How to set up a company in Spain

Find out how to set up your company in Spain with our step-by-step guide to the requirements and necessary formalities. #CommercialLaw #Company #Procedures

Last year, 102 169 new companies were created in Spain, marking the third highest level of entrepreneurial activity since 2008, surpassing the 100 000 mark in a single year.

After the downturn in business activity caused by the pandemic, a faster and stronger than expected economic recovery has encouraged optimism, so many entrepreneurs have been encouraged to get their business ideas off the ground. If you are also thinking of starting a business in Spain, we explain the requirements and steps to formalise its incorporation, so that you can start invoicing as quickly as possible.

These are the 10 steps you need to follow to set up a company in Spain

1. Choose the legal form

The first step in setting up a company is to decide on its legal form, which will depend on factors such as the nature of the activity, the scope of the project, the number of partners and the legal liability you are willing to assume. This choice will also determine the tax and accounting obligations you will assume, as well as the initial financial investment for setting up the company.

If you have no partners, you can set up a single-person limited company (SLU) to restrict your tax liability to the capital contributed. On the other hand, if you are going into partnership with other people, you could set up a limited liability company (SL). Another possibility is to set up a public limited company (SA), whose capital can be divided into shares and distributed among the partners, or a cooperative company, in which case you will need at least three partners, who will also act as employees of the company.

2. Obtain negative name certification

One of the requirements for setting up a company is to obtain negative certification of the name you have chosen for your business. You can request this from the Central Mercantile Register by visiting their physical offices, filling in the web form at their online headquarters or by sending a letter by post.

This document certifies that there is no other company operating under the same name, thus avoiding duplication and legal problems in the future. If the name you request is free, it will be reserved for six months. After this period of time, if you have not registered the company in the Provincial Mercantile Register, the name will be free and other entities will be able to claim it. In fact, the negative certification is valid for three months, extendable for a further three months, the time necessary to complete the rest of the legal formalities to incorporate the company.

3. Draft the articles of association

The articles of association govern the operation of the company and, although they can be amended at a later date, it is ideal to make them clear from the outset to avoid possible disputes between the partners.

They should reflect the basic information about the company, such as its name, registered office, intended duration, corporate purpose and target public. They should also include everything related to the initial share capital to set up the company, as well as the shareholding policy, i.e. the division of shares among the shareholders and the forms and circumstances of transfers.

The articles of association must also include the organisational structure of the company, from how it will be managed to what remuneration the director will receive. They must also indicate how decisions are voted on and how profits and losses are distributed among the shareholders, what the reserve fund is to be and the causes and channels for dissolving the company.

4. Open a bank account in the name of the company

One of the requirements for setting up a company is to provide a minimum amount of share capital. Depending on the type of company you set up, you will have to deposit this money in a bank account in the name of the company.

In the case of a limited liability company, the minimum capital required by law is 3,000 euros, while for public limited companies this figure rises to 60,000 euros. For cooperative companies, on the other hand, the minimum share capital depends on regional regulations and the sector of activity, but normally ranges between 1,500 and 3,000 euros.

5. Apply for a tax identification number at the Tax Agency.

The Tax Identification Number (NIF) is an alphanumeric code that you will have to use in all the documents related to your business, both for the incorporation of the company and for the filing of taxes and invoicing of the activity.

To obtain the NIF, you will have to fill in form 036, which you can file online at the Tax Agency. You will receive a provisional NIF with which you can start invoicing and within six months you will receive the definitive one, when you present a copy of the deed of incorporation of the company.

6. Sign the public deed before a notary

If you have partners, you will have to go before a notary to sign the public deed of incorporation of the company. You will have to present a series of documents, including the articles of association, the negative certification of the company name issued by the Central Mercantile Register, the bank certification of the deposit of the share capital and the identification documents of each of the partners.

It should be clarified that if the partners are married under the separation of property regime, they will have to submit the marriage contracts. If they are married in community of property, the spouse will have to come to the signing of the public deed.

If the contribution to the share capital of one of the partners is not in cash, a list of the assets must be submitted, giving a breakdown of their description and valuation, as well as the number of shares or holdings attributed to this contribution. In the case of real estate, for example, the registration details must be submitted.

7. Register the company in the Commercial Register.

The Commercial Register records the creation of the company. By registering the acts of entrepreneurs, it gives the company full legal capacity and allows it to be recognised by suppliers, banks, investors, public bodies and other entities with which it has dealings. In fact, all companies must be registered in the Mercantile Register.

To do this, all you have to do is go to the Mercantile Register office in the province where your business is located and register it. You will need to present all the documents that accredit the incorporation of the company, such as the public deed and the NIF. And don't forget to legalise the company's books. You have a period of two months from the moment you sign the deed of incorporation to complete this procedure.

8. Register with IAE

The Economic Activities Tax (IAE) applies to all SMEs and freelancers who carry out a professional, business or artistic activity in Spain. Therefore, to open a company, you have to register with the Tax on Economic Activities at the Tax Agency, indicating the business activity you are going to carry out, a procedure that you can do in person at the physical offices or directly online.

If you are going to act as administrator of the company, you will also have to register in the Tax Agency's census of entrepreneurs and in the RETA, where you will appear as a self-employed company director. Bear in mind that corporate self-employed persons are not eligible for bonuses for self-employed persons and that your Social Security contribution will be higher than that of self-employed persons registered in the general regime.

9. Register patents and trademarks

Registering your company in the Trade Register does not guarantee that your logo, slogan or any product you create will be protected. You need to register them with the Spanish Patent and Trademark Office.

Your trademark is one of the intangible assets of your business and when you register it, you protect it so that other companies or people cannot use it, which adds value to your activity. On the other hand, registering the patent will give you the ownership and exclusive right to exploit it, preventing third parties from plagiarising it or using it without your consent.

10. Obtain the electronic certificate

The Spanish government is increasingly using electronic means, so the last step in setting up a company in Spain is to obtain an electronic certificate for your business, which will facilitate many procedures and save you a lot of time. The good news is that you can apply for the electronic certificate as sole administrator online.

Finally, remember that, depending on the type of activity you are going to carry out, you may have to apply for a municipal opening licence, which will certify that your office, business or industrial building meets the requirements of the current regulations.

If you feel overwhelmed by the process of setting up a company in Spain, don't worry, it's normal. Our Marbella law firm is here to help you manage all the paperwork and make it as simple as possible, so contact us today to start setting up your company and establishing yourself in the Spanish market!