From opening an office to form a partnership: What are the formulas to establish a business in Spain?

Establishing a business in Spain is simple. Not only thanks to the different types of company that are fully in line with those existing in other OECD countries.

Establishing a business in Spain is simple. Not only thanks to the different types of company that are fully in line with those existing in other OECD countries, but also thanks to a lot of different options and possibilities that can be adapted and configured to the need of the investor.

To this we must also attach a very favorable legislation on foreign investment and exchange control, which follows the line taken by the EU in this regard.

Investment models and business establishment 

Possible models of investment and business establishment for foreign investors in Spain are varied. Let's review the main models of investment alternatives in this regard:

 

  • Constitute a Spanish society with independent legal personality

Here the investor will find different types in which will take shape their investments under current Spanish legislation. Although we will review later, the most common corporate models are the public limited company S.A. and the limited liability S.L.

 

  • Entrepreneur with limited liability 

In this case, through the fulfillment of requirements for this purpose, the investor can develop their activity as an individual.

 

  • Subsidiary or permanent business establishments

In both cases, we find no independent legal personality, so that the activity and legal responsibility are always linked directly to the investor’s companies at its country of origin.

It is important to note that foreign entities whose registered office is in the so-called European Economic Area are allowed to operate in Spain under the regime of right of establishment, or also, in the freedom to provide services.

 At the freedom to provide services we will find the power granted to companies to operate from their country of origin in Spain, in any event obliged to have a representative residing in our country in certain areas (for example in the insurance field to certain insurance contracts).

 

  • Partnership with companies established in Spain

This is another option through which the foreign investor may opt for a partnership with an entrepreneur already established in Spain.

In the Spanish legal framework there are different formulas associated with this figure (Joint Venture). 

  • Temporary Business Association
  • Participation account with spanish companies
  • Economic Interest Group
  • European Economic Interest Group
  • Joint Ventures (through public limited company or Limited Partnership)
  • Joint Ventures through public limited company or limited liability

 

  • No physical business establishment and constitution of partnership or association with other companies

As we saw in the freedom to provide services (with its peculiarities) it is possible to operate in Spain without the presence of physical and legal company directly. In addition to this formula there are others that can be taken in this regard:

  • Through a distribution agreement
  • Through an agent or commission agent
  • Through a franchise

Types of commercial companies in Spain

The most common commercial companies in Spain are the following:

SOCIETY

PARTNERS

CAPITAL

RESPONSIBILITY

limited company

from one

from 60000€

capital provided

limited partnership

from one

from 3000€

capital provided

 

Options are derived from the previous one, for example a European limited company, where different companies established in different EU countries can operate as a single company for legal purposes.

We may also collect the so-called New Enterprise Limited Company, in this case a limited liability company aimed to promote the creation of new companies with some peculiarities, seeking greater flexibility in the development of business activity without changing the statutes.

We would also find the option of professional societies, societies that can become constituted from any of the forms of earlier societies, but with individual response to specific legal provisions (in addition to the rules for the social form adopted).

 

 

Other options of business establishment

Office Representatives

Let's review some of the most commonly used forms of business establishment for the investor who want to start operating in our country, in addition to the corporate possibilities already reviewed.

 

  • Branches and subsidiaries

A branch must be signed in the Commercial Register for granting public deed. Following the legislation on foreign investments, branches must have capital allocated although it is not subject to minimum quantity requirements.

Also, the branch must have a legal representative who is authorized to manage that branch. Without existing administrative or management, its operation is very similar to the business relationship with other companies to a company.

The most notable differences with the establishment of a subsidiary (in addition to those on internal management) will be those pertaining to legal certainty, as limited liability partner, or commercial or strategic derived from the tactical margins management and maneuvers , superior with respect to which has a branch. 

In any case the procedures and costs for both options are very similar. From a tax point of view, both options receive a corporate tax of 30% on net profit.

We must specify that for those branches whose head office resides in a country outside the EU with which Spain has signed an agreement. Dividends are taxed at a reduced rate of the agreement, and the return of the profits of the branch are not taxed in Spain (although there are agreements with exceptions). While, on the other hand, when the parent company resides in the EU, both return profits as dividends generally are exempt from taxation.

From the point of view of reducing overhead in the parent company, it is often more convenient and easier to consider deductible expenses for branches than for subsidiaries.

 

  • Representative Offices

We are facing a formula that does not have separate legal personality from its parent. In this way no governing bodies are required, since the performances by the representative of the office are made according to the powers given to and received from the matrix.

The activities of the representative office are limited, it can not engage in economic activities and these activities are basically focused on coordination and collaboration. The non-resident company is responsible for the debts that contract the representative office.

From the point of view of the constitution, the great advantage is that in this way large formalities are not required from the market standpoint, but are required from the point of tax, labor and current legislation view regarding working conditions and social security.

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