Setting up a limited company in Spain: a practical guide

Setting up a limited company in Spain is now a fast, low-cost procedure. The decisions taken on incorporation —the capital, the management body, the articles and the shareholders' agreement— shape the company's life for years to come. This guide explains how an SL is created today, what changed with the "Create and Grow" Act and what is worth deciding carefully from the outset.

Why the SL remains the preferred form

The private limited company accounts for the vast majority of incorporations in Spain for a simple reason: it separates personal assets from those of the business and is, at the same time, flexible and cheap to maintain. Compared with the public limited company it requires fewer formalities; compared with operating as self-employed, it protects the owner's home and savings from the debts of the business, with the qualifications we will see.

Share capital after the "Create and Grow" Act

Law 18/2022 on the creation and growth of companies amended Article 4 of the Companies Act and removed the minimum capital of €3,000. The capital must be fully subscribed and paid up from incorporation. The Act maintains, however, two safeguards while the capital is below €3,000, aimed at protecting creditors:

• Allocating to the legal reserve at least 20% of each year's profit until the reserve and capital reach €3,000.
• In the event of dissolution with insufficient assets, the shareholders are jointly and severally liable for the difference up to that figure.

Initial capitalisation is therefore a matter of financial prudence rather than a mere formality: sizing it to the planned activity prevents solvency problems in the early years.

How an SL is set up, step by step

1. Negative name certificate. This is applied for from the Central Commercial Registry, which reserves the chosen name. Request several alternatives: clashes are common.
2. Drafting the articles. They define the corporate purpose, the capital, the shares and the management body. You may use standard-form articles, which are faster and cheaper, or tailored articles where the project calls for them.
3. Bank account and payment. The capital is deposited and the bank issues the certificate; alternatively you may make non-cash contributions, which should be valued carefully.
4. Public deed before a notary. The shareholders sign the incorporation. For SLs without tailored articles there is a standardised deed format that speeds up the procedure.
5. Taxes and registration. Incorporation is exempt from the capital duty heading of Transfer Tax and Stamp Duty. With the deed, the company is registered in the Commercial Registry.
6. Tax and registration formalities. Final tax identification number, tax registration return (Form 036), Business Activity Tax heading and registration with Social Security of directors and workers.

This whole route can be completed online through the one-stop shop (CIRCE), with reduced registry timescales, lower notary costs and exemption from fees in the BORME. It is the recommended route for most straightforward projects.

The decisions that shape the next ten years

Incorporation is a procedure; what really matters are the decisions you take while doing it.

The management body. Sole director, joint and several directors, joint directors or a board. The choice determines the agility of management and the scope of each director's personal liability.

The corporate purpose. Neither so narrow that it forces you to amend the articles as soon as the company grows, nor so generic that, taken from standard models, it raises objections from banks or the Commercial Registry.

The shareholders' agreement. It is not compulsory, but it is the document that prevents most of the disputes that paralyse a company: majorities, entries and exits, what happens if a shareholder leaves or dies. Signing it on day one costs a fraction of what it costs to negotiate it in the middle of a crisis.

Non-cash contributions. Contributing premises, machinery or an intangible is possible, but its valuation binds the person who makes it: it should be well documented.

How we support you at RCM Legal

In the projects we advise on, disputes rarely arise from the incorporation procedure; they arise from what was not anticipated in it. In our view, the risk is concentrated in three decisions: capitalising the company below what its activity requires, adopting standard articles that do not anticipate growth, and postponing the shareholders' agreement. It is also common to confuse the position of the shareholder with that of the director, whose tax and liability consequences differ. Resolving these questions at the time of incorporation —and not when a disagreement already exists— is what distinguishes a solid company from an exposed one.

Setting up a limited company is affordable; setting it up well is what protects the project. At RCM Legal we design a tailored corporate structure, draft the articles and the shareholders' agreement with the company's likely development in mind, and coordinate the work of the notary, the registry and the tax authorities. If you are shaping a project or are about to join as a shareholder, set out your case and we will tell you how to approach it with full legal certainty.