Company incorporation in Spain

Are you thinking about setting up a company in Spain? Would your company like to establish a subsidiary or to open a branch in order to set up in business in Spain? Do you urgently need an already established and registered company?

We will be glad to help you find the company form that best suits your project and put your ideas into practice, taking into account the particularities of the Spanish law. Especially when it comes to international projects, we have the necessary expertise and know how to meet all your challenges. And if, for whatever reason, you would like to skip over the setting-up process, we have already established and registered Spanish companies at your disposal, so that you can directly start your business plan.

Content overview

1. What types of companies exist in Spain?
2. What is a Spanish SL (limited liability company)?
3. What is a subsidiary
4. How is the SL incorporated
5. What information must be deed of incorporation contain?
6. How is a SL registered with the commercial register?
7. What are the special features of a sole shareholder company?
8. Which steps are necessary when registering the SL with the tax office and social security?
9. How can the management body of an SL be organised?

1. What types of companies exist in Spain?

Companies offer important advantages for carrying out a business activity and managing assets, in particular greater stability and continuity (between generations), the possibility of growth (e.g. through the incorporation of investors), better access to finance, more favourable (international) taxation and better protection of the partners' assets. These are legal entities that are distinct from their shareholders and which require an act of incorporation, the articles of association or incorporation.

Different types of commercial companies can be incorporated in Spain (public limited company, limited partnership, etc.), but the absolute queen of international legal and commercial transactions is the limited liability company or SL. It is a "closed" company in which the transfer of shares and the admission of shareholders is subject to strict rules. Its success is due to the simplicity and economy of its creation and management, as well as its flexibility, which allows it to be adapted to any business activity or asset management.

2. What is a Spanish SL (limited liability company)?

The SL is a limited liability company (sociedad de responsabilidad limitada) established under Spanish law. In the SL, there is a strict separation between the company assets and the assets of the shareholders. The shareholders have a limited asset risk with regard to the contribution. As soon as the contribution has been made, the shareholders are not personally liable. The minimum share capital of the SL is now €1, after the previous limit of €3,000 was reduced by the reform implemented with the entry into force of Law 18/2022. The SL is governed by the articles of association (estatutos) and the provisions of the Spanish Capital Companies Act (Ley de Sociedades de Capital) and, if applicable, the shareholders' agreements. 

3. What is a subsidiary?

A subsidiary is a company in which another company is the (sole) shareholder, the so-called parent company. In international legal transactions, foreign companies usually operate in other countries through a subsidiary in which they either hold a 100% stake or a smaller percentage if they have a (local) partner, in what is known as a joint venture. As an alternative to a subsidiary, foreign companies can establish a branch in Spain, which is generally considered a permanent establishment for tax purposes.

4. How is the SL incorporated?

The SL is incorporated by notarial deed (escritura pública de constitución) and registered with the commercial register responsible for the province in which the SL has its registered office.

Prior to incorporation, a certificate must be obtained from the Central Commercial Registry in Madrid confirming the admissibility of the desired company name. If the name is authorised and no other company with the same or a similar name exists, the Central Commercial Registry will issue a certificate of reservation for the company. The company is reserved for a period of 6 months. Subsequent extensions are possible. It should be noted that subsidiaries cannot have the same name as their foreign parent company, even if the legal form is different.

The shareholders must make a contribution when the SL is incorporated. This can be a cash contribution or a contribution in kind. In the case of a cash contribution, the contribution must be paid in full to a bank before the company is incorporated. The bank then issues a certificate of contribution, which must be submitted to the notary and attached to the deed of incorporation when the company is founded. It is also possible for the founding partners to provide an assurance that the contribution has been made when the incorporation is notarised. No proof is then required. However, the company founders are then jointly and severally liable to the company and the company's creditors for this circumstance.

In addition to a cash contribution, a contribution in kind can also be made, whereby tangible or intangible assets are contributed instead of cash. However, the prerequisite is that a value can be assigned to the asset. The valuation can be carried out either by an expert, by agreement between the parties or by consulting the market value, which is not possible in the case of labour services according to established case law.

5. What information must be deed of incorporation contain?

The deed of incorporation must be signed by all founding shareholders in person or by a person expressly authorised to do so. The deed of incorporation must contain the following information:

• Personal details of the shareholders. If the shareholders are legal entities, information must also be provided on the beneficial owners, i.e. the natural persons who directly or indirectly control more than 25 % of the capital or voting rights of the legal entity or exercise control in a comparable manner.

• If a foreign company acts as founding shareholder, it must prove that it is still registered in the country of origin by means of a bcertified extract from the commercial register of the country of origin, provided with an apostille in accordance with the Hague Convention and a certified translation into Spanish.

After incorporation, the provisional tax number (NIF) must be obtained and a form 600 must be submitted to declare the contributions made (the incorporation process is currently tax-free with regard to capital transfer tax, but must be declared). All foreign founding shareholders must also submit a declaration of foreign investment by sending in form D1-A.

6. How is a SL registered with the commercial register?

The SL can only be registered with the commercial register if all documents haven been submitted, i.e.:

• A notarised copy of the deed of incorporation
• The provisional NIF of the SL
• Proof of submission of the tax form 600.

If there are no legal obstacles to registration that would lead to the refusal or suspension of registration, the company is registered with the commercial register by resolution.

The company’s register data is publicly accessible. Current extracts from the commercial register can be obtained online for a fee at www.registradores.org.

Once the company has been registered with the commercial register, those facts that the Spanish Commercial Register Regulation (Reglamento del Registro Mercantil) declares to be subject to registration must be registered. In addition to the incorporation of the company, these include, in particular, changes to the articles of association, such as an increase or decrease in capital, relocation of the registered office or a change in the object of the company. In addition, appointments or dismissals of managing directors, liquidators and auditors as well as the granting of general powers of attorney must also be registered with the commercial register.

7. What are the special features of a sole shareholder company?

If the SL is incorporated by only one shareholder, natural or legal person, it is considered a sole shareholder company (sociedad unipersonal). The sole shareholder must be entered in the commercial register within 6 months of the incorporation or full acquisition of the shares in the SL. Otherwise, the sole shareholder is liable alongside the SL for the debts during the period of the company's status as a unipersonal company.

In addition, there is a legal obligation to record all contracts concluded between the SL and its sole shareholder in writing and in a contract book (libro-registro de contratos con el socio único). This contract book must be legalized and filed with the competent commercial register. In addition, the contracts must be recorded in the management report to the annual financial statements, stating their type and contractual conditions. If the above requirements are not met, the contracts cannot be held against the insolvency estate in the event of the insolvency of the SL or the sole shareholder, which means that these contracts can be treated as non-existent vis-à-vis the creditors.

8. Which steps are necessary when registering the SL with the tax office and social security?

1.  Tax registration and communication of tax obligations

Once the SL has been entered in the commercial register, the company must be registered with the tax office in order to obtain the final NIF by submitting form 036. Depending on the type of activity of the SL and the type of business premises or workplace, a business licence may have to be applied for.

The taxable income of an SL resident in Spain is subject to corporation tax. The profit of the SL according to the commercial balance sheet is used to determine the taxable income. The profit determined on the basis of the commercial balance sheet (after making the necessary tax adjustments) is the assessment basis for corporation tax. The Spanish corporation tax rate of generally 25 % is applied to the assessment basis. A reduced rate of 15 % is applied to newly established companies in the first two years of profit. Special regulations apply to certain sectors and funds as well as to the regions of Navarra, the Basque Country, the Canary Islands, Ceuta and Melilla.

          2.  Registration with social security

If the SL has employees, it must be registered as an employer with the competent social security authority. The registration is made by submitting the form TA 6. After the successful registration, the social security authority assigns the company a contribution account number (código de cuenta de cotización-CCC), which is essential for all further procedures, such as the hiring of employees and the corresponding contributions. The social security authority can use this number to determine the company's obligations as an employer. It should be noted that the company must apply for a contribution account number for each province in which it carries out its economic activity. Directors who are not employees must pay social security contributions under the special scheme for self-employed workers (Régimen Especial de Trabajadores Autónomos-RETA) if they receive remuneration for carrying out their work.

The application must be submitted electronically and signed with the SL’s electronic certificate.

9. How can the management body of an SL be organised?

The SL can be represented by a sole managing director, at least two managing directors with sole or joint power of representation or a board of directors.

If only one managing director is appointed, this person represents the company on their own. If several managing directors are appointed, it is assumed that they are authorised to represent the company individually, unless a joint authorisation to represent the company is expressly stated at the time of appointment. However, a mixture of joint and sole power of representation is not possible. This means that either all managing directors are authorised to represent the company individually or jointly.

Managing directors can be any person with legal capacity who is authorised to dispose of their assets, regardless of their nationality. Non-EU citizens can also be appointed as managing directors of a Spanish SL without having to fulfil further requirements, such as providing proof of a residence or entry permit.

The managing director can also be a legal entity. However, it must appoint a natural person to represent it in the management of the company.

The SL may also be represented by a Board of Directors. The Board of Directors consists of a minimum of three and a maximum of twelve members. It is a collegial body that acts jointly. The meetings of the Board of Directors must be recorded in minutes, indicating the resolutions adopted. The Board of Directors must appoint a Chairman (Presidente) and a Secretary (Secretario). The chairman convenes the meetings and chairs them. The secretary is responsible for keeping the records of the Board of Directors. He is responsible for preparing the minutes of the meetings and ensuring that the actions of the Board of Directors comply with the applicable legal provisions. If provided for in the articles of association, the secretary may also be a person who is not a member of the board of directors. In practice, this office is often held by lawyers specialising in company law.