5 steps to set up a limited company in spain

5 steps to set up a limited company in spain

Setting up a limited company in Spain can be a challenging process for those unfamiliar with the necessary requirements and procedures. 

The Limited Company (“SL“) is one of the most commonly used types of commercial companies in Spain. Setting up an SL may seem complex, but all that is needed is to follow the correct procedure. 

In this article, I will provide a summary of the five key steps you need to follow to set up a limited company in Spain. 

What is a Limited Company? 

The Limited Company, formally known as the Limited Liability Company (“SRL“), is a capital company, that is, a legal fiction for commercial purposes with its own legal personality in which each partner is liable for its responsibilities up to the amount contributed to the capital. Thus, and although there may be personal liabilities in case of negligent or fraudulent acts, partners can protect their personal assets from the debts assumed by their business. 

SRLs can be formed by a single partner, without any maximum limit, regardless of whether the person is physical or legal. When it is created by a single person, we would be in the presence of a Single-Member Limited Company. 

The essential steps to set up a Limited Company are as follows:

Reservation of the company name 

The first thing you need to do is choose a name for your limited company and check if it is available. This step is what starts the constitution of your company, as you need to know what it will be called for the rest of the procedures. 

Every Limited Company must have a name or trade name. This name must not coincide with any other registered name. Therefore, to set up an SL, you need the Negative Certificate of trade name, a document that certifies that the chosen name has not been registered by another company. To obtain it, you must request a certificate through the Central Mercantile Registry indicating whether the name is available. 

In your request, you can identify up to five possible names, ordered by preference, which will be compared to confirm that there is no risk of confusion with existing companies. The Central Mercantile Registry will approve the trade name reservation of the first of those five that is free and has no conflicts. 

This reservation has a maximum duration of three months and can be renewed for another three months. Once these six months have elapsed without completing the process, you must request it again.

Deposit of the share capital 

As it is logical, to set up a company, you need to have liquidity. The limited company in Spain requires a minimum share capital of 3,000 euros. 

Although it is true that there is the possibility of setting up companies for one euro, it is not something that we recommend except in exceptional cases. You can read more about the reasons in this other article. 

The capital can be contributed in cash (that is, in cash contribution) or by other movable assets (vehicles, computers, machinery, tools, etc.) or real estate (premises, housing, etc.) that have a value equal to or greater than 3,000 euros (that is, non-cash contribution). 

To be able to deposit this capital, you must have a bank account opened in one of the entities authorized by the Bank of Spain. This bank account will be necessary to receive the share capital and can be used later to manage the company’s financial operations. 

This could easily be the first step, but keep in mind that to open the account in the name of the new company, you will need to provide the previous certificate with the name. 

You should bear in mind that the deposited capital will be blocked until the company is formalized and the bank receives all the necessary documentation. Generally, the following documents are usually required: the company deed, the registration certificate from the Commercial Registry, and the company’s tax identification number (NIF); as well as any document that proves the identity of the company representatives, such as the National Identity Document (DNI) or passport, and their contact details.

It is important to note that each bank has its own requirements and procedures for opening a bank account for a limited company. Therefore, it is recommended to compare different options and choose the one that best suits the needs of the company.

It must be proven what capital has been contributed and in what percentage or amount each partner is responsible for. The way to prove it will be through a contribution certificate issued by the bank, which we will provide along with the rest of the documentation.

Drafting the Bylaws

The Bylaws are the main document of the company. This document contains all the essential data (company name or corporate name, purpose, registered office -which must be in Spain-, share capital, number of shares, etc.).

This step is very important to successfully create the company, as its content is highly regulated and must be approved by the corresponding Commercial Registry.

In addition, good Bylaws will be crucial for the proper survival of the company, as they establish the foundations and regulate the way in which the company will be managed (administrative body, holding of shareholder meetings, etc.).

Therefore, it is recommended that this document be drafted by a lawyer or notary.

Public Deed

The deed of the company is a legal document that gives birth to the legal personality of the company. This document, generally prepared by a notary, collects in a single element all the aforementioned elements, from the company’s bylaws to the certificates, as well as the identity of the founding partners that make up the company and the details of the distribution of their shares.

The public deed of the limited liability company is the fourth and penultimate step in the process of setting up a limited liability company in Spain. Although, as we mentioned, at this point it can be understood that the company already exists since it is what gives it authenticity and legal validity from the signature before a public notary.

To formalize the public deed of the limited liability company, certain requirements must be met, such as having the company’s bylaws and share capital fully paid into the company’s bank account. In addition, the identity documents of the founders and legal representatives of the company must be presented. The notary must verify the identity of the founders and legal representatives of the company and verify that the deed of the limited liability company meets all legal requirements. After verifying all the documents, the notary will proceed to sign the deed.

Therefore, it is essential that all founding partners go to the Notary to sign the deed of incorporation, having provided the following documentation:

• Certificate of corporate name.
• Certificate from the bank proving the contributions.
• Bylaws.
• ID card of each partner (original)*.

* If any of the partners are not of Spanish nationality, they must have a Tax Identification Number (NIF), whether they are individuals or legal entities. In addition, if any foreign individual is going to participate in the administrative body, they must also have a Foreigner Identification Number (NIE). This is something to keep in mind at the beginning of the process, as obtaining them can extend the deadlines and must be managed prior to signing the deed.

Once the deed has been signed by the notary, it must be registered with the Commercial Registry. Registration in the Commercial Registry implies the official registration of the company and the issuance of the registration certificate, which proves the legal existence of the limited liability company.

Company Registration 

Company registration is a critical step in setting up a limited company in Spain. Once you have prepared the company deed, you must submit it to the Mercantile Registry for registration.

Company registration also requires providing detailed information about the founding members, the company’s share capital, and the company’s articles of association must be presented in writing, signed by all founders, and notarized. This means delivering the deed for review and validation by the corresponding Registrar, who will confirm that it complies with all legal requirements.

It is important to note that the registration process can take several days or even weeks, depending on the workload of the Mercantile Registry. Registration also requires a registration fee, which varies depending on the location of the Mercantile Registry office.

Once the company is registered, a registration certificate will be issued, certifying the legal existence of the limited company, which will be attached to the end of the deed. This certificate is an important document that you must present in any procedure related to the company, such as opening bank accounts and applying for licenses and permits.

In summary, company registration is a fundamental step in setting up a limited company in Spain. This process publicly certifies that the company is legally constituted and meets the legal requirements to operate.

Bonus track – Other necessary procedures, licenses and permits

Obtaining a Fiscal Identification Number (NIF) Once your company is registered, you must obtain a Fiscal Identification Number (“NIF”). Normally, a provisional NIF document valid for 6 months will be attached to the deed signed before the notary. To formalize the assignment of the NIF, you must submit the registered Deed to the Tax Agency office of the company’s fiscal domicile. This number is a requirement for your company to conduct commercial transactions and file taxes.

In addition, depending on the nature of your company, you may need to obtain additional licenses and permits. For example, if your company is engaged in alcohol sales, you will need an alcohol sales license. If your company uses chemicals, you may need environmental permits.

Conclusion 

Setting up a limited company in Spain is a rigorous process that requires time, money, and effort. However, with due diligence and by following the steps outlined above, you can create a legally constituted company ready to operate. It is important to seek legal and accounting advice to ensure compliance with all legal and tax requirements.