Spain is a prominent European country with a thriving business landscape, a growing economy, a strategic location, and vibrant markets that open the doors to highly lucrative business opportunities. The World Bank Annual Ratings placed Spain 28th among 190 economies in ease of business— sounds excellent if you’re considering starting a business here.
However, navigating the procedures, local regulations, and tax requirements can take time and effort. It may also take some time to adjust to business practices in Spain, but there is no need to worry. In that case, there is also an option to partner with an EOR and hire international employees from the country.
Whether you establish a business or partner with an EOR, begin by understanding the procedure for setting up a company in Spain! This article provides a detailed process of establishing a business in Spain and highlights the relevant documents to ease company registration. So, continue reading!
Types of Businesses to Start in Spain
You have the option to choose from a variety of business structures, each with its own legal and operational characteristics. You must research thoroughly about business entities to select the one that suits your business plan and expectations.
1. Limited Liability Company (LLC)
The LLC is a separate legal entity with limited liability for its owners (shareholders). This business structure offers limited liability and protects shareholders' personal assets from business debts.
For instance, a group of entrepreneurs jointly established an LLC to launch a new online retail platform. The structure provides liability protection, flexible management, and tax advantages while allowing them to pursue their passion.
2. Self-Employed Worker
Such a worker is an individual who works for themselves and is responsible for their own contributions to social security and taxation. They have complete control and flexibility over their work.
Suppose an individual works from home and provides translation services to various clients. They manage their business affairs, including tax payments and social security contributions.
A partnership in Spain is a business structure where two or more individuals or legal entities collaborate to manage and operate a business. You can categorize partnerships depending on shared responsibilities, profits, and losses.
For example, two friends join hands to launch a tech startup. They will share responsibilities and profits as they develop and market their innovative software product.
4. Stock Corporation
A stock corporation is a type of business structure where ownership is divided into shares of stock. It offers more flexibility for raising capital through the sale of shares.
For instance, a stock corporation specializes in pharmaceuticals. It will comprise a diverse group of shareholders who can buy and sell company shares on the stock exchange.
5. Branch Office
A branch office is an extension of a foreign company in Spain. It operates as part of the parent company and is subject to Spanish laws and regulations.
Imagine a foreign manufacturing company opening a branch office in Spain to distribute its products locally. It will adhere to Spanish regulations and laws to operate the business.
A subsidiary is a separate legal entity partially or wholly owned by a parent company. It operates independently but is controlled by the parent company.
Say there is a multinational environmental technology corporation in the United States. They established a subsidiary in Barcelona to manufacture and sell their eco-friendly products within the Spanish market. The subsidiary operates independently but is owned by the parent company.
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Advantages of Starting a Business in Spain
Is it financially worth establishing a company in Spain? It is! Spain is the land of opportunities for foreign investors planning to begin new projects. Some notable perks of starting a business in Spain as a foreigner are:
1. Stable and Booming Economy
Spain boasts a stable and steadily growing economy. It is among the largest economies in Europe and offers a flourishing marketplace for businesses to thrive. The diversified economy spans various sectors, including tourism, manufacturing, and technology, providing ample opportunities for entrepreneurs and investors.
2. International Trade Hub
Spain is at the crossroads of Europe, Africa, and America. Its strategic location positions it as an international trade hub. The open investment policies, foreign direct investment incentives, and a skilled workforce attract multinational corporations and contribute to trade growth. Spain provides access to a vast single market and regulatory harmonization, simplifying trade within the EU.
3. Robust Infrastructure and Networks
Spain harbors a modern and well-developed infrastructure, including a high-speed rail network, airports, and well-maintained roads. In fact, it scored 75.28 out of 100 for its infrastructure and logistics services, according to the Global Competitiveness Report from 2007-2021. The country offers advanced telecommunications and internet connectivity and facilitates smooth connections for international trade.
4. Simpler Procedures and Less Tax Burden
Spain has simplified business procedures and reduced bureaucratic hurdles. The country offers a competitive corporate tax rate compared to other European nations. Moreover, the Spanish Tax Agency has a computerized system allowing you to arrange the procedures online.
Steps to Start a Business in Spain
Anyone can set up a business in Spain, regardless of their nationality. The country has no distinction between domestic and foreign entrepreneurs when it comes to launching a business. The following are the steps to start a company in Spain:
1. Get the NIE Number
Apply for an NIE number at the Foreigners Office of the province where your business will be. It is an identification number required for foreign business and tax purposes in Spain. You can obtain an NIE number in two ways:
- Acquire it from your home country at the Spanish Consulate.
- Get an appointment with a police officer to receive it in Spain.
2. Define the Name of the Company
Submit a request for your company name to the Spanish Companies Registry. You can provide a list of five preferred names. Ensure your company has a unique name and does not match with existing businesses. The process will take about 48 hours.
3. Open a Bank Account
Fill out an application to open a Spanish bank account. It is designated to hold the deposited share capital (minimum 3,000 euros for some company types).
4. Establish the Shareholders
Decide who and how many shareholders will be there. Further, selecting a director is a necessary step. Craft a shareholders' agreement and define each shareholder with their precise share.
5. Draft the Articles of Association
Create the Articles of Association and outline details like the company name, objectives, registered address, share capital amount, and internal decision-making processes.
6. Sign the Public Deed
Visit a notary's office to sign the public deed of incorporation. Register the signed deed at the Companies Registry in the jurisdiction where the registered office for your business is located.
7. Register with the Tax Agency
Complete Form 036 and submit it to the Spanish Tax Administration to acquire a Tax Identification Number (NIF).
8. Obtain CIF or tax ID Number
You will receive a CIF (Código de Identificación Fiscal). It is the tax identification number for your company.
9. Register with Social Security
Enroll your company and its employees with the Spanish Social Security system to comply with social security contributions and benefits.
Processes involved in Registering a Business in Spain
Registering a company in Spain is a structured process. It involves several crucial steps to ensure legal compliance and establish your business presence in the country. Here are the essential steps to successfully register your company in Spain:
1. Choose a Legal Structure
Determine the legal structure of your company and define its bylaws accordingly.
2. Secure a Business Address
Obtain a physical address in Spain for your company's registered office. It is required for legal and tax purposes.
3. Deposit Share Capital
Deposit the required minimum share capital in a Spanish bank account designated for your company.
4. Notarize the Deed of Incorporation
Sign the deed of incorporation with all founders and shareholders before a Spanish notary public.
5. Register with the Mercantile Registry
Submit the notarized deed of incorporation to the local Mercantile Registry for official registration. It will provide your company with legal recognition.
6. Request Licenses and Permits
Apply for any necessary licenses and permits at the regional or municipal level contingent on your business activity.
7. Fulfill Tax Obligations
Register with the Spanish Tax Agency and complete tax filings to ensure compliance with corporate tax obligations.
8. Notify the Local Authority
Notify the labor authority about your intent if you plan to hire employees and adhere to labor laws.
Documents Requirements for Starting a Business in Spain
Knowing the required documents can save you time and streamline the process. Although the documents may vary based on the business structure, the standard requirements are as follows:
1. Valid Passport
A current and authentic passport is necessary to establish your identity and confirm your nationality.
A Número de Identificación Extranjero (NIE) is the tax identification number. It is essential whenever you interact with the public administration or sign a public document.
You must obtain a Número de Identificación Fiscal (NIF) when the shareholder is a foreign corporation. It helps in proper tax reporting and compliance.
4. Proof of Financial Resources
You should provide evidence of sufficient funds based on your chosen business type. It demonstrates your ability to cover investment and operational expenses.
5. Comprehensive Business Plan
You must frame a detailed business plan. Include your business objectives, thorough market research, strategies, and financial projections.
6. Work Permit Application
Apply for a work permit if you intend to work within your business in Spain. It is particularly crucial for those planning to manage and operate their companies actively.
7. Certificate of Good Conduct
You may need to present a certificate of no criminal record issued by the authorities in your home country. It helps validate your integrity and suitability for conducting business.
8. Professional Qualifications or Accreditations
Specific businesses in Spain require professional qualifications. Ensure you meet the requisites related to your field before commencing business operations.
Cost Involved in Starting a Business in Spain
Before starting a company in Spain, you must estimate the upfront and ongoing costs. The location where you plan to operate, the number of employees you hire, and the nature of your service will naturally influence the total expense.
The table below gives an overview of the associated cost of starting a business in Spain on average:
The cost of starting a business in Spain can alter based on the business structure. Consider a Limited Liability Company; it is Spain's most common business entity. In addition to the minimum initial capital of €3,000, it requires several shares in the firm. Further, you must pay an extra €1,500 - €2,000 for notary fees, certificates, trademarks, and legal fees.
Related Read:The Cost of Hiring a New Employee: A Comprehensive Guide
Setting up a Company vs. Partnering with an Employer of Record in Spain
Here is a brief distinction between setting up a company in Spain and collaborating with an Employer of Record to conduct business.
Hire Talent in Spain Compliantly
Starting a business in Spain as a foreigner can be rewarding owing to its vibrant economy and strategic location within the European Union. However, setting up a company in Spain is expensive and time-consuming. Additionally, it is not easy to navigate employment and labor laws in Spain.
Partnering with Skuad makes your expansion plans to Spain easy. With Skuad, you can easily hire and onboard employees and contractors in Spain. Our unified platform also manages multi-currency payroll, navigates taxation and ensures you stay on top of compliance, always.
Book a demo with Skuad to streamline global hiring and compliance when hiring in Spain, or around the world.
Q1. How much does it cost to start a company in Spain?
The cost of starting a business in Spain can vary. Initial share capital, number of partners, and extension of the incorporation deeds, among other factors, can influence the associated costs. For instance, setting up a limited company with €3,000 initial minimum share capital and four shareholders requires approximately €1,500 - €2,000.
Q2. Can you work in Spain as a foreigner?
Yes. You can obtain a work authorization or work permit to work as an employee for a company or as a self-employed in Spain. You must apply for a work employment or self-employed visa based on your business activity.
Q3. What is the hourly wage in Spain?
The minimum wage in Spain is known as Salario Minimize Interprofessional (SMI) and increases annually. The current rate for the domestic employees working by the hour is about €8.45 per hour worked.