Starting a business in Spain

Spain is one of the world’s most robust economies by GDP, standing at fourth in the Eurozone and 15th in the world. This is in no small part thanks to its strength across a diverse range of industries, including manufacturing, automotive, financial services, chemicals and pharmaceuticals, clothing and apparel, and tourism, for which it is globally renowned. Spain is also a modern knowledge-based economy with services accounting for over 76% of its economic activity.  

The Spanish economy is also stable due to its membership of the European Union (EU), which delivers key benefits to companies operating in the country. Free movement of goods allows businesses to trade within Europe without tariffs and restrictions – and in 2023, Spain’s exports reached a record high as a percentage of GDP (at 39%), the majority of which was to its fellow EU countries. EU businesses also benefit from the stability of the single currency, transparency of taxation and business accounting rules, and simplified administration procedures including a ‘one-stop-shop’ for value-added tax (VAT) reporting for eligible businesses.  

Owing to its location, Spain has excellent connections not only to Europe, but also acts as a bridge to Africa, Latin America and the Middle East. This strategic position provides excellent access to European and international markets, facilitating cross-border trade and cooperation.

It is a position that is enhanced by excellent transport infrastructure, be that by road, air or sea, enabling businesses to ship products simply and quickly.  

As a general rule, foreign investors can invest freely in Spain without having to obtain authorisation or prior notification.

They only need to report the investment within one month, once it has been made, to the Directorate-General for International Trade and Investments for administrative, statistical or economic purposes. 

The Spanish Government offers a range of incentives and support programmes for businesses, with the aim of promoting investment, employment, competitiveness and economic growth.

These programmes include tax breaks for investment in research and development, subsidised funding for SMEs, incentives for training and skills development, and incentives for investment in specific industrial sectors.

As the fourth most populous country in the Eurozone, Spain is home to a large workforce (as well as a substantial consumer base). It also ranks sixth in the world and second in Europe when it comes to the percentage of its population studying at a higher education level.

Its universities and business schools are highly regarded and produce professionals with skills and competencies that are valued worldwide. Consider this alongside professionals who move to Spain to work, and the country has a broad and deep pool of talent for businesses to draw from.

The limited liability company, or Sociedad Limitada (SL), is one of the most popular entities in Spain. As the name implies, it provides limited liability, ensuring that shareholders are only liable for their capital contributions, while their personal assets remain separate from the business.

An SL can be formed by just one shareholder (or multiple shareholders) and needs a minimum initial capital of €3,000. This does not need to be paid up on or before company registration. The SL can be registered with €1 paid up and annually a minimum of 20% of the company profits must be set aside to contribute to the share capital until the €3,000 is reached.

The SL’s adaptability and limited liability make it attractive to both domestic and international investors seeking to establish a business in Spain. 

The Sociedad Limitada Nueva Empresa (SLNE) is a special type of limited liability company, designed specifically for small business projects. A simplified system makes it easier to set up the company and get it up and running while still providing legal status.

Between one and five shareholders can establish an SLNE, with initial capital set between €3,000 and €120,000. As with an SL, shareholders are only liable for their capital contributions while their personal assets remain separate from the business.

The Sociedad Anónima (SA) is generally suitable for large businesses or those planning to go public. It offers the ability to raise capital through the issuance of shares, which can be publicly traded if the company is listed on a stock exchange. An SA can be set up with just one shareholder, but it’s usually more common for them to have multiple shareholders.

The initial capital requirement is €60,000 and shareholders’ liability is limited to their investment in the company. The SA is often a strategic choice for large-scale operations and foreign investors with substantial financial backing.

In a limited partnership (Socieded Comanditaria), there are two types of partners: general partners (GPs), who have unlimited liability, and limited partners (LPs) who have liability up to their capital contribution. Limited partnerships must have a minimum of one GP and one LP, and there is no minimum initial capital requirement. 

A general partnership, or Sociedad Colectiva, is a structure where all partners are personally and jointly liable for the debts and obligations of the company. No minimum initial capital is required and there must be at least two partners. No special formalities are required to establish it, apart from a private contract being drawn up between the partners.

A branch office, or Sucursal, is an extension of the parent company, not a separate legal entity. It operates under the same name and business scope as the parent company and is fully controlled by it. Unlike a subsidiary, a branch office doesn’t have limited liability, making the parent company fully responsible for its debts and obligations in Spain. There is no minimum initial capital requirement although sufficient funds must be allocated for its operations. 

A representative office (or liaison office) is also an extension of the parent company in Spain. However, it is primarily designed for market research and establishing business relationships rather than conducting commercial activities. The parent company is fully responsible for the activities and debts of the representative office, and no initial capital is required as it isn’t a separate legal entity.