Starting a Business in Spain: Corporate Formation

Choosing the Right Structure

Embarking on a new business venture in Spain requires selecting the right legal structure to suit your needs. Each type of business entity has its own set of advantages and disadvantages, impacting your tax obligations, liability, and operational flexibility. At Salvador Tax & Legal, we provide expert advice to help you choose the best structure for your business.

1. Self-Employed (Autónomo)

What is a Self-Employed Individual?
A self-employed individual, or Autónomo, operates a business as a sole trader. This is the simplest and most flexible structure for individuals starting a business.

Advantages:

• Simpler Administration: The registration process is straightforward, and ongoing administrative requirements are minimal.
• Lower Costs: Generally lower setup and operational costs compared to other business structures.
• Complete Control: You have full control over all business decisions and operations.

Disadvantages:

• Unlimited Liability: You are personally liable for all business debts and obligations, which can pose a risk to your personal assets.
• Higher Tax Rates on Profits: Tax rates can be higher compared to those available to companies, particularly for higher income levels.

Example: If you’re a freelancer or a consultant offering services, operating as an Autónomo might be the simplest way to start.

2. Limited Company (Sociedad Limitada, SL)

What is a Limited Company?
A Sociedad Limitada (SL) is a separate legal entity with its own rights and obligations. Shareholders are only liable up to the amount of their capital contributions.

Advantages:

• Limited Liability: Shareholders’ liability is limited to their investment in the company, protecting personal assets from business debts.
• Tax Benefits: Potentially lower corporate tax rates and the ability to reinvest profits in the business.
• Credibility: Often perceived as more professional and stable, which can enhance your company’s reputation.

Disadvantages:

• Higher Costs: More complex and costly to set up and maintain compared to being self-employed.
• Increased Regulation: Subject to more stringent regulatory requirements, including annual audits and more detailed financial reporting.

Example: If you plan to employ several staff members or seek investment, setting up an SL might provide the necessary structure and liability protection.

3. Community of Goods (Comunidad de Bienes, CB)

What is a Community of Goods?
A Comunidad de Bienes (CB) is a partnership where two or more individuals or entities jointly own and manage a business. Each partner is jointly and severally liable for the business’s obligations.

Advantages:

• Flexibility: Provides a flexible structure for partners to share resources and responsibilities.
• Simplicity: Easier and less costly to establish compared to an SL, with fewer formalities.

Disadvantages:

• Joint Liability: Partners share unlimited liability for business debts, putting personal assets at risk.
• Profit Sharing: Profits and losses are shared among partners, which can lead to disagreements or disputes.

Example: A group of friends or family members starting a small business together, such as a local restaurant or retail store, might choose a CB for its simplicity and flexibility.

Choosing the Right Structure: Advantages and Disadvantages

Here’s a summary of the main advantages and disadvantages of each business structure:

Structure	Advantages	Disadvantages
Self-Employed	Simple setup, lower costs, full control	Unlimited liability, higher tax rates for high profits
Limited Company	Limited liability, potential tax benefits, enhanced credibility	Higher setup costs, increased regulatory requirements
Community of Goods	Flexibility, lower setup costs	Joint liability, potential for profit-sharing disputes

 Making the Right Choice

Selecting the right business structure depends on various factors, including the nature of your business, your financial goals, and your risk tolerance. At Salvador Tax & Legal, we offer personalized advice to help you evaluate your options and choose the most suitable structure for your business. Our team is here to guide you through the setup process, ensuring that you make an informed decision and start your business on the right foot.

Legal Information for Companies

The legal landscape of labour and mercantile law is crucial for companies operating in Spain. These areas involve a range of legal requirements and regulations that impact daily business operations, employee relations, and corporate governance. At Salvador Tax & Legal, our team of specialists provides expert legal support to ensure your company remains compliant and well-informed in these critical areas.

Labour Law for Companies

1. Handling Disputes and Claims

Labour disputes and claims can arise from various issues, including unfair dismissal, wage disputes, and contract violations. Our legal team provides support in resolving these disputes through negotiation, mediation, or litigation if necessary. We aim to achieve fair resolutions while minimizing disruption to your business operations.

2. Employment Regulations and Rights

Complying with employment regulations is essential for maintaining a positive work environment and avoiding legal issues. Our experts provide guidance on employee rights, including paid leave, working hours, and health and safety requirements. We help ensure your company adheres to all legal obligations and implements best practices in employee management.

Mercantile Law for Companies

1. Corporate Transactions and Contracts

Handling corporate transactions, such as mergers, acquisitions, and partnerships, involves complex legal considerations. Our team offers comprehensive support in negotiating and drafting contracts, conducting due diligence, and managing regulatory approvals. We help ensure that transactions are executed smoothly and in compliance with applicable laws.

5. Legal Risk Management

Managing legal risks is a key component of business strategy. Our specialists provide guidance on identifying and mitigating potential legal risks related to labour and mercantile matters. We advise on legal implications of business decisions.