Foreign self-employed individuals or expatriate non-residents also require a deed of incorporation to formalise the establishment of a company in Spain. For example, an Australian citizen who moves to Barcelona and wishes to set up a business must comply with various legal requirements. We discuss these below.
You will need to take into account notary fees, administrative charges and the minimum share capital required to incorporate the company.
At Taxmind, we assist our international clients, often taking the lead throughout the entire process, such as drafting and preparing the company’s articles of association.
Documentation required to set up a company in Spain
The bureaucratic procedures involved in starting a business in Spain are necessary, mandatory and, yes, generally slow and somewhat cumbersome. Setting up a company is no exception. We will be required to comply with and submit certain documentation, which we detail below.
One of the most important: the company’s articles of association.
What is meant by a company’s deed of incorporation
The deed of incorporation acts as the foundation for the establishment of any company in Spain. This document, which must be executed before a notary, confers legal personality on the company, enabling it to act legally.
As we can see, the deed sets out vital details such as the partners’ details, the corporate purpose, and the distribution of share capital. It provides a legal framework that protects both the founders’ rights and the obligations they must assume.
Company incorporation document
The incorporation document can take various forms depending on the structure of the company. Generally, a standardised format is used which highlights the key points of the deed. Practical examples include templates detailing the essential elements that must be included, such as the identification of the partners and the capital contributed.
Detailed example of a company incorporation deed (suitable for any type of company)
A detailed example of a company’s memorandum of association could well be as follows:
Let’s imagine an Australian citizen named John, who moves to live in Barcelona. He decides to set up a limited company dedicated to the sale of sustainable products. His articles of association would include the following points:
- Identification of the partners: John Smith, with an Australian ID number.
- Company name: “Sostenibilidad Barcelona, SL”.
- Corporate purpose: marketing of organic products.
- Minimum share capital: €3,000, contributed in cash.
- Registered office: Calle de Ejemplo, 123, Barcelona.
- Articles of association governing the operation of the company.
In this way, our fictional friend John would now have his company up and running in our country. We can see that this example illustrates how each section of the deed must be treated with care and rigour, ensuring that all legal requirements are met to successfully establish John’s new company in Spain.
Types of companies and the most suitable legal form for expats
Choosing the right legal form for expatriates wishing to set up a company in Spain must be carefully considered and executed. What options are available? Let’s find out.
Limited liability company (SL) and its characteristics
The limited liability company (SL) is one of the most commonly used legal forms for entrepreneurs in Spain. This structure is characterised by the limited liability of the partners, who only risk their contribution to the share capital.
Based on our extensive experience as an international consultancy in Barcelona, this type of company is the most suitable for the majority of expatriates seeking to manage their financial risks.
Reasons for this recommendation:
- The minimum share capital required to set up an SL is €1, but in practice, it is advisable to establish a capital of at least €3,000 to ensure the viability of the business.
- An SL can be owned by a single shareholder, which makes it easier for individual entrepreneurs to set up their business.
- The procedures for setting up an SL are relatively simple and quick, allowing expatriates to start their business within a short period of time.
Public limited company (SA): requirements and advantages
A public limited company (SA) is another option that expatriates may consider, particularly if they have plans to expand or attract investors. It is more complex than the previous option.
This type of company is distinguished by its ability to issue shares and raise capital from a wider range of shareholders.
- The minimum capital required to set up an SA is €60,000, which can be a higher barrier to entry compared to an SL.
- At least 25% of the capital must be paid up at the time of incorporation, which ensures an initial commitment from the founders.
- The SA allows for greater flexibility regarding the entry and exit of shareholders, which may be attractive to international investors.
Other legal forms available to new entrepreneurs
There are other, less common legal structures that may suit the needs of expatriates.
Limited partnership
In this model, partners with unlimited liability are combined with others whose liability is limited to their capital contribution. It is suitable for those seeking a more flexible structure.
Employee-owned company
This structure allows employees to also be owners of the business. It is particularly suitable for expatriates planning a business in which they will actively participate as both employees and partners.
Self-employed
For some expatriates, operating as a self-employed person may be the simplest and quickest option, allowing them to avoid formalities such as the incorporation of a company. However, liability here is unlimited, meaning that personal assets may be at risk – a tricky aspect that must be taken into consideration.
When weighing up these options, each legal form must be analysed in light of business objectives, available capital and the level of risk one is willing to assume. Each structure has its own advantages and legal implications that expatriates must carefully evaluate before making a decision.
Essential content of a company’s articles of association
The articles of association must include certain fundamental elements that ensure their legal and operational validity. We explain them below.
☑️ Company name and registered office
The company name refers to the name by which the company will be identified. This name must be unique and specific, avoiding confusion with other existing entities. To check its availability, a Certificate of No Objection to the Company Name must be requested from the Commercial Register.
On the other hand, the registered office is the company’s legal address. It must be located in Spain and is where official notifications relating to the business activity will be received.
☑️ Corporate purpose: definition and legal limits
The corporate purpose describes the activities the company will carry out. It is essential to define this clearly, as it will delimit the scope of the company’s operations. It must be lawful and comply with current regulations, and it is recommended to avoid overly broad descriptions that could lead to misinterpretation.
If activities are carried out outside the scope of the stated corporate purpose, legal and administrative problems may arise.
☑️ Minimum share capital and methods of contribution
The minimum share capital is the amount of money or assets that the shareholders must contribute to set up the company. For a Limited Liability Company (SL), the minimum capital is generally €3,000, whilst for a Public Limited Company (SA) it is €60,000, of which at least 25% must be paid up at the time of incorporation.
There are various forms of contribution, which may include cash, movable or immovable property, and intellectual property rights.
☑️ Articles of association: rules governing internal operations
The articles of association are a key part of the memorandum of association, as they set down the rules governing the internal functioning of the company. These documents must include aspects such as the organisational structure, the rights and duties of the partners, as well as decision-making procedures.
The clearer and more concise the articles of association are drafted, the less likely it is that conflicts between shareholders will arise in the future. They are invaluable in ensuring the smooth running of the company.
☑️ Management and representation: appointment of directors
The articles of association must specify how the company will be managed. Directors must be appointed, who will be responsible for day-to-day management.
There are various structures, such as a sole director, joint and several directors, or joint directors, and each has different implications in terms of liability and decision-making.
Procedure for formalising and registering the memorandum of association
The process of formalising and registering a company’s memorandum of association is one of the most significant steps in the entire process of incorporating a company. If we want it to begin operating legally, it must be granted legal personality and comply with current Spanish regulations.
The first stage of the procedure is the signing of the deed before a notary. This is a mandatory and highly significant step. Once the notary has verified the identity of the founding partners and officially attested to their intention to incorporate the company, the way is cleared for the company to receive official approval.
Costs involved
The costs of the notarial signing can vary, but generally range from €300 to €700, depending on the complexity of the deed and the notary’s fees (not including the drafting of the deed by the notary, if required).
☑️ Submission of Form 600 and handling of property transfer tax
Subsequently, Form 600 must be submitted; this is a document required to manage property transfer tax and stamp duty (ITP-AJD). This is a procedure that formalises the tax exemption for company incorporation.
It is necessary to comply with the current regulations governing this tax, which usually varies depending on the capital contributed and the autonomous community where the incorporation takes place. This form can be submitted online or in person, depending on the entrepreneur’s preference.
☑️ Registration with the Commercial Register
Once the deed of incorporation has been signed and Form 600 has been submitted, the next step is to register the company with the relevant Commercial Registry. This procedure confers legal personality on the company, enabling it to operate legally.
The processing time for registration is usually around 15 working days from the submission of the deed, although this may vary depending on the registry’s workload. The necessary documentation includes the deed of incorporation, proof of tax payment and the certificate confirming that the company name is not already in use.
☑️ Obtaining the definitive Tax Identification Number (CIF) from HM Revenue & Customs
Finally, following registration with the Commercial Registry, it is necessary to apply for the definitive Tax Identification Number (CIF) from the Tax Agency. The company requires this number to issue invoices and carry out commercial activities.
The provisional CIF is obtained during the incorporation process, but it is essential to apply for the definitive one in order to operate fully.
This procedure can be carried out in person or online. Usually, the Tax Agency issues the definitive CIF within 5 to 10 working days. The required documents include the application form and a copy of the deed of incorporation, as well as other forms ensuring compliance with tax obligations.
Legal prerequisites for company incorporation
The first step in incorporating a company is to choose a name that identifies it. This name must be unique and cannot match that of other already registered entities.
To confirm availability, a certificate of non-existence for the company name must be requested from the Central Commercial Register; this process prevents potential future conflicts and ensures the company has its own distinct identity in the market.
☑️ Determination of share capital and shareholders’ contributions
Once the name has been chosen, the share capital must be decided, which varies depending on the type of company to be incorporated.
In the case of limited liability companies (SL), the minimum capital is €1, although it is advisable to contribute at least €3,000, whilst public limited companies (SA) require a capital of at least €60,000, of which 25% must be paid up at the time of incorporation.
Shareholders’ contributions may be made in cash or in kind, and must be clearly defined in the memorandum of association.
☑️ Drafting and content of the articles of association
Next, importantly, the drafting of the articles of association. These will govern the internal functioning of the company.
The articles of association must include information on the company’s corporate purpose, its duration, its management structure and the regulation of relations between shareholders. They must, of course, reflect the expectations and responsibilities of all members involved, as they will serve as a guide for the company’s operations.
☑️ Obtaining the provisional tax identification number (CIF) and its implications
Following this, we will obtain the provisional Tax Identification Number (CIF), which is necessary to commence the company’s business activities.
We must apply for this code at the Tax Office, a mandatory step before proceeding with other administrative procedures. The CIF allows the company to issue invoices and manage its accounts formally. Bear in mind that, without this document, you cannot operate legally in the market.
Tax and administrative aspects for expatriate companies
The deed of incorporation of a company, like the incorporation process itself, requires an expatriate to have a thorough understanding of the tax and administrative regulations that must be complied with.
What tax obligations will the expatriate have?
The new entrepreneur will face certain tax obligations that they must be fully aware of. We are referring to:
- Corporation Tax: Companies in Spain must pay tax on their profits via Corporation Tax, the standard rate of which is 25%. This tax applies to the taxable income earned by the company.
- VAT (Value Added Tax): Most commercial activities are subject to VAT, which applies to goods and services sold. It is crucial to register as a taxpayer and submit the relevant returns quarterly.
- Pay-as-you-earn deductions and advance payments: If the company employs staff, deductions must be made from salaries, which are paid to the Tax Agency. Advance payments must also be made if the company carries out activities that generate deductions.
Company registration and its importance for legal identity
Registration with the Commercial Register confers legal personality on the company. Without this registration, the company cannot operate legally. The process involves registering the deed, obtaining the company number and publication in the Official Gazette of the Commercial Register (BORME).
Once the deed of incorporation has been signed, it must be submitted to the Commercial Registry to formalise the company’s existence. Once registered, the company is assigned a number that identifies it legally. After that, all that remains is to wait for the company’s incorporation to be published in the BORME, which ensures transparency and access to information for third parties.
Opening bank accounts
To do this, banks in Spain normally require the following documentation to proceed:
- Deed of incorporation.
- Provisional Tax Identification Number (CIF).
- Documentation relating to the partners.
Approximate costs for incorporating and setting up a company
As a rough estimate, you would first need to cover the notary’s fees. Signing the deed of incorporation before a notary usually costs between €200 and €500, depending on the complexity of the document. Next, registration with the Commercial Register, which usually costs between €100 and €200.
Consultancy and management services can range from €500 to €1,500, depending on the procedures and the complexity of the case, and, finally, the minimum share capital required depends on the type of company, being 1 euro for limited liability companies and €60,000 for public limited companies.
Case study: setting up a business by an expat in Barcelona
Let’s imagine David, a young Australian who has decided to move to Barcelona in search of new business opportunities. With a background in graphic design and several years’ experience working in agencies, David plans to set up his own design and branding company. His aim is to establish himself as an entrepreneur, take advantage of the opportunities the city offers and contribute to the local community.
Upon his arrival, David begins to research the requirements for setting up his business in Spain, focusing on the articles of association for a company.
To set up his business, David evaluates various legal options. After consulting with local experts, he opts to form a Limited Liability Company (SL), as this provides a straightforward way to limit his personal liability. The steps he follows in this process are as follows:
- Apply for a Certificate of No Objection to the Company Name from the Central Commercial Register to ensure that his company name, ‘David Design SL’, is unique.
- Contribute the minimum required capital, set at €3,000, which is deposited into a bank account in the company’s name.
- Draft the articles of association, defining the main business activity and the internal operating rules.
- Sign the deed of incorporation before a notary, who will certify the deed and compliance with legal requirements.
The costs for David in setting up his company include:
- Notary fees: approximately €300 for signing the deed.
- Company Registry: around €200 for registration.
- Obtaining a provisional tax identification number (CIF): there is no associated cost, but it does take time to process.
- Share capital: €3,000, representing an initial investment.
The entire process, from choosing the name to obtaining the definitive tax identification number (CIF), can take between two and four weeks, depending on the speed of the administrative procedures and the submission of documents.
Conclusions
Being an expatriate and wishing to formalise the incorporation of a company does not differ in form or substance from what is required of any other citizen. If you are unsure how to proceed, it is highly recommended that you seek the support of specialist solicitors and agents such as the Taxmind team. Let professionals with expertise in Spanish law handle the process of setting up a company.
As we have outlined, the process must include notary fees, administrative charges and the minimum share capital required to legally set up a company.
Whether you are a foreign national resident in Spain or a non-resident, you can count on the Taxmind team of tax advisers to guide and advise you on any administrative procedure, including the incorporation of a new company. We are at your disposal.
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