company debts to the extent of their contributions.
5. Joint Ventures
Joint Ventures in Spain may use different forms.
- A group of companies can form temporary business associations (uniones temporales de empresas – UTE) to carry on specific projects for a limited time, each company will keep its legal status, they undertake operations in common under specific regulation. These are normally set up for engineering and construction projects. Notarial deed shall be made and registered with the Special Register of UTE at the Spanish Ministry of Economy (Ministerio de Economía).
- Economic Interest Groups (Agrupación de Interés Económico – AIE); which are set up to help their members to achieve their individual objectives; its members are liable for the company debts. This is normally used to provide centralised services for a group of companies. They must be incorporated by public deed and entered in the Spanish Corporate Registry (Registro Mercantil). Members can transform an AIE into any other type of commercial entity.
- Entrepreneurs may agree to contribute with money or in kind to a venture that they do not manage (contrato de cuentas en participación), the non-managing participants do not become shareholders, they receive the right to an agreed share of the profit resulting from the venture.
6. Branches
The branch is an organization depending on its parent, which is located abroad. It has the same legal personality as its parent and runs similar activity.
A branch has to be set up through a public deed made before a notary and registered at the Corporate Registry. The following documentation will be required for the registration:
- Copy of the incorporation deed and articles of association of the foreign partner.
- Copy of the minute of the foreign company’s Board of Directors’ meeting establishing the decision of opening a branch in Spain, containing the capital assigned to it, the name of the manager and his general powers.
- Certificate of a Spanish bank showing that the transfer of capital assigned to form the branch has been carried out.
A Spanish Consul shall legalize the copies mentioned above, and a sworn official translator shall translate the incorporation deed and bylaw of the foreign company into Spanish.
A permanent address and fiscal representative in Spain will be required.
The requirements for the constitution of a branch are the same as for setting up any other business in Spain.
The tax position is very similar to other business, although the branch may deduct from its income the costs incurred in respect of the parent company; e.g. cost of management.
Creditors may demand their payments of their debts to the branch located in Spain or directly to the parent located abroad.
