Incorporation in Spain: forms of enterprise

With the founding of a company, the choice of the appropriate legal form becomes a crucial decision. Spanish law recognises different legal forms in which cost and time as well as the particular requirements of the establishment process and the scope of the liability of shareholders vary greatly.

The forms of a company can be distinguished principally by their capacity as a sole proprietor, partnership or corporation. The significant legal forms are explained below.

Sole-proprietor

A sole proprietor (empresario individual / autónomo) requires only one shareholder. This shareholder is fully accountable for his or her assets for all business-related liabilities. The process of company formation is straightforward and takes approximately one day. A minimum capital is not required.

Partnerships

A company constituted as a partnership (Sociedad Civil). To establish a partnership (Sociedad Civil), at least two partners are required. Each partner has unlimited liability with his or her private assets for any debts of the company. The company is formed solely by the conclusion of a partnership agreement. A minimum capital or an entry in the register is not required. The partnership is therefore fast and economical to set up.

The partners can give the company a separate legal entity through an agreement, notarized and authenticated and entered into the Spanish Commercial Registry.

The general partnership

The creation of a general partnership (Sociedad Colectiva) requires at least two partners. These partners have unlimited accountability with their assets for the liabilities of the company. A minimum capital is not required. To set up the company, it is necessary to establish a social contract that will be certified by a notary. Created with full legal capacity, the company is recorded in the Spanish Commercial Registry.

Limited Partnership

A limited partnership (Sociedad comanditaria simple) involves two or more partners. A limited partnership requires a general partner (socio colectivo), who has unlimited liability for the debts of the company and a limited partner (socio comanditario), who has limited liability for the debts of the company. A minimum capital is not required. The establishment occurs by a notarial deed and the registration of the company, through which the company acquires its legal personality.

Corporations

Company with limited liability (S.L.)

The most frequently created corporation in Spain is the limited liability company (Sociedad de Responsabilidad Limitada (S. L.)). This requires at least one shareholder. If there is only one shareholder, the company name must identify the company as a single shareholder company (Sociedad Unipersonal). The liability of the shareholders is limited to their contributions. The required capital is at least €3,000.00 and must be fully paid at the time of establishment. The establishment of a limited liability company requires mandatory notarization and registration in the Spanish Commercial Registry.

New Company with limited liability (S.L.N.E.)

Since 2003, there exists in Spain a special corporate form, the new Company with limited liability (Sociedad Limitada Nueva Empresa (S.L.N.E.)). A maximum of five shareholders may be present at the time of establishment and the shareholders must be natural persons. The liability of the shareholders is limited to their contributions. There is a minimum capital of € 3,012.00 prescribed and a maximum capital of € 120,202.00. In the case that the upper limit is exceeded, the S.L.N.E. is converted to an S.L.

The benefits of this special form are its speed and establishment through electronic means.

Many of the establishment arrangements are made by electronic means and Madrid and Valencia require no notary to certify the incorporation. The establishment of S.L.N.E. should be possible within 48 hours.

Joint stock company (Sociedad Anónima, S.A.)

The largest companies in Spain are joint stock companies (Sociedad Anónima (S.A.). They differ substantially from the aforementioned companies through their additional publication requirements. A joint stock company requires at least one shareholder. The liability of shareholders for company debts is limited to their contributions. The statutory minimum capital amounts to € 60,000.00, from which only 25% must be paid at establishment. The establishment requires notarial authentication and company registration.

Corporations have legal capacity only through registration with the Spanish Commercial Registry

All these corporations attain their full legal capacity upon registration with the competent commercial registry and the effects of limited liability occur only from that date.

Partnerships have short and cheap start-up phases

Partnerships in Spain are not widely used due to their lack of limitation of liability. However, unlike corporations, they have the advantage of a much shorter and cheaper start-up phase. The establishment of a business in Spain has been simplified in recent years for Spaniards, namely through numerous law amendments and reforms. Nevertheless, a local expert in international investment, familiar with the current legal and tax requirements, should not be dispensed.

Catharina Jung & Karl Lincke

For further information regarding the forms of enterprises in Spain,