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How to Start Your Business in Spain

Spain is a country located on the Iberian Peninsula of Europe. Being the 5th largest economy in the European Union and the 14th largest in the world has put Spain in the eyes of investors to invest in the country. The country, with a GDP of USD 1.425 trillion, is ranked 14th in the world, of which the Industry sector contributes to 23.2% of the total GDP of the country, which shows about the country’s growth in terms of setting up new industries in Spain. This is why it is essential to know how to start a business in Spain. If you are looking at how to set up a business in the country, then this article is for you

Business Entities in Spain

Before setting up a business in Spain, let us know what kind of a business entity can be set up in the country. Once you’ve gained rights to work and live in the country, you also have a right to start a business in Spain. Here are some of the types of business entities in Spain

1.Sole Proprietorship (Empresario Individual)

A sole proprietorship company only consists of a single shareholder, who is fully accountable for all the liabilities of the company. For this type of company, the minimum capital requirement is not required. Advantages of starting this type of business are to not worry about money in the first place. You can start a company without investment as such. The main disadvantage of setting this type of company is that you are liable for all the losses that happen in the company, and if anyone sues you, then that's it! It would be a financial disaster for your company.

2.Partnership Company (Sociedad Civil)

A partnership company consists of two or more partners, who are fully liable to their private assets for any liabilities of the company. A partnership between two people forms this type of company. Advantages of starting this type of company are the same as a sole proprietorship company and eliminate financial burden on an individual, as both the partners are equally liable.

3.General Partnership Company (Sociedad Colectiva)

A general partnership company is the same as a partnership company, only that it is required to establish a social contract that is certified by the Notary. Also, the company will be recorded in the Spanish Commercial Registry.

4.Limited Liability Company (Sociedad Responsabilidad Limitada (S.L.))

A limited liability company is the most frequent option that an investor chooses while starting a business in Spain. This type of company incorporation requires at least one shareholder, and the maximum number of shareholders can be 50. If there is a single shareholder present in the company, then the company must be identified as an only shareholder company (Sociedad Unipersonal). The minimum share capital required at the time of formation of a company in Spain is EUR 3000, and the amount must be paid at the time of investment. The company is required to be properly notarized and registered with the Spanish Commercial Registry.

5.Joint Stock Company (Sociedad Anonima, S.A.)

A joint stock company is the chosen option for the largest companies operating out of Spain. These types of companies differ from the mentioned types of business entities in terms of the additional paperwork requirements. The minimum capital required at the time of formation is EUR 60,000 out of which 25% is to be paid at the time of establishment.

6.New Enterprise Limited Company (Sociedad Limitada Nueva Empresa/SLNE)

A new enterprise limited company is similar to that of a limited liability company. The idea behind establishing this kind of a business entity is to benefit the incorporation of small and medium enterprises. This type of business entity also differs from a limited liability company in terms of the number of shareholders and capital requirements. The maximum number of shareholders in a company should be 5, and the minimum capital required to start this type of company is EUR 3012, and the maximum invested should not be more than EUR 120,202.

7.Small and Medium Businesses (Pequeñas y Medianas Empresas/PYME)

These types of businesses are the ones that have dominated the economy of Spain, and the government is encouraging the company's growth and formation. These types of business are, in fact, the most chosen ones in terms of starting a company in Spain. According to the Ministry of Tourism, Commerce and Industries, 99% of the businesses set up in Spain are PYME's, which means that the government is providing benefits and grants for setting up these types of companies. In Spain, there are three kinds of PYME's. they are

1.Mediana Empresa

Mediana Empresa is a medium sized business that has a workforce between 50 and 250 employees and has a yearly turnover of up to EUR 50 Million

2.Pequena Empresa

A Pequena Empresa is a small sized business that has a workforce between 10 and 49 employees and has a yearly turnover of up to EUR 10 Million

3.Micro Empresa

A Micro Empresa is a microenterprise, that has a workforce of fewer than ten people, and has a turnover of up to EUR 2 Million

Business Opportunities in Spain

Here are some of the industries that are prominent in helping the country grow in terms of economy. 

  • Tourism Industry
  • Manufacturing Industry
  • Agriculture Industry
  • Energy and Electricity Industry
  • Exports and Imports

Process of How to Register Your Business in Spain

Once you figure out your business entity type in Spain and the industry in which you want to set up a business, it is necessary to know how to set up a business in Spain. Here is the procedure on how to set up a business in Spain

1.Obtain an NIE Certificate

An NIE certificate (Número de Identidad de Extranjero) is an identification number issued by the Spanish Government. This is a mandatory requirement before starting a company in Spain, as this certificate will enable you to open a bank account, pay taxes and many such other things that will help you operate freely in the country. This process takes three to five days to complete. Note that this is required for any individual that is not a resident of the European Union. If the person is a resident of the European Union countries, he/she is required to provide his green card at the time of incorporation.

2.Submit the Company’s Name to the Registrar

After obtaining the NIE, it is required to submit three names that you are willing to name the company on, to the Spanish Corporate Registry (Registro Mercantil). They are to be provided to prevent any resembling names that have already been registered. If available, then as per the preferences are given beforehand, your company name will be registered. This process will take about 48 hours

3.Opening a Bank Account

As you have now received your NIE, it will become easy to open a bank account in Spain. The bank account can be opened at any bank of your choice, and the bank must be registered with the Government of Spain. The minimum amount required to open a bank account depends upon your business entity type in Spain

4.Applying for CIF (Company Tax Identification Code)

CIF stands for Company Tax Identification Code. This is necessary for identifying whether the company is eligible to pay tax or not. This certificate is issued by the local tax office (Delegación de Hacienda)

5.Preparing Company Deeds

If the company is registered as a limited liability company, then this document is necessary at the time of formation of a company in Spain. You must be clear about your company administrators, shareholders, how the shares will be divided by this point. These lists must be prepared well before going to the Notary for company registration.

6.Going to the Notary for Registration

After all of the above processes, the next step is to go to the Notary and register your company, along with the NIE, CIF and other mentioned documents, so that the Notary can register the documents with the competent tax authorities.

Benefits of Starting Your Company in Spain

Once you’ve finished with the procedures of opening your company in Spain, it is also necessary to understand the benefits of starting your company in Spain. Here are the benefits of starting your company in Spain.

  • Fewer Obstacles while registering for a business
  • Great for startups, with a wide variety of funding opportunities
  • The strategic location of the country
  • Less legal procedures required for a company

Thus, here is the information needed on how to start your business in Spain. We at Business Setup worldwide do provide company registration services in Spain. Our expert team of consultants are available all the time for such queries. Contact us for more; we are happy to help you!

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