Setting up a company in Spain is a process that, when well planned, can be completed within a reasonable timeframe and with controlled costs. However, choosing the right legal form and meeting all legal requirements are decisions that will have a lasting impact on the life of the company.
Limited Company vs Public Limited Company
The Sociedad de Responsabilidad Limitada (SL) remains the most widely used legal form in Spain, especially for SMEs and startups. It requires a minimum share capital of three thousand euros, offers management flexibility and limits partners’ liability to their contribution. The Sociedad Anonima (SA), with a minimum capital of sixty thousand euros, is more suitable for larger companies planning to attract external investment or list on the stock exchange.
The choice between the two forms depends on factors such as the number of partners, growth expectations, the need to attract investors and the sector of activity. In many cases, an SL incorporated quickly can be converted into an SA later when circumstances require it.
There is also the Sociedad Limitada Unipersonal (SLU) — a single-member limited company — particularly suited to individual entrepreneurs who want to separate personal and business assets without needing partners. The SLU pays Corporate Income Tax (Impuesto sobre Sociedades) on all profits, unlike a sole trader, who pays the progressive IRPF personal income tax rates. This tax difference is often the deciding factor when choosing between operating as a self-employed person or incorporating a company.
Steps for incorporation
The process begins with requesting a company name certificate from the Central Companies Registry, which confirms that the chosen name is not already in use. Next, a bank account is opened in the name of the company being formed and the minimum share capital is deposited.
The following step is signing the deed of incorporation before a notary, which includes the articles of association and the identity of the founding partners. Once the deed is granted, a provisional Tax Identification Number is requested and the company is registered at the Companies Registry in the corresponding province.
Contents of the articles of association: The articles of association are the company’s most important document, regulating its internal governance. It is essential not to rely solely on standard templates and to customise, at minimum: the corporate purpose (which should be broad enough to accommodate future activities), rules for the transfer of shares (pre-emption rights, drag-along and tag-along clauses), the rules for shareholders’ resolutions, and the management structure (sole director, joint directors, joint-and-several directors or a board). A shareholders’ agreement complementing the articles allows regulation of matters that parties prefer not to make public in the Companies Registry.
Costs and timelines
Total incorporation costs typically range between one thousand five hundred and three thousand euros, including notary fees, registry fees, administrative services and charges. The average timeline, using available electronic procedures, is between one and three weeks. Express incorporation through the CIRCE system can significantly reduce these timelines for standardized models.
The main costs are: notary fees (between 300 and 600 euros for a standard SL), Companies Registry fees (approximately 150 euros for an SL registration), advisory fees from a law firm or gestor (highly variable, from 400 to 1,500 euros depending on complexity), and Transfer Tax on corporate transactions — currently exempt for company incorporations in Spain since 2010, though this should be verified.
Self-employment as an alternative
For those starting an activity with moderate initial income, operating as a self-employed person (autónomo) may be more efficient than incorporating a company in the early phase. The main arguments for starting as a sole trader are: lower administrative cost and complexity, eligibility for the reduced Social Security contribution for new self-employed workers (the flat-rate start-up contribution of 80 euros per month for the first 12 months in 2024), and deductibility of activity-related expenses against IRPF.
The arguments for incorporating from the outset are: limited liability protection, professional image with clients and investors, the Corporate Tax rate of 23% for SMEs (25% standard) versus IRPF marginal rates that can reach 47%, and the ease of admitting new partners or investors.
Post-incorporation obligations
After incorporation, the company must register for the Business Activity Tax (IAE), Social Security and, where applicable, the intra-Community operators registry. Establishing a sound accounting and tax system from the start is an investment that will prevent future problems.
Immediate recurring obligations: The company must maintain organised bookkeeping in accordance with the Spanish General Accounting Plan (PGC) from its first day of trading. Recurring obligations include quarterly VAT returns (Modelo 303) and withholding tax returns on payroll and professional fees (Modelos 111 and 115), quarterly Corporate Tax advance payments (Modelo 202), and filing the annual accounts at the Companies Registry within one month of approval by the shareholders’ meeting.
At BMC, we support entrepreneurs and companies throughout the entire incorporation process, ensuring that every decision is made with complete information and a forward-looking perspective.
