Setting up an LLC in Spain is a growing trend – How to do it?

Jul 21, 2022 | Corporate Law

Businessmen and women who are interested in leveraging Spain’s opportunities are all following 1 simple trend that’s getting their foot in the door: creating an LLC.

In 2021 more than 102,135 companies were incorporated into the Spanish market, with 9 out of 10 being a Limited Company. It is the highest figure since 2016. With so many types of business structures, the LLC wins the battle as the most used one because of what it offers.

With an LLC you can quickly obtain external financing and immigration benefits as setting up a business grants you residency and work permit. We’ll cover more on this up next.

First, we want to teach you the ABC of creating an LLC in Spain and its benefits in comparison to other business structures.

What is a Limited Liability Company (LLC)?

Known in Spanish as Sociedad de Responsabilidad Limitada (SL) an LLC is a type of Limited Company inside the Corporate Companies business structure.

Although its name in Spanish includes the word “society”, its formation doesn’t require a partnership of two or more people.

A Limited Liability Company can have a sole proprietorship, meaning a single partner who has sole responsibility for all the decisions that are taken in the company.

What are the advantages and disadvantages of an LLC compared to an Autónomo?

An Autónomo is another type of commercial structure for self-employed workers in Spain. This structure does have some important advantages compared to an LLC, like having an easier process of registration than setting up a company.

But as an Autónomo, you have to bear in mind that you’ll respond with your assets to any debt or non-payment that you may generate since no legal distinction is made between company assets and personal assets. Therefore, a risk to property, savings, or personal possessions in the event of a large enough shortfall presents itself.

Whereas an LCC will always respond with the assets that have been generated through the business activity itself because it has its own legal personality that is different from that of its owner(s) or partners, and therefore the responsibility is limited to the assets of the company.

As mentioned earlier, external financing is easier to get for a limited company due to the legal status of the company. Banks or lenders consider this type of business more creditworthy than a natural person and therefore see it as a more favourable type of borrower or investment.

We cannot forget the benefits in the field of immigration that the constitution of a company implies. The constitution of a company as an incentive for the Spanish economy and a source of job creation can be an opportunity for foreigners who want to live and work in Spain legally. Through the “Self-Employed Visa” , you may request a residence and work permit that allows applicants to obtain a one-year visa, renewable 2 times for 2 more years. Consult our professionals at the Immigration Department for more information on this.

How to set up a Limited Liability Company as a foreigner?

First, the immigration steps to take.

You’ve decided to choose the LLC as the best route for your business, great! Now, where do you start?

The quick answer is: If you’re a non-EU citizen, you’ve got to apply for a Self-Employed Visa from the Spanish Embassy in your home country. You will be required to provide:

  • Business plan: it is important that this is completed with the correct information and formatting according to Spanish law.
  • Qualifications & experience: evidence that you have education and/or experience related to the project you want to set up.
  • Proof of health insurance with full coverage in Spain.
  • Personal documentation: correctly completed application form, passport with correct validity, criminal record checks, medical certification, etc.

If you’re an EU citizen the initial step is less complicated, as you will only need to register in Spain and get a NIE number. 

The NIE is essential for any fiscal transactions in Spain, such as creating a company. Applications for a NIE can be made at a processing office for foreign citizens (Oficina de Extranjeros) or at a national Spanish police station (comisaría).

Once your immigration status has been solved, you’re finally up to the fun part.

Creating the company.

  1. The process begins with the drafting and legalization of the POA (Power of Attorney) empowering CARBRAY INTERNATIONAL LAW FIRM for the execution of the complete service.

  2. Next, we’ve got to apply for the company name reservation certificate through the Mercantile Registry (process done online), and reserve the name of the future company for a maximum period of 6 months.

  3. Once we’ve reserved the name, the company has to open a bank account. The founder or founders must contribute the share capital to this bank account a minimum of 3,000€. Once the company’s share capital has been contributed, the financial institution will issue a certificate reliably proving the identity of the partners and the amount of capital contributed.

  4. The creation of the legal structure and corporate bylaws will be made, including the process for appointing an administrator, establishment of the registered office and nominal value of each shareholding, etc. Ask our experts about this.

  5. Once that is settled, then we have to coordinate with the Notary the granting of the public deed that states the incorporation of the limited company. This document will then be registered in the Mercantile Registry that corresponds to the company according to its registered office.

  6. The last step of the process is the economic activation of the company, which implies:

a. The request for the definitive CIF of the company.
b. Signing up to the Tax Administration.
d. The registration of the administrator in the Social Security.
c. And requesting the digital certificate of the company and the administrator of the company.

After this, you would have set up successfully your business which will result in setting yourself up for outstanding opportunities. To find out more about how to set up a business in Spain, get a consultation with one of our Corporate experts.