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Business creation and entrepreneurial activity developed by foreigners in Spain

The first decision that a foreign investor or entrepreneur should take before start his business in Spain is the judicial framework that will take the new activity. Know the different options presented by the legislation is relevant both for the purposes of taxation and patrimonial liability, and in relation to the foreign entrepreneur expectations about their residence in Spain.

While Spanish law provides numerous legal forms, for purposes of this article we will consider only the most widespread and, ultimately, may be more interesting from the point of view of a foreign citizen who’s beginning a new activity: Limited Company (SL), Anonymous Company (SA) and the Individual Entrepreneur.

From a commercial point of view, these three forms can be classified as to whether or not have own personality different from their partner: both the SL and the SA have a lawful personality, while the Individual Entrepreneur is a natural person and doesn’t have a distinct personality, which will impact especially in relation to his patrimony and responsibility.

However, before delving into the comparative ranking of the different lawful forms that business can take, we must add the question of residence permit and possibility to work in Spain.

On the one hand, commercial companies (SA and SL) may be established by nonresidents in Spain, while starting a business by way of as an Individual Entrepreneur, commonly known as autonomous, requires obtaining a residence permit in advance at the beginning of this activity.

Comparing legal forms

  • Individual Entrepreneur

Being a single entrepeneur can be a real advantage for small business projects: no minimum investment is required, the registration is simpler as well as the management, and to some extent, it is much more attractive from a tax point of view.

However, as we have already advanced, the foreign entrepreneur must be aware that in order to be registered as freelance, the proper authorization’s required- authorization to reside and work for on his own account. The legislation states that, among other requirements, it’s necessary to present a business project and to prove that the original investment is sufficient to finance it or that the project has support from financial institutions, to request the authorization.

Moreover, an aspect to consider is the unlimited liability of the entrepreneur. Unlike limited companies, the individual entrepreneur answers in their project activities with his present and future assets.

In short, to be registered as autonomous should be considered as an option for foreigners who decide to start a small or medium business project, establishing their residence in Spain and directing their own activity and being able to hire workers or working personally.

  • Limited Company (SL), Anonymous Company (SA)

In case that the business project requires a significant investment, whether it’s both from the point of view of the limitation of liability and protection of personal patrimony, as well as and from the perspective of the need to seek fundings, the businessman must consider to create a society.

Also, the need to create a society can be given by the conditions of the market or by the requirements of a specific industry standards or business.

The Limited Liability Company is the most widespread legal form, both in terms of simplicity formal and bureaucratic requirements such as a minimum capital requirement relatively low.

It’s the main features of this are:

  • It has its own legal personality.
  • The minimum share capital is 3,000 €.
  • It can be constituted by a single partner.
  • The responsibility is limited only up the amount of the contributed capital.

As mentioned, the Limited Company can be created by a foreigner without having residence permission. Now, it must have a Foreigner Identification Number (NIE), and may not work for his own society. Therefore, it is imperative that there’s at least one authorized person to work in Spain and can perform the tasks as required of management worker.

By the other hand, the Anonymous Company is a legal form designed for large companies. Its main advantage over the Limited Company is the free transfer of shares, which facilitates the addition of new investment partners.

The main features of this are:

  • It has its own legal personality.
  • Minimum share capital is 60,000 €.
  • May be single-owner.
  • The liability is limited only up the amount of to the capital provided.

Once the business plan is done,  and its legal form is decided, the next  steps and time periods for a foreign entrepreneur to establish a company in Spain, are:

  • Any foreign investor, without residence permit, who begins his first activity in Spain must obtain a Foreigner Identity Number.
  • The Spanish legislation states that foreigners, who for their economic, professional or social interests, maintain links with Spain, must apply for a NIE number for the purposes of identification. This will be the identifier of foreign incorporation in all documents issued or processed. Therefore, whether to acquire a commercial premises or to sign the partnership deed in the presence of a notary, the foreign businessman must have an NIE.
  • The NIE application can be done either at the Consulate of Spain or at the police station. Though the term varies depending on the province, it usually requires between 6 and 8 days.
  • Every company must have a unique name. This requires getting the name called ‘Negative Certification’– this document certifies that there is no society with an identical name as the one being created. It may take from 3 days to several weeks, in case that the requested denominations have already been used by other companies.
  • The company will also require a bank account, though it may not be operational until the company is formed, it may be useful to get a certificate of capital contributions.
  • Finally, the statutes must will be signed in the presence a notary and then, the last step remaining will be the registration and final approval of the company, so as to get tax identification number, NIF.

LAW TO SUPPORT ENTREPRENEURS

When speaking of foreign investment is impossible not to mention the changes introduced by law 14/2013 of support for entrepreneurs.

This law provides facilities for the entry and permanence in Spanish territory to investors, entrepreneurs, highly qualified professionals, researchers and workers engaged in inter-company motions.

Speaking only about investors and entrepreneurs, must indicate that they can apply for a ‘visa’ to stay and also for residence, among other cases, who make an investment of one million euros in shares of Spanish companies, acquire property by valued in more than superior value to 500 thousand euros or develop a business project of general interest.

It’s important to highlight that the investment may also be made through a legal person domiciled abroad, as long as provided it is not in an area considered a tax haven. However, in the latter case, the foreigner investors who holds the majority of voting rights and the power to appoint or remove the majority of the members of the board of the company, will be able to apply for a visa to

Moreover, as an alternative to the residence permit on their own, the law 14/2013 provides for the possibility of applying for a visa for those entrepreneurs who wish to start a business and need to carry out prior procedures to develop. Once started the activity, visa holders may apply for a residence permit for entrepreneurs that enables them to initiate, develop and manage economic activity as entrepreneurs.

The minimum requirements that this activity demands are to be innovative and to represent a special economic interest for Spain. For the assessment of the activity will count both the professional profile of the applicant, and the business plan of the project along with the added value for the Spanish economy, innovation or investment opportunities that may arise.

 

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