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Company Formation in Spain

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Company Formation in Spain

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Company Formation in Spain

Incorporation in Spain follows this 10-stage process:

    1. Check that the company name is not already in use with the Mercantile Register. This takes 3 to 4 days and costs approximately 20 Euros.

    2. Open a bank account in which to deposit the capital and obtain certification of the deposit. This takes one day and costs approximately 500 Euros.

    3. A public deed of incorporation needs to be granted before a notary public. This takes one day and costs approximately 500 Euros.

    4. Submit Declaracion Censal de Inicio de Actividad to the Delegacion Provincial de la Agencia Estatal de la Administracion Tributaria and obtain the Tax Identification Code. This takes 1 day.

    5. Within 30 business days of the public deed of incorporation, pay Asset Transfer Tax and Legal Documented Act Tax to the tax authority. This takes 1 day and costs 1% of the capital.

    6. Submit the public deed of incorporation with the Mercantile Registry. This takes 15 days and costs approximately 170 Euros.

    7. Legalise the company books, which takes 15 days and costs approximately 90 Euros.

    8. Obtain a licence to open business premises from the town or county council. This takes between 15 days and 3 months, at a cost of approximately 350 Euros. This can be done at the same time as stage 6.

      1. Register with social security. This takes one day and can be done at the same time as stage 8.

      2. Notify the Delegacion Provincial de la Consejerea de Trabajo e Industria within 30 days of starting activities. This takes a day.

        To assume legal recognition and start any economic activity, the following are generally considered prerequisites:

          • Registration of your company name: you must apply for a certificate issued by the Central Commercial Registry confirming that the name you intend to use is not already registered

          • Apply for your Company Tax Identification Code (CIF) at the tax office

          • Deposit the capital into a bank account in the company's name: the amount of money will depend on the kind of business you want to create

          • Deed of Incorporation. The owner(s), when necessary, will need to sign the constitution deed for the business in front of a notary (someone with the legal power to witness and authenticate documents)

          • Pay the transfer tax at the tax office. Deed of Incorporation and CIF will be required. The amount to pay is 1% of the company capital share

          • Registering the company with the Corporate Registry. This needs to be done once the transfer tax is paid. Deed of Incorporation will be required

          • Formal Declaration. Needed to start the activity of the company. Filed before the Spanish Tax Office that will contain the tax system for which the company will be liable

          • The company will be accountable for the Spanish tax on economic activity. It will be requisite to enter the company at the Tax Office for this reason. The Tax Office will ask for your business specifics and credentials: description of company activity, start date of the activity, description of the business premises, etc.

          • Enrol the company at the Social Security General Treasury

          • The company director will join the autonomous workers' special system

          • It is essential that your business obtains the libro de matricula. This tome will log personnel registration, as well as the visits that labour inspectors make to your work centre(s)/office(s), etc.

          • The start or resumption of any business activity must be made known to the Regional Work Authorities Office

          • Application for an opening license at the Spanish Town Council. You will need to present the premises map and its general location, description of the business activity and receipt of local tax payment

          • Taxation books may be required. Check to see if your business requires this

          • Declare any foreign investments in Spain. Foreign investments assigned to set up a company in Spain need to be declared to the Spanish Investments Register of the Tax and Economy Ministry

            It is advisable that you obtain the services of a lawyer in Spain. It will help bypass any complications, misunderstandings or tedious red-tape. He or she will know the specifics of documentation, paperwork, etc.

            First of all you will have to decide what sort of 'structure' your business is:

            Sole Trader (empresario individual or autonomo)

            You run and own the business. You don't have to file special tax returns - just the normal IRPF (Impuesto sobre la Renta de las Personas Fisicas):

              • You will need to register to pay IAE tax (Impuesto de Actividades Economicas), even thought you may not need to pay it

              • You will also have to fill in a declaration that you are opening a business (Declaracion Censal de Iniciode Actividad)

              • You will have to register for social security

                Partnership (Sociedad Civil)

                Two or more people involved in the business who divide costs, money, equipment, management etc. Debts are also split. The business only has to be made 'official' in certain circumstances. If it is 'official' you will need to, amongst other things:

                  • Create a partnership agreement

                  • Sign the agreement before a notary

                  • Register to pay IAE tax

                    General Partnership (Sociedad Colectiva)

                    Personally owned and managed by the partners. It is a separate legal entity, but partners are still personally liable for any debts. You will need to notarise the articles of incorporation and register with the commercial registry (Registro Mercantil).

                    Limited Partnership (sociedad comanditaria)

                    There are two types of partners in this type of business; general partners (who are personally liable for business debts), and limited liability partners (who are not personally liable for debt). At least one person must be held responsible for debt.

                    Public Limited Company (Sociedad anonima or s.a.)

                    An autonomous legal entity and shareholders are not personally responsible for company debt. This type of business is highly structured, with a lot of regulation, annual audits are compulsory. All sociedades must pay company tax. You must also:

                      • Draft and notarise the articles of incorporation

                      • Have a minimum investment of 60 101.21 euros

                      • Register with the commercial registry (Registro Mercantil)

                      • Get a CIF - tax identification code

                      • Register to pay IAE tax

                      • Register with social security

                      • Obtain a CNN (proves that your business name is not already being used

                        Limited Liability Company (Sociedad de responsabilidad limitada s.r.l / s.l)

                        This is much the same as the Sociedad Anonima, but the minimum investment is less; 3 005.06 euros.

                        New Enterprise Limited Company (Sociedad Limitada Nueva Empresa)

                        This is like a limited liability company, but apparently simplified.

                        There are special naming requirements; the company name must have a registration number, one of the founders names, and the words 'Sociedad Limitada Nueva Empresa (s.l.n.a).

                        At the start, the shareholder numbers are limited to 1-5. Then, by transfer the company may incorporate new shareholders.

                        There are also the Cooperative (Sociedad cooperativa), and the worker-owned company (Sociedad Laboral).

                        You should consult with local government (Comunidad Autonoma) and a legal advisor before setting up a business in Spain. The local Chambers of Commerce offer free business plan advice (Comaras de Comercio). You should also check to see if you need any special licences.

                          Offshore Companies

                          By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

                          The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

                          • Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions

                          • Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent

                          • Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation

                          • Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability

                          Characteristics of an offshore company:

                          • Memorandum and Articles of Association

                          • Certificate of Incorporation

                          • Registered Office/Agent

                          • Shareholders / Members

                          • Directors / Managers

                          • Company secretary

                          • Statutory Register

                          • Bookkeeping

                          Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

                          What if I want to buy into a franchise?

                          Buying into a successful franchise can be a smart financial option for people looking to move to Spain. Franchising in Spain offers a much more reliable way to make money in when compared to setting up you own business.

                          For those not in the know, a franchise is an already formed business idea that you buy into as opposed to starting your own. An example of this is Dominoes Pizza or McDonalds. The benefit of doing this is, simply, buying a brand that instantly attracts customers. Additionally, the on-going franchise fee is partly reinvested in national advertising to continually draw consumers.

                          It is possible, with a franchise in Spain, that you will have access to goods at wholesale prices: with a few franchisees, there is bigger buying power when compared to your low buying power as a single unit operation.

                          Buying a franchise in Spain can give you an essential head start in business. Indeed, you are running your own business - but you won't be alone.

                          What types of franchise can I expect in Spain?

                          In Spain, you can buy a franchise in almost every area of business conceivable. Naturally, if your grasp on the Spanish language is limited, so will be your choice of franchise. Furthermore, if you are limited to an expatriate area, maybe the franchise of your choice has already been taken.

                          When considering a franchise opportunity in Spain, be careful. Just because a concept is advertised as a franchise it doesn't necessarily guarantee success. Research and check out every facet of the franchise. Indeed, talk to as many of the other franchisees already operating in Spain as you can.

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