Posted in: Case studies, Legal
A British couple approached Molina Solicitors for assistance in setting up a Spanish Limited Company in Spain. They planned to operate a small property-related service in the Alicante and Murcia regions, working with holiday homeowners and local property owners.
Although they had experience running a business in the UK, they were unfamiliar with Spanish company law and were unsure about the correct legal structure, the registration process, and their tax obligations.
Following an initial consultation, the solicitor advised that the most appropriate structure for their business would be a Sociedad Limitada (SL), which is the most common type of limited liability company used by small businesses in Spain.
This structure allows the owners to operate through a company while limiting personal liability to the amount invested in the business.
The first stage involved discussing the clients’ intended activity and business plans. During this meeting the solicitor reviewed:
The solicitor explained the responsibilities involved in running an SL company and asked how many employees there would be.
Before a company can be created in Spain, foreign shareholders must obtain a Número de Identidad de Extranjero (NIE).
This identification number is required for any foreign national who wishes to become a shareholder in a Spanish company, act as a director and carry out financial transactions in Spain.
Fortunately the clients had already obtained their NIEs.
The next step was to apply for a company name reservation.
Five proposed names were submitted to the Spanish Mercantile Registry to confirm that the chosen name was not already in use. Once approval was received, a certificate confirming the name reservation was issued within days. This certificate is required before the company can be incorporated before a notary.
Once the certificate was obtained it was sent to the clients and they were advised how to open a Spanish bank account in the name of the company.
The shareholders have to deposit the required share capital (3,006€ is the minimum), and the bank issues a certificate confirming that the capital had been paid. This certificate forms part of the documentation required to create the company.
The solicitor drafts the company’s Articles of Association, which establish the internal rules governing the company. These documents include details such as:
Careful drafting is important to avoid future disputes between shareholders, which is why an experienced solicitor is needed.
Once the documentation is prepared, an appointment is arranged with a Spanish notary. During this meeting the shareholders formally signed the deed of incorporation, which legally creates the company.
The notary reviews the documentation to ensure it complies with Spanish company law.
After incorporation, the company needed to be registered with the Spanish Tax Agency (“Hacienda”).
A provisional tax identification number is issued so the company could begin operating. The company’s economic activity is also registered at this stage, identifying the nature of the business.
The incorporation deed is then submitted to the Mercantile Registry for official registration.
Once registered, the company receives its permanent tax identification number, confirming that it is fully established under Spanish law.
Finally, the company director/administrator needs to be registered with the Spanish Social Security system, and the business begin preparing for normal operations. Depending on the nature of the business, additional licences or municipal permits may also be required.
With legal assistance, the process is usually completed within approximately three weeks/six weeks from the initial consultation to full registration of the company, depending on how busy the Notary and solicitor are.
Professional legal guidance provides several benefits:
This allows the clients to focus on launching their business while the legal process was handled efficiently.
One of the first decisions is whether to operate as a self-employed individual (autónomo) or through a limited company. Many foreigners automatically choose a company structure without understanding the tax and administrative obligations involved. In some cases, operating as self-employed may be more suitable during the early stages of a business.
Professional advice at the beginning helps determine which structure best fits the business model.
Foreign shareholders and directors must obtain a Número de Identidad de Extranjero (NIE). Many entrepreneurs attempt to start the process without this identification number, which can significantly delay the incorporation.
The Articles of Association govern how the company operates.
Foreign founders often use very generic statutes that do not properly address important matters such as director powers, shareholder decision-making, share transfers, business activity descriptions.
Well-drafted statutes can prevent disputes and provide clarity if shareholders disagree in the future.
When registering a company with the Spanish tax authorities, the business must declare its economic activity using a **CNAE (Clasificación Nacional de Actividades Económicas) code.
Selecting an incorrect code can lead to problems. The activity description should accurately reflect the company’s real operations.
Company directors/Administrators in Spain are usually required to register with the Spanish Social Security System and pay monthly contributions. Many foreign directors assume they only need to pay tax when profits are generated, but social security contributions may still apply even if the company is new or not yet profitable.
Certain activities require local licences before operating. These permits are normally issued by the local town hall. Attempting to operate without the necessary licence can result in fines or closure of the business.
Spain has a detailed legal and administrative system, and the company formation process involves several institutions, including a notary, the tax authority and the Mercantile Registry.
Foreign entrepreneurs sometimes attempt to handle everything themselves, which can result in delays, incorrect filings, or compliance issues.
Working with a solicitor ensures that the company is created correctly and that all legal obligations are understood from the outset. They can also often introduce an accountant to go forward and assist with the company’s tax obligations.
Setting up a company in Spain can be straightforward when the correct steps are followed. However, small errors during the formation process can create long-term complications. Molina Solicitor’s professional legal guidance can help ensure that the business is structured correctly, registered properly, and fully compliant with Spanish law from the beginning.