Setting up a Limited Liability Company (LLC) in Spain – A Guide for 2024
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Setting up a Limited Liability Company (LLC) in Spain – A Guide for 2024

Spain Limited Liability Company (LLC): formation, characteristics and benefits

A Spanish Limited Liability Company (LLC), known in Spain as “Sociedad Limitada” (SL), provides a favorable legal framework for foreign entrepreneurs due to its asset protection benefits, which shield personal wealth from business liabilities. This company type is also preferred for its administrative simplicity, low minimum capital requirement, and the credibility it establishes in the market. How to establish a Limited Liability Company in Spain? The incorporation process is straightforward, involving a series of legal and fiscal steps that will be outlined in this guide, to ensure a robust and compliant business initiation.

team of an llc company in spain walks into the office

What is a Limited Liability Company (LLC) in Spain?

The equivalent of a Limited Liability Company (LLC) in Spain is the ‘Sociedad de Responsabilidad Limitada’ (SL) or ‘Sociedad Limitada’, a type of corporate structure that offers its owners limited liability.

This means that the personal assets of the shareholders are protected, as their financial risk in the venture is confined to the capital they have invested. The LLC is the most common form of corporate entity chosen by small and medium-sized enterprises in Spain, largely due to its simplicity and the limited liability it offers.

It is governed by the Spanish Companies Act (Ley de Sociedades de Capital), encapsulated in the Legislative Royal Decree of 2010, which provides the regulatory framework for both SL and ‘Sociedad Anónima’ (SA), the latter being suitable for larger companies with a higher minimum share capital requirement.

Looking to set up an LLC in Spain? Contact Lawants for expert legal assistance and ensure your business starts smoothly and on a solid legal foundation.

Starting a business in Spain

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Minimum share capital

The inception of a Limited Liability Company (LLC) in Spain requires a minimum share capital of 3,000 Euros. This capital serves as a financial foundation for the company’s operations and a guarantee for its creditors. It is a relatively modest amount compared to other corporate forms, making the LLC an accessible option for many entrepreneurs and small businesses looking to establish a presence in the Spanish market.

Shareholders

In Spain, the formation of a Limited Liability Company (LLC) does not necessitate the inclusion of a local partner; it is open to any individual or legal entity, regardless of nationality or residence. This inclusive approach allows for a diverse range of investors and entrepreneurs to participate as shareholders, fostering a global business environment within the Spanish economy.

Share transfer

The transfer of shares in a Spanish Limited Liability Company (LLC) is a process that requires a public deed, formalized through a notary. This not only ensures the legality and transparency of the transaction but also upholds a significant level of privacy. Since these notarial deeds are not recorded in the Mercantile Registry, the identities of the LLC’s shareholders are not publicly disclosed. This framework provides a layer of anonymity, safeguarding the privacy of investors and making the Spanish LLC an attractive vehicle for those who value confidentiality in their business dealings.

Liability

The cornerstone of a Limited Liability Company (LLC) in Spain is the principle that the partners are not personally liable for the company’s debts. The LLC, as a legal entity, bears the responsibility for its obligations, committing its entire assets to meeting its debts. Shareholders’ exposure to financial risk is thus limited strictly to their capital contributions. This separation of personal and corporate liability is a fundamental aspect that underpins the appeal of the LLC structure to entrepreneurs and investors alike.

Partners’ rights

Partners in a Spanish Limited Liability Company (LLC) are entitled to a set of rights that are integral to their role as shareholders. These rights include, but are not limited to, the right to participate in the distribution of profits, the right to vote and make decisions that affect the company, and the right to information, allowing them to be informed about the company’s performance and decisions. Additionally, partners have preemptive rights to subscribe to new shares in the case of capital increases, ensuring they can maintain their percentage of ownership and influence within the company. These rights collectively empower the partners to actively engage in the company’s governance and benefit from its success.

Company bodies

The organizational structure of a Spanish Limited Liability Company (LLC) is delineated through various company bodies that govern its operation. The General Shareholders’ Meeting acts as the supreme decision-making body, where shareholders exercise their voting rights on critical matters. The management of the company can be entrusted to a single director, several directors acting jointly or severally, or a Board of Directors, depending on the size and preferences of the LLC. These bodies are tasked with ensuring the company adheres to its objectives, complies with legal requirements, and operates in the best interest of the shareholders and the company at large.

General meeting functions

The General Meeting in a Spanish Limited Liability Company (LLC) serves as the principal forum for shareholders to influence the strategic direction of the company. Its functions are pivotal, encompassing the approval of annual accounts, the appointment and removal of directors, amendments to the bylaws, and significant decisions like mergers, acquisitions (read our guide to M&A in Spain), or the dissolution of the company. It is also the platform for shareholders to exercise their right to information, discussing and questioning the management’s report, and making informed decisions about the company’s future. The General Meeting’s role is thus central to the democratic governance and oversight of the LLC.

Management body functions

The management body of a Spanish Limited Liability Company (LLC) is tasked with the day-to-day administration and strategic decision-making necessary to steer the company towards its objectives. This includes executing the resolutions passed by the General Meeting, ensuring compliance with legal obligations, maintaining accurate financial records, and managing the company’s assets. The directors or the Board of Directors, depending on the company’s governance structure, are also responsible for representing the LLC in all legal and business affairs, entering into contracts, and taking actions that drive the company’s growth and success. Their functions are critical to the operational efficiency and the long-term viability of the LLC.

Accounting

Accounting in a Spanish Limited Liability Company (LLC) is governed by stringent standards and regulations to ensure transparency and accuracy in financial reporting. These standards are in accordance with both national legislation and international accounting principles. The LLC is required to keep reliable accounting records that reflect its financial position, which are crucial for informed management decisions, tax purposes, and compliance with the Commercial Code and other fiscal regulations. The meticulous maintenance of these records is not only a legal obligation but also a critical component of corporate governance and stakeholder trust. Many opt for hiring a fiscal and tax representative in Spain.

Registered Office

The Registered Office of a Spanish Limited Liability Company (LLC) is its legal address and the hub for official communications and legal notices. It is imperative that the Registered Office is a physical location where the company can be reliably contacted. While Business Centers can provide a convenient address, they are not recommended for establishing a company’s Registered Office if the company does not possess its own offices. A more advisable approach is to domicile the LLC at the office of the company’s legal counsel or accountant. This not only ensures a stable point of contact but also aligns with the professional and legal framework within which the LLC operates..

Dissolution

The dissolution of a Spanish Limited Liability Company (LLC) is a formal process that concludes its legal existence. It can be initiated voluntarily by a resolution of the General Meeting or by mandatory causes stipulated by law, such as insolvency, the fulfillment of the company’s objective, or the expiration of the company as stated in its bylaws. Once the dissolution is agreed upon, the company enters into liquidation, where its assets are disposed of to settle debts, and the remaining assets, if any, are distributed among the shareholders. This process is meticulously regulated to ensure fairness and legality in the disbanding of the company’s affairs.

Spain Limited Liability Company (LLC): Benefits

The benefits of starting a Limited Liability Company (LLC) in Spain are numerous and cater to a wide array of business needs:

  • 100% Foreign Ownership: Spain allows for complete foreign ownership of an LLC, providing international investors with full control over their business.
  • Limited Liability: Shareholders’ personal assets are protected; they are only liable for the capital they contribute.
  • Single Administrator: An LLC can be managed by just one administrator, simplifying decision-making and operational processes.
  • EU Membership: As a member of the European Union, Spain offers access to a vast single market, facilitating trade and investment opportunities.
  • Tax Advantages: Spain offers competitive corporate tax rates and has double taxation agreements with many countries, optimizing fiscal efficiency.
  • Flexibility in Share Transfer: The transfer of shares can be done privately, ensuring discretion and maintaining the privacy of the business owners.
  • No Minimum Shareholders: An LLC can be incorporated by a single shareholder, offering simplicity for solo entrepreneurs.
  • Streamlined Processes: Recent reforms have streamlined the process of setting up an LLC, reducing bureaucracy and making it more business-friendly.

Steps to starting a Limited Liability Company LLC in Spain

Embarking on the journey to establish a Limited Liability Company (LLC) in Spain involves a series of clear and structured steps. These steps are designed to ensure legal compliance and set a solid foundation for the company’s operations:

  • Company Name Approval: Obtain a certificate from the Central Commercial Registry to verify the uniqueness of your company name.
  • Bank Account Opening: Open a corporate bank account and deposit the minimum required share capital of 3,000 Euros.
  • Deed of Incorporation: Draft and sign the deed of incorporation before a notary, detailing the company’s bylaws and shareholder information.
  • Tax Identification Number (NIF): Apply for a provisional tax identification number for the company from the Spanish Tax Agency.
  • Registration: Register the company with the Mercantile Registry and obtain a permanent NIF.
  • Social Security Registration: Register the company and its employees with the Spanish Social Security system.
  • Local Licenses and Permits: Obtain the necessary local licenses and permits for your specific type of business.
  • Compliance with Data Protection: Register with the Spanish Data Protection Agency if applicable.
  • Opening of Commercial Operations: Once all registrations are complete and the necessary permits are obtained, the company can commence its commercial activities.

Discover also how to obtain an EORI number for Spain.

Starting a business in Spain

As a leading law firm in Spain, with international, experienced and expert professionals, we understand how important it is for […]

Read More… from Starting a business in Spain

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How long does it take to open an LLC in Spain?

The duration required to open a Limited Liability Company (LLC) in Spain can vary, largely depending on the composition of its shareholders. Typically, the incorporation process can be completed within 72 hours, during which the provisional Tax Identification Number (NIF) is obtained. Following this, the formal registration of the new company in the Mercantile Registry is concluded over the next three weeks. It is crucial for clients to seek preliminary advice from their lawyer or accountant in Spain, as there are various options to consider. This professional guidance is essential to navigate the process efficiently and establish the company in the shortest possible time.

Taxation of an LLC in Spain

The taxation regime for a Limited Liability Company (LLC) in Spain is characterized by a corporate tax rate that supports business growth, particularly for startups. New companies benefit from a reduced corporate tax rate of 15% for the first two years in which they generate profits. After this initial period, the tax rate settles at the general rate of 25%. It is important to note that this taxation applies uniformly across Spain, with the exception of the autonomous cities of Ceuta and Melilla and the Canary Islands, which have their own special tax regimes. This fiscal policy is designed to encourage entrepreneurship and investment in the Spanish economy.

To understand other tax regimes in Spain read our article on the Beckham Law.

ceo of an llc in spain shakes hand with a new employee

Legislation on spanish Limited Liability Companies LLC

The legislative framework governing Limited Liability Companies (LLCs) in Spain is comprehensive and designed to ensure clarity in operations and protections for shareholders. The cornerstone of LLC legislation is Law 2/1995, which specifically addresses Sociedades de Responsabilidad Limitada (Limited Liability Companies). This law outlines the formation, management, and dissolution processes of LLCs, establishing the rights and obligations of the shareholders and directors. Additionally, the Articles of Association play a crucial role, acting as the company’s constitution and detailing the rules for its governance. These regulations ensure that LLCs operate with a clear legal structure, providing a stable environment for business activities.

When should you open an LLC in Spain?

Opening a Limited Liability Company (LLC) in Spain is particularly suitable when seeking a legal form that offers flexibility, protection, and credibility. It is ideal for small to medium-sized enterprises that desire a straightforward structure with limited liability for shareholders, ensuring personal assets are safeguarded against business liabilities. This legal form is also beneficial for foreign investors who wish to establish a presence in Spain due to its simplicity and the country’s favorable business environment. However, it is important to recognize its limitations, such as the requirement for a minimum capital investment and the potential for less investment attractiveness compared to larger entities like public limited companies. The decision to open an LLC should be aligned with the business’s strategic objectives and operational needs.

Alternatively, you might opt for setting up a non-resident company in Spain.

How Lawants can help you set up an LLC in Spain

Lawants offers expert guidance and comprehensive support to navigate the complexities of setting up a Limited Liability Company (LLC) in Spain. Our team of seasoned lawyers and economists specializes in providing personalized legal, tax, and accounting advice tailored to the unique needs of international clients. We stand out from our competitors with our innovative approach and commitment to understanding each client’s business, ensuring a seamless incorporation process. From initial consultation to the successful registration of your LLC, Lawants ensures that every legal and fiscal aspect is meticulously addressed, allowing you to focus on growing your business with confidence. Our dedication to competence, speed, and client satisfaction makes us the ideal partner for establishing your LLC in Spain.

Starting a business in Spain

As a leading law firm in Spain, with international, experienced and expert professionals, we understand how important it is for […]

Read More… from Starting a business in Spain

Find out more

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