Steps On The Incorporation Of A Spanish Company

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Previous approach:

Step 1. Business viability

Make a Business Plan and make sure your business has the potential to be viable. Don’t forget, for instance, that Social Security costs in Spain represent 35% of an employee’s net salary (see Labour Rules In Spain).

Step 2. Financial needs

Ask yourself how much money you need to start up your business. You have to convert your Business Plan into a Financial Plan. Turn to FFFs (family, friends and fools) for your first round of finance and then turn to your bank if you still have financial needs.

Step 3. Partners

Select your partners: how many, with which profile and who. And the most important, how much money will each invest. Don’t forget that it is very important that you all have a shared vision of the business.

Step 4. Administrators

Decide who will be the administrator or the administrators of the company. Each option implies different levels of power within the company.

Types:

- Sole administrator

- Two independent or joint administrators

- Board of directors

Step 5. Articles of Association

Write the company Articles of Association. At least they must contain:

- Company name

- Corporate purpose

- Date of fiscal year end

- Company address in Spanish territory (either a home address or the address of the accounting firm or attorney)

- Social capital, in euros, with a minimum of €3,000 for a Limited liability company (Sociedad Limitada, S.L.), the number of shares in which that capital is divided and their nominal value

- System of administration

Steps for legal incorporation:

Step 6. Apply for the company name

In the name of one of the partners apply for the company name to the Mercantile Register head office in Madrid. Once conceded, it expires in 3 months, although it can be renewed for another 3 months.

Step 7. Capital contribution

Open a bank account for the incorporation of the company which will automatically be related to the company and blocked until the incorporation. After opening the account, each partner must deposit the agreed share capital, consequently obtaining the certificate of capital contribution. When capital has foreign origin, the bank must also certify the country of origin of funds and the account from which the money comes to prevent money laundering.

Step 8. Incorporation

For the Incorporation, all partners must physically attend the notary carrying the following:

• Partners identity

• Individuals:

• Spanish: Identified by the DNI.

• Foreigners: Identified by NIE (see First Step To Do Business In Spain)

• Legal entities:

• Spanish: Identified by the original deed of incorporation.

• Foreigners: Identified by the deed of incorporation, which must be translated into Spanish by a sworn translator, notarized and legitimized with the Apostille of The Hague.

• Administrators composition (Step 4)
• Articles of Association (Step 5)
• Company name certificate (Step 6)
• Certificate of capital contribution (Step 7)

The deed of incorporation must contain:

• The partners and administrators identity
• The equity of each partner in euros and in number of shares
• The administrators composition
• The identity of the administrator or administrators who will initially assume the administration and representation of the company
• The Article of Association

Once all the necessary documents are verified by the Notary, he will sign and protocolize the deed of incorporation.

IMPORTANT: At this point, you can start invoicing your clients with the new company.

Step 9. Apply for the company tax ID (CIF)

Within one month from the incorporation the tax ID (CIF) must be obtained. In order to obtain it, the model 036 should be completed and presented at the tax office with the deed of incorporation.

Step 10. Payment of the Incorporation tax

Within one month from the incorporation go to the tax office assigned to the company address with the deed of incorporation to present and pay the Incorporation tax (ITP & AJD). In order to register the company in the Mercantile Register a payment receipt of the incorporation tax is needed, and even though since 2010 the tax is €0, this formality is still mandatory.

Step 11. Registration in the Mercantile Register

Register the company in the Mercantile Register providing the deed of incorporation and the payment receipt of the incorporation tax. The registration is made in two steps:

1. The document presentation

2. The return of the documentation once registered (within 15 days)

Step 12. Registration in Hacienda

Within one month from the registration in the Mercantile Register the company has to be registered in Hacienda (Spanish tax authority). In order to do so, model 036 has to be correctly completed and presented. Then the company will be enlisted in all its tax duties referring its activities.

Step 13. Registration in the Social Security System

Both the company and the partners should be considered when registering in the Social Security System:

• Partners should be registered in the Social Security System in one or other modality depending on:

• Their percentage of shares

• Their position of administrators or not administrator

• Their labour relationship with the company

• The company should be registered in the Social Security System only if it is going to have employees, registering the workplace at the same time.

Step 14. Official Books legalization

The company must have a Minute Book and a Partners Book (which can be bought in any stationary shop) that have to be legalized in the Mercantile Register when starting the business activity.

Additionally, a Guestbook has to be legalized in the Work Inspection Office and later placed in the workplace to record any work inspection that could be carried by the Work Inspection Office.

Step 15. Other procedures

If a shop (or similar, not office) is needed to begin the business:

- The Opening License has to be requested from the City Hall.

- If any shop reforms are needed a Reforms License has to be requested from the City Hall.

If you have any doubts or need any assistance please contact FraLucca.