Thanks to its reliable legal system and strong economic growth, Spain has emerged as one of the most attractive countries in Europe in which to start a business.
Spain recorded significant economic growth throughout 2017, making it one of the Eurozone’s standouts for foreign investors. In fact, the country’s turnaround has been labeled as one of the most impressive in Europe.
It’s also a popular market for foreign property investors, frequently included on lists of the best places to buy property abroad.
There are several legal structures available for foreign investors interested in a new company in Spain. These range from simple sole trader entities to the more popular limited liability company option.
Below, we’ve listed the most common company legal structures for foreign investors in Spain, as well as short descriptions of the advantages and unique characteristics offered by each option.
Sole Trader
Operating as a sole trader is the simplest way to start a business in Spain. As a sole trader, you don’t need any minimum amount of share capital. This means that you can start a business with almost no initial costs, other than those required to establish operations.
Foreign investors interested in becoming sole traders in Spain will need to obtain a Numero de Identification de Extranjeros (NIE). Non-EU citizens also need to have a Spanish residence visa and a self-employment work permit.
The biggest advantage of operating as a sole trader is simplicity — unlike other company types, starting a business as a sole trader is very straightforward and inexpensive. However, it’s also a potentially risky option, as sole traders have unlimited personal liability for company debts.
Because of this, sole proprietorship is usually chosen by business owners with a limited initial budget.
Partnership
Spanish businesses can also be formed as a partnership, or sociedad civil. Like in most other countries, partnerships in Spain involve two or more business partners who all contribute cash, labour, property or other items of value to the business.
Similar to a sole proprietorship, business debts in a partnership are the liability of the business partners. There is also no minimum investment for this type of business, allowing a partnership to be formed at little cost.
Partnerships have many of the disadvantages of sole proprietorships — mainly, total liability for the business’s debts — but offer the advantage of being cheap and easy to form for two or more people interested in going into business together.
Limited Liability Company
Spain also offers limited liability companies (known as Sociedad de Responsabilidad Limitada), which serve as a legally separate entity from their shareholders. The Spanish S.R.L., or limited liability company, is quite similar to a private limited company in the UK.
Opening a limited liability company is the most popular option for foreign investors interested in starting a business in Spain. Incorporation costs are reasonable and the process is fairly quick, meaning you can be up and running and “in business” without much of a delay.
The biggest advantage of a limited liability company is that you, as a shareholder and investor, can’t be held personally liable for the company’s debts. By law, there is a minimum investment of €3,000 for the process of opening a limited liability company in Spain.
Other Company Types
Spain offers several other company formation options for investors and entrepreneurs. These include the Sociedad Limitada Nueva Empresa, or new enterprise limited company, which has different reporting requirements from a typical limited liability company.
Larger businesses can also incorporate as a public limited company in Spain, although this type of business structure is — like elsewhere in the world — highly regulated and generally only used by large corporations.
Finally, some businesses in Spain form as co-operatives, or Sociedad Cooperativa. Like public limited companies, the co-operative model is typically only used by larger organisations with a significant workforce.
