Mistakes To Avoid When Incorporating A Company In Spain

Spain is an attractive country for many foreign companies wishing to establish and expand their business in Europe. However, incorporating a company in Spain can be complex and requires careful planning. 

Written by Xiomara Jiménez Rodríguez, Commercial Area. AGM Abogados

In this article we will discuss the 4 most common mistakes to avoid when incorporating a company in Spain:

1)      Not considering the steps and deadlines for the creation of a company in Spain

While it is relatively easy for a local to set up a company in Spain, the same cannot be said for a foreigner wishing to establish a business there. Thus, it is necessary to anticipate certain formalities that can be very long, especially if they depend on the public administration. You will have to resort to many service providers, both in Spain and abroad (notaries, courts for apostilles, sworn translators, banks, Commercial Registry, etc.), which, if not anticipated, could delay you setting up your company.

2)      Failure to understand the different legal forms of companies in Spain and, therefore, choosing the wrong one:

In Spain there are several legal forms for incorporating a company:

• Public Limited Company (SA).
  • Limited Liability Company (SL).
  • General Partnership.
  • Limited Partnership.

Each legal form has its advantages and disadvantages in terms of the liability of the partners, governance structure and administrative formalities. Therefore, it is important to understand the differences between these legal forms and choose the one that best suits your business.

3)      Not being informed about tax obligations in Spain and the associated costs:

Setting up a company in Spain entails costs and tax obligations. For example, it is necessary to have a minimum share capital to incorporate a company (€3,000 for an SL and €60,000 for an SA, for example). It is also important to consider local taxes, which can vary from one region of Spain to another. To avoid this pitfall, it is important to work with a local tax advisor, a legal advisor, or a competent local firm to understand the tax obligations and costs associated with setting up a company in Spain.

4)      Not working with legal counsel:

Working with a legal advisor is a key element to avoid mistakes when setting up a company in Spain. Such professionals can help you understand local regulations, tax obligations and administrative procedures. They can also help you find local partners, translate documents, and assist you in setting up your company. Failure to work with professionals can lead to costly mistakes and delays in setting up your company.

Consequently, setting up a company in Spain can be complex, but by avoiding these mistakes and, above all, anticipating them, entrepreneurs can ensure that their company is correctly constituted and that it will comply with all current regulations and, in this way, ensure that the company is ready to enter the Spanish market.