Choosing Business Legal Structures in Spain

Posted on Nov 17, 2024 in Law & Jurisprudence

ITEM 6

A) Sole Trader

A sole trader is a person with legal standing who operates in their own name, either independently or through representatives, engaging in commercial activity. They are personally liable for all obligations with their entire property, without distinction between civil and commercial assets.

Proceedings to Acquire Legal Form:

Register with IAE (Impuesto sobre Actividades Económicas)
Register for VAT (Value Added Tax)
Declaration prior to commencement of activity
Choose personal income tax regime
Enrollment in Social Security (if hiring employees)
Legalization of official records

B) S. Merchant (Collective, Partnership, Limited, and Limited Liability)

Two types of transactions are required: Acquisition of legal personality and setup:

Draft the constitution and bylaws
Obtain negative clearance certificate from the Central Trade Register
Notarize the constitution and obtain approval
Registration in the Register of Labor Societies (for applicable companies)
Commercial Registration
Obtain tax identification code
Register for census and tax options
Registration with the economic activities tax
Register the company with Social Security
Membership and registration of workers
Membership of partners in Social Security
Formalize employment contracts
Prepare work schedule
Acquire and seal the guestbook

C) Cooperatives

Application for qualification of the statutes
Settlement of Transfer Tax and Stamp Duty
Registration in the Register of Cooperatives

D) Community Property

Drafting the statutes
Provision of public deed before a notary (voluntary)

Additional Information:

Registration with IAE: A local tax on business, professional, or artistic activities. Entrepreneurs must register before starting their activity. The registration and declaration are done using an official form from the tax office. IAE is payable by companies with a turnover exceeding €1,000,000 per year.
Declaration of VAT: A document outlining the characteristics of the local tax activity and the chosen mode. It is submitted to the tax administration for the fiscal domicile.
Declaration prior to starting the activity: Filed with the tax administration to deduct input VAT at the start of the activity. It is presented along with the VAT declaration.
Choosing the personal income tax regime: The tax on individuals’ income based on their earnings and personal circumstances.
Registration of the company in Social Security: All employers who hire staff must register with the Territorial Social Security Treasury. The application includes company identification data, the owner’s ID, and a certificate from the commercial register for companies.
High self-employed in Social Security: For individuals who perform direct personal or economic activity without employment contracts, including individual entrepreneurs.
Drafting the memorandum and articles of association: Done by a qualified professional, complying with the rules for the specific type of company. Required for companies and cooperatives, with the latter’s statutes approved by the partners’ assembly.
Notarizing the constitution and bylaws: Partners sign before a notary, approving the articles of association.
Property Transfer and Stamp Duty of the statutes: Processed at the autonomous region’s territorial delegation. The rate is 1% on equity (€3,000). Labor cooperatives have a 99% bonus on the 1%.
Registration in the Register of Industrial Societies: Only for Labor Societies, requiring an application with the memorandum of association. A certificate is issued for presentation at the commercial register.
Enrollment in the General Registry of Cooperatives: Similar to the commercial register, granting legal responsibility to the cooperative. Requires an application for registration and copies of the constitution deed.
Enrollment in the Commercial Register: Required for all except cooperatives, for public disclosure. A company has no legal responsibility until registered in the provincial commercial register.
Collection of Tax Identification Code: For the company, requested at the provincial tax office with ID, photocopies of company deeds, and the official form.
Membership and registration of workers: Mandatory for all Social Security members. The employer applies for worker membership at the Social Security Treasury with the official form and worker’s ID.
Application for opening license: Authorizes the use of premises, requested by anyone with a space, and processed by the municipality.
Open communication in the workplace: All new workplaces must be reported to the Provincial Department of Labor, providing company data and activity details.
Acquisition and sealing of the registration books and visits: All employees must acquire and seal the guestbook and paper registration at the Provincial Labor office.
Preparation of work schedule: Every company must prepare a yearly work schedule in accordance with the Ministry of Labor’s guidelines.
Drafting the contract of community property: Only for community property (SdBienes), drafted by a lawyer, including partners’ details, activity focus, and each partner’s contribution.
Purchase of premises: Done before a notary with a purchase agreement, registered in the property registry, paying 1% tax on acquisition or transfer tax for second-hand properties. Real estate tax (IBI) declaration must also be filed.

ITEM 5

Choice of Legal Form

A) Legal Requirement: Some activities have specific legal requirements or require a particular legal form, which determines the choice.

B) Responsibility of Promoters: This refers to the liability towards others, such as administration, customers, suppliers, employees, and banks. It can be:

Limited Liability: Liability is limited to the capital, property, and rights in the company’s name, not extending to personal assets. This applies to Limited Liability Companies (SRLimitada), Labor Societies, Cooperatives, and Limited Partnerships.
Unlimited Liability: Liability extends to personal assets in addition to the company’s capital and property. This applies to Sole Traders, Collective Societies, Community Property, and General Partnerships.

C) Number of Partners:

1 member: SRLimitada, S. Limited
2 partners: S. Collective, S. Partnership, S. Partnership by shares, Cooperative Bienesy C. of 2nd degree
3 partners: S. Education
Min. 1 and max. 5: SLnueva company

D) Social Capital: The contribution made by members in money, goods, or work:

S. Partnership-stock: Min. €60,000
Limited Liability S.de: Min. €3,000
SLNueva Company: Min. €3,000 and max. €120,000
S. Limited: Min. €60,000
S. Labor: Min. €3,000

E) Fiscal Aspects: Two main groups: legal forms subject to income tax (Income Tax of Natural Persons) and those subject to Corporation Tax (CT).

Sole Trader

A natural person operating in their own name through a business engaged in commercial, industrial, or professional activities.

Partners: 1
Responsibility: Unlimited
Capital: No minimum
Management Bodies: The owner
Constitution: DNI, voluntary registration in the Commercial Register

Partnership

A personal society operating under the collective name of all partners with unlimited and joint responsibility.

Partners: 2
Responsibility: Unlimited
Capital: No minimum
Management Bodies: Administrators (one partner, multiple partners, or all together)
Constitution: Public deed and registration in the Commercial Register

Partnership-Society

Consists of general partners with unlimited liability and limited partners with limited liability, engaged in commercial activity directed by the general partners.

Partners: 2
Responsibility: Unlimited for general partners, limited for limited partners
Capital: No minimum
Management Bodies: General partners
Constitution: Public deed and registration in the Commercial Register

Company Limited

A commercial company with capital divided into equal, cumulative, and indivisible shares, limiting partner liability to the contributed capital.

Partners: 1
Liability: Limited
Capital: €3,000
Management Bodies: General Meeting and one-person or multi-member administration
Constitution: Public deed and registration in the Commercial Register

New Company Limited Partnership

: A specialty of the limited partnership. It is easier and reduces the time of incorporation. N º MEMBERS: Between 1 and 5 RESPONSIBILITY: Limited. CAPITAL: 3000 to 120000 € BODIES MANAGEMENT: General Meeting and manager or council housing management. CONSTITUTION: = before.
Public: Society whose capital is divided into shares that can be transmitted freely and under the principle of limited liability and no staff members from their debts. PARTNERS No. 1 RESPONSIBILITY: Limited Capital: 60000 € Min bodies and Constitution: = before.
COMPANY LABOR Son SA or SL whose capital is mostly to workers who provide direct personaly sevicios shaped, whose relationship is laborallo indefinitely. N º MEMBERS: 3 LIABILITY: limited capital: 3000 € Min SLL SALT 60000 € BODIES MANAGEMENT: SLL, SL like the SAL, as the SA. Constitution: Public deed and registration in the Commercial Register. Registration in the Register of Industrial Societies.
COOPERATIVE: They provide their members jobs through personal effort and direct, to tiempoi whole or part, through a joint organization of the production of goods and services to third parties. PARTNERS No.: 3 RESPONSIBILITY: Limited unless otherwise hire of the Statute. CAPITAL: No E min. MANAGEMENT BODIES: General Assembly. Governing Council. Interveners. CONSTITUTION: Structure and publishes commercial registration. Registration of cooperatives.
COMMUNITY OF PROPERTY: Contract by which the ownership of a thing or undivided right belongs to several persons. 2 Unlimited No Min BODIES AND OFFICERS: All the commoners. CONSTITUTION: verbal or written contract.
CIVIL SOCIETY: Society for two or more persons are obliged to pool money, goods or industry profit-profit from each other. 2 Unlimited No Emin. All Partners = before.