How To Start A Business In Spain - Globaloptimizer.com

The Spanish territory is ideal for foreigners worldwide to establish their own businesses. Cities with ideal infrastructures, global talent, and an entrepreneurial ecosystem, such as Barcelona or Madrid, are your best bet when deciding where to start. However, the steps you should take to launch your company could be clearer. That is why we created this comprehensive guide: to clear up any confusion. So get ready to learn the step-by-step process for establishing your company as an expat in Spain.

Including some videos to ensure that everything is easily understood!

Why Should You Establish Your Business In Spain Rather Than Elsewhere?

Spain has emerged as a truly European business center in recent years. Madrid, Barcelona, and Valencia are important entrepreneurial hubs that attract all elements necessary for a successful business. In that regard, the following are the primary advantages of establishing your business on Spanish soil:

Because there are too many successful startups in Spain, this attracts foreign talent and investment.
The country has good logistics and infrastructure, which can aid your business project’s success.
The country provides a large and diverse enough market for various business ideas to succeed.
Growing a business is a thrilling adventure. And Spain, with its people, food, culture, and weather, is the ideal place to embark on that journey.
The country’s business culture is ideal for making connections and succeeding with your venture.

Who Can Start A Business In Spain?

Everyone can start a business in Spain, whether a foreigner or a Spanish citizen. However, depending on your country of origin, the process may become more complicated.

The legal and constitutional steps of the business, whether you are a foreigner or not, are as follows. What’s different is the requirement to become a legal resident of the country, which adds an extra step you’ll need to take.

So consider the following two scenarios:

The procedure is simple if you are from a European Union member country. You only need to obtain your NIE and EU registry certificate before proceeding to the constitution section.
However, if you are a non-EU citizen, you will need to obtain a working visa to start your business in the country.

How To Obtain A Business Visa: Work Permit To Establish A Company

Two types of work visas can be used to complete the process: the work permit and the entrepreneur visa as a self-employed individual. So, these two permits will grant you the type of residency that will allow you to start a business.

You will select one or the other based on the specific business idea.

Entrepreneur Visa

If the business idea you want to develop is innovative and relies heavily on technology, you should apply for an entrepreneur visa. Even though the requirements are much stricter and no business idea will be accepted for residency, it offers many benefits.

The application process is faster, and you can expect a response in 20-30 days.

However, you must understand the requirements before beginning because you will need to present a very detailed business plan and demonstrate that you have the necessary skills and financing methods to ensure the company’s growth.

Self-Employed Worker Visa

Assume you want to open any traditional brick-and-mortar store, such as a cafeteria or local supermarket.

In those cases, because the project needs to be sufficiently innovative (already existing), the self-employed worker visa will allow you to set everything up (a regular work permit).

Even if the project can be something other than technological, for the self-employed worker visa application to be accepted, only some companies will be valid. How do I know what kind of business to start?

Finding The Right Business Idea

This is yet another critical consideration you must make before beginning. As previously stated, the corresponding residency card varies depending on the type of company you wish to establish. Finding the right business idea is, therefore, critical.

Furthermore, you can only start a business if you have a good idea. It simply will not work.

And now, thanks to the internet’s rise and the interconnected world it has created, opportunities abound. In that regard, consider some excellent investment opportunities in Spain.

Which Type Of Company Should You Choose? How To Do Business

Before we begin the process of forming a company, we must first determine its type. However, we need to discuss the business model or a specific project. We’re talking about its legal framework.

The Commercial Code defines the various company structures that exist in Spain. Each has distinct characteristics, and understanding their various functions is critical. We’ll only touch on the most important ones.

The following are the various business structures in Spain:

Sole Trader

The best option for small businesses is the legal process for forming one is extremely simple. One of its primary advantages is that no initial investment is required.

However, being a sole proprietor (“empresa individual”) has a significant disadvantage: there is no distinction between the company’s and your assets. As a result, you are fully liable for any debt the company may incur.

Who is this structure intended for? Painters, web designers, etc. For individuals whose work does not necessitate the use of a company, such as freelancers.

Sole Trader Taxes

You will be subject to income tax (IRPF) as a sole proprietor. This implies that you will be in charge of your tax returns on an annual basis.

Because your activities are governed by the income tax regime, using this legal structure may result in you paying excessive taxes. And this will occur if your annual earnings exceed € 50.000 – € 60.000.

So, if you expect to earn more than that, we recommend forming a limited liability company.

Sole Trader Vs “Autonomo” (Self-Employed)

There is a widespread misconception that we must address here.

We frequently mistakenly believe that “autonomo” and “self-employed” are synonymous. And it’s incorrect. Because, as a self-employed worker, you may have a work permit. However, this does not imply that the company you establish is an autonómo.

An autonómo is both a freelancer and a company administrator. On the other hand, a self-employed person or a freelancer does not necessarily administer the company.

Why are we bringing this up? Because the constitution-making process is identical. You must complete model 036 or 037, depending on the case. The form asks if you are a sole proprietor (“empresa individual”) or a self-employed individual (autónomo). You must select the former.

Limited Liability Company (SL)

This is undoubtedly the most common firm structure in Spanish territory. Why? Because of its flexibility and ease of registration, the constitution process only requires € 3.000 as a minimum capital investment.

If you anticipate earning more than 60.000€ per year, form a company instead of establishing yourself as a self-employed worker.

One of its primary advantages is that your liability is limited to the amount of capital invested. So, if you only invested € 3.000, that is the maximum amount that can be demanded of you in the event of indebtedness.

In this case, you will not pay income tax, but rather corporate tax (“impuesto de sociedades”) of 25% on your profits. Filing your VAT returns (“IVA”) is also necessary. Nonetheless, several exemptions available to you can significantly reduce your taxable amount.

As a result, we recommend hiring an accountant to handle your quarterly and annual returns. You will save a lot of money.

Stock Corporation

A stock corporation, also known as a “sociedad anónima,” is the legal structure reserved for large corporations that trade in stocks. It has a much more rigid structure, requiring € 60.000 to be established.

Its main advantage is that you can obtain external financing because the company’s shares can be purchased on the stock exchange.

Nonetheless, if you decide to go for an IPO, we recommend starting with an SL and moving to a stock corporation.

Branch Office

But what if you already have a business in another country and want to expand into Spain?

In those cases, establishing a branch in Spain is the best option. It will allow you to enter a new market while leveraging the power of your brand and systems.

If you want to open a branch of your business, you must present a notarized power of attorney and a copy of the company’s public deed of incorporation. If your country’s business law requires it, you must also present a certificate of good standing.

If you are starting and running the branch in Spanish territory, you must be a country resident.

How To Start A Business In Spain As An Expat

To begin your business in Spanish territory, you must first complete the following steps:

Obtain your NIE number.
Defining the company’s name and ensuring its validity: certificate of distinction
Obtaining a CIF or tax ID number
Opening a bank account for the company’s use
Create the shareholders and the shareholder agreement
Visiting a notary public and signing the public deed of incorporation
Getting the company registered with the tax authorities
Adding the company to the social security system

Taxation For Businesses In Spain

The type of enterprise you run determines how your business is taxed in Spain. Sole traders will pay tax quarterly at the standard income tax rate and must file a tax return at the end of each fiscal year.

Partnerships operate similarly, with each partner responsible for their income tax. The process is significantly different for limited companies. In Spain, limited companies must pay corporation tax on their worldwide profits.

New businesses can benefit from tax breaks. For the first two years, the limited companies pay 15% tax on profits up to €300,000 and 20% tax on profits above this amount. Following this period, you will be taxed at the standard rate of 25%.

Business Insurance In Spain

The amount of business insurance you’ll need varies greatly depending on the size of your company, whether you employ people and the nature and value of the assets it owns.

As the owner of any limited company, you must obtain personnel insurance to protect your employees in the event of an accident or illness. As with all insurance schemes, the levels of cover and costs vary, so it is best to seek advice from an expert broker.

If you own a business, you must have public liability insurance. This protects you against third-party claims for injuries, accidents, or property damage that occur on your watch or as a result of negligence within your company.

You will also require buildings and contents insurance. This will cover any damage to your offices, loss of stock, and theft of stock owned by your company.

Employing Staff When Starting A Business In Spain

Employment in Spain is highly regulated, so you must ensure that you are in compliance before expanding your team.

Employees in Spain typically work a 40-hour week and are paid in 14 installments per year (one payment each month, then an extra one in July and December). Employees also have the right to 30 days of vacation per year. In Spain, the minimum wage is currently €900 per month, divided into 14 payments per year.

The 8 Steps To Starting A Foreign Business In Spain

Let us go over each of the eight steps to forming your company as an expat in Spain.

Get The NIE Number

The first thing you should do as a foreigner is to obtain your NIE number. This identification number will enable you to open a bank account, file taxes, and so on. The NIE is the most important thing to have in order to operate freely in Spain.

Obtaining the NIE is a very simple process. The time it takes to obtain it depends on whether you are an EU citizen or not: it takes 3 to 5 working days for EU citizens to obtain the NIE number, and the time period for non-EU citizens varies depending on the corresponding Immigration Office.

This number can be obtained in two ways:

Do it from your home country, at the Spanish consulate.
It’s being done while I’m in Spain. Obtaining an appointment at any police station is required for this.

Names Of The Company

Once you have your NIE number, you must obtain a certificate of uniqueness. This document states that your company’s name is now available for use and in your possession. How do you get it?

Make a list of three names you would like to give your company. They must be sent to Spain’s Corporate Register (Registro Mercantil) to be checked for availability.

If any of the three are available, they will accept one of them based on the preferences you specify when submitting them. This procedure can take up to 48 hours to complete.

This will be the company’s official name, which will appear on invoices and other documents.

Nonetheless, you can request an additional name from the registry to be used in non-legal situations or purposes.

Opening A Bank Account For Your Business

You can easily and quickly open a business bank account in Spain now that you have your NIE.

Suppose you choose to form a Limited Liability Company. In that case, you must contribute 3.000€ in cash for the formation of the company, which you must have on deposit in the newly created account.

This is undoubtedly not money lost and can be applied to the firm’s daily operations.

The contribution of that amount of money results in the creation of a bank certificate proving the payment. On the actual Constitution Day, you must bring this document to the notary.

And what if you don’t have that kind of money? You can also use assets with the same value as capital. For example, you could use your computer, phone, or any other similar asset that adds up to that amount.

However, we recommend something else. Why? Because if you want to sell the company’s shares or divide the firm’s capital among the different shareholders later, it will be much more difficult than if you used cash.

Establishing The Shareholders Of The Company

At this point, you must decide how many and who will be the company’s shareholders. Furthermore, deciding who will be the company’s director is necessary.

In that sense, there are two kinds of directors.

First and foremost, we locate the corporate director (“director mercantil”). She does not require a salary or a work permit, and he must sign the company’s annual accounting once a year. Having this type of director shows that you will also need one worker under your structure, as required by Spanish law.
However, many businesses have one director who handles both corporate and operational functions, eliminating the need for an employee.

Once that is decided, you need to draught a shareholder agreement outlining each shareholder’s share percentage. This is one of the most vital steps in the process because you must anticipate future possibilities to avoid problems later on. That is why we strongly advise hiring a business lawyer.

Visiting The Notary Public To Sign The Public Deed

With all of the previously mentioned documents (NIE number, bank certificate, and Registro Mercantil certificate), you must now go to the notary to sign the public deed of incorporation. You’ll find out who the investors/shareholders and the administrator are.

You will also need to include an address.

Additionally, you must clearly define the company’s activity. Our advice is to be as open as possible, introducing all of the activities associated with what you intend to do. This is a critical step. Why? Because it will save you from having to go to the notary again in the future if you expand your business or pivot the core activity.

The notary will then register the company with the Company Registry. This procedure can take up to three weeks. Nonetheless, as soon as we sign the company formation documents at the notary, they will issue you a provisional VAT number, with which you can begin your business.

Rely on us for the entire process of starting a business in Spain. We will coordinate and represent you in the notary, obtaining all of the necessary appointments with the various legal institutions that appear among all of the steps.

Going To The Tax Agency

After obtaining the deed from the notary, you should go to the Spanish Tax Agency (Agencia Tributaria) to:

Register that documentation and have it stamped by them.
Obtain your company’s final Tax Identification Number (CIF).

Keep in mind that you will begin paying taxes as soon as you begin your activity.

Getting Your CIF (Tax ID Code)

You must register your company with the tax authorities. That is why you must request the CIF of the company. So, in a nutshell:

To begin, go to the tax agency’s website and download the appropriate application form.
Then you fill out that form.
You schedule an appointment with your local tax agency to present it, along with your NIE.

An EORI number is required for import/export within the EU. In most scenarios, it is assigned automatically when you register the company, but if you still need to, you must apply for it.

Registering With Social Security

Finally, visit your local social security office to register your newly established business.

Keep in mind that registering as a sole trader is subject to a separate regime known as RETA. You must bring the 036 or 037 forms, your NIE, passport, and the IRPF form to your appointment.

Then you’re ready to go!

Useful Resources

Final Words

This is a guide for expats looking to start a business in Spanish territory. You will go through eight steps to establish your company, which can be tedious at times. Not only are we discussing delicate steps and documents (for example, the shareholder agreement), but you must also ensure that you keep up with your tax obligations.