How to establish your LLC in Spain

How to establish your LLC in Spain

The Sociedad Limitada, that is, a Limited Liability Company (hereinafter, “LLC”), is the most widespread type of corporate company in Spain. This type of company is widely used by small and medium-sized entrepreneurs who want to limit their liability to the share capital contributed, thus they avoid responding with their personal assets before the debts of their business, among other advantages.

Our foreign clients who want to establish their business in Spain often use this corporate vehicle because they consider it to be the most appropriate, for this reason, throughout this article, we will explain how to establish your LLC in Spain.

What is a Spain Limited Liability Company (LLC)?

A limited company is a type of corporate entity that has the following main characteristics:

• Minimum share capital: Euro 3,000. Which must be fully disbursed at the time of incorporation.
• Share transfer: It must appear in a public document. Generally, the shares will not be freely transferable (unless they are acquired by other partners, ascendants, descendants or companies of the same group). The Law provides a preferential acquisition right in favor of the other partners or of the company, in the event of transfer of shares to different persons from those indicated above (unless otherwise provided in bylaws).
• Partners main rights: (i) Participate in the profit’s distribution and in the equity resulting from the company’s liquidation, and (ii) Participate in social decisions and be elected as administrators.
• Corporate bodies: (i) General Meeting (shareholders), and (ii) Management Body.
• General Meeting main functions: Deliberative body, its main functions are to deliberate on the following issues:
  • Social management, approval of annual accounts and result application.
  • Appointment and separation of directors, liquidators, and, if applicable, account auditors.
  • Bylaws amendment.
  • Share capital increase or reduction.
  • Transformation, merger and split up of the company.
  • Company’s dissolution.
• Management Body main functions: Executive and representative body which carries out the company’s daily administrative management and representation with third parties. Representation shall extend to all acts included in the corporate purpose defined in the Bylaws.
• Liability: Limited to the share capital contributed.
• Dividend distribution: The dividends distribution to the partners will be made in proportion to their participation in the share capital, unless otherwise provided in the bylaws.

Benefits of starting a LLC

Among the most interesting advantages of incorporating an LLC in Spain we may highlight:

• Legal regime more flexible than Sociedad Anómina, that is, Public Limited Companies (Ltd).
• Very small minimum share capital and no maximum share capital.
• There is no minimum or maximum percentage of share capital per member.
• Possibility of providing the amount of the share capital chosen in goods or money.
• It is not necessary to assess the non-monetary contributions by an independent expert.
• No minimum or maximum limit of partners.
• Possibility of appointing Administrator with indefinite character.
• Possibility of organize the Management Body in different ways without requiring bylaws amendment.
• Possibility of setting a salary to the partners who work in the company, in addition to the participation in profits.
• Interesting taxation, based on a certain benefit volume.

Steps to start an LLC company

The steps to incorporate an LLC in Spain are the following:

1. Certificate the company’s name requested to the Central Commercial Register. The name cannot match with other already registered in Spain.
2. The share capital must be deposited on a Bank account (minimum share capital for LLC: Euro 3,000).
3. Request a provisional NIF (Tax Identification Number) for the LLC.
4. Drafting of the bylaws, which with the deed of incorporation will be raised as public by a Spanish notary. In this act, it is also necessary to provide the bank certificate where the share capital was deposited and the provisional NIF.
5. Application of the incorporation deed in the Commercial Register located at the chosen registered office of the LLC.
6. Once registered, obtaining the definitive LLC NIF.
7. Finally, completion of census procedures for tax and labor purposes (registration in Economic Activities Tax, VAT, registration in Social Security, etc.)

LetsLaw

At Letslaw we boast a professional team with expertise in commercial and corporate law who help our Spanish and foreign clients to design and build the corporate vehicle that best suits their needs, offering effective advice tailored to each profile.