01 Jun Start and run a business in Spain
As an EU citizen, you are free to establish a company in Spain.
For certain professional groups, mainly in healthcare, the Spanish authorities require that your degree be approved in Spain. Many northern Europeans start businesses on the Costa del Sol. It can be real estate agents, craftsmen, restaurant, hotel or cafe owners, IT specialists, builders, car mechanics, hairdressers and various types of shop owners, to name a few examples.
Before starting a business in Spain, you should draw up a business plan where you analyze what it is you want to work with. This includes a budget, a calculation and which staff and company form you want to use.
Our owner, Sven F. Källström, has started and run various companies for more than 35 years in Spain. If you are thinking of starting some kind of business in Spain, you are welcome to contact him directly so that you can discuss your business plan together and he can give you his opinion on whether it is sustainable and worth investing in.
If you come to the decision to continue and start the business, you need a company form and help to start the company as well as someone who takes care of the bookkeeping. We put you in touch with a company that specializes in all of this. We have worked with that company for over 30 years and it has been a great security.
Let us tell you the different business forms you can choose from when starting a business in Spain.
As an entrepreneur, you can freely choose the form of business, which is as follows:
Sole proprietorship (Cuenta Propia)
Running the business in a sole proprietorship is called being self-employed and means that your private finances are completely mixed with your company’s. To try to separate the private from the company, it may be a good idea to have two separate bank accounts. One for the business and one for you as a private person. The business is registered partly with the tax authority and partly with the insurance fund.
There are no requirements to invest a certain amount of capital in the company. You must have organized ongoing accounting, which ends with an annual report. When the business must be declared, which must be done on 31 December each year, you only need to present an income statement. The balance sheet does not appear in the declaration.
The time required to start a sole proprietorship is approximately one day and the cost of this can be estimated at approximately 200 euros including VAT. The VAT must be reported quarterly, as well as your own and your employees’ social costs. The business organization number is the same as your private Spanish NIE number.
Branch (Sucursal)
A branch is normally associated with a foreign company wanting to start business in Spain as part of the foreign company. A branch must be registered with the commercial register and established with a notary, who draws up an escritura (similar to a certificate of registration). As a branch is part of another company, there are no rules on minimum capital. The main company is responsible for the operations.
Private Limited Company (Sociedad Limitada – S.L.)
It is enough that one person owns, runs and controls the company. Upwards there is no limit to how many owners or board members there may be. The capital, which must be invested, is a minimum of 1 euro but normally 3,000 euros. As long as the capital in limited companies does not reach the figure of three thousand euros, the following rules will apply: An amount corresponding to at least 20 percent of the profit must be allocated to the reserve fund until the reserve fund together with the share capital reaches three thousand euros.
In the event of voluntary or compulsory liquidation, if the company’s assets are insufficient to meet the payment of social obligations, the partners will be jointly and severally liable for the difference between the amount of three thousand euros and the amount of the subscribed capital.
Normally, the company’s owner makes up its board, while the signatory is called an administrator (roughly a company manager). So the one who in practice decides in the company is the administrator. A legal person can be an administrator.
The procedure for starting an S.L. company is as follows: The first step is to apply for a name at the commercial register in Madrid. There it is checked that no other company in the whole of Spain has the same name as the one you are applying for or that something is considered to be confusing. You can apply for several names at the same time, which will be tried in the order in which you have prioritized them.
The applicant must become a partner in the company. You usually get a response to the name application within a week. When you have been granted the requested name, you take the name certificate to your bank and deposit a minimum of 3,000 euros as share capital. The granted name is entered as the account holder. The bank will print a special receipt that you have invested the share capital.
The third step is to visit a notary to form the company. When the escritura has been completed at the notary, it must be submitted to the tax authority and you will then receive a preliminary organization number. This will start at the letter B.
The escritura must then be presented to the commercial register. There it is checked that all documents drawn up by the notary are correct. And if this is the case, the company is registered. The processing time at the trade register can be up to one month. When you have received the escritura from the Trade Register, you take it to the tax authority to get the definitive organization number. This will usually always be the same as the provisional number you previously received.
Finally, you must take the escritura to your bank, whose legal department must check and approve it. Once this is done, the company’s bank account is opened and you can make deposits and withdrawals.
The time required to start a limited liability company can be around two months. The cost of starting a company can normally be estimated at around 2,000 euros and this amount includes expenses, fees and VAT.
Public limited companies (Sociedad Anónima – S.A.)
In principle, it is like setting up an S.L. company, but the rules are more formal to protect minority owners and the share capital is a minimum of 60,000 euros. Invitations to various meetings must be made via press announcements. In principle, you only start an S.A. company if you are considering an IPO. Upon registration, an S.A. company receives an organization number that begins with A.
