Setting up Companies

The keys to choosing your best option.

One of the main questions that entrepreneurs or future company heads have to ask themselves when they start out in a business or professional activity is what legal form the business will take. It is good advice to undertake a legal and fiscal analysis of the options and to seek a professional opinion which will allow you to make a well-founded decision.

The keys to choosing the best option for the business project are the following:

• number of partners in the business
• the type of activity undertaken
• the formalities necessary for its incorporation
• the level of liability the partners are prepared to accept
• the amount of capital available
• the economic size of the project (turnover, costs, expected investments)
• taxation associated with each type of legal entity (through Income Tax or Corporation Tax)

Legal entities have to have a minimum number of partners and minimum level of capitalization under the law, depending on the type of entity chosen. The company types most frequently chosen are Sociedad Limitada (Private Ltd Company), Sociedad Limitada Nueva Empresa (for small Private Limited Companies working in such areas as agriculture, construction and tourism), Sociedad Anónima (Public Ltd Companies), Sociedad Limitada Laboral (limited partnership involving at least 1 Spanish partner) and Sociedad Anónima Laboral (Limited Liability Workers’ Cooperative). With the coming into force of the new (2013) Law of Support for Entrepreneurs and their Internationalization, two new types of companies have been created – Limited Liability Entrepreneur and Sequentially Incorporated Ltd Liability Company (with capital requirements below €3,000)