The purpose of creating a limited company is to make a legal distinction between the business’ assets and the owner’s personal assets, offering financial protection to the owner in case the business goes into debt. This process of setting up a limited company in Spain, known in Spanish as sociedad limitada or S.L., involves multiple steps. Having a team experienced in company and branch formation take care of everything will usually be more efficient (and less frustrating), but if you choose to tackle it on your own, this guide will help you get started.
Establishing a company in Spain: alternatives to a limited company
Setting up a limited company in Spain requires a minimum capital deposit of €3000. If you can’t meet that requirement right now, there are a few alternatives that may be a good fit for you. These include:
- Autónomo (self-employed)
- Empresa individual (sole trader)
- Sociedad civil (partnership) or Sociedad comanditaria (limited partnership)
None of these have a minimum capital requirement, and you, as the business owner, will be classified as “autónomo” and will be responsible for paying the corresponding monthly fee. Your business income will be reported on your personal income tax declaration each year.
Setting up a limited company in Spain: sociedad limitada
Here are the general steps you will need to follow when starting a limited company in Spain:
Get your Spanish NIE if you don’t already have one. This is Spain’s tax identification number for foreigners, and it’s necessary to get just about anything done in the country, so there is a chance you have already completed this step.
Register your desired company name with the Registro Mercantil Central. You can do this on their website. This is to ensure there is no company already registered in Spain with the name you want to use. If there is “no name coincidence”, you will receive a certificate that will allow you to continue with the remaining steps.
Starting a limited company in Spain
Once you’ve got a verified, unique name for your company, it’s time to get a tax ID number for the company. In Spanish, this is called a certificado de identificación fiscal, or CIF for short.
Now that you have been assigned a CIF identification number for your company, you can open a company bank account and make the required share capital deposit, which is €3000 to start a limited company in Spain.
The next document you need to apply for is the deed of incorporation, which must be signed by a notary.
After the deed of incorporation is completed and signed, it must be used to register the company with your local tax authority.
Finally, you will need to register the company with the social security office, for yourself and for any potential employees.
Spain corporate tax rate for limited companies
Unlike the alternative options listed earlier, an S.L. company in Spain will have to file a corporate tax return at the end of each fiscal year. Spain’s corporate tax rate is currently set at 25%, although newly formed companies may be able to benefit from a reduced rate for the first two tax years. Like all types of business, you will also have to pass the VAT tax you collect from your customers on to the Spanish government.