Find out what procedures you must follow in the formation of a Limited Company in Spain (known as “Sociedad Limitada”), from the business idea, the registration of the company name and to the registration in the Mercantile Registry, also explaining how the opening of the bank account is made, the drafting of the Company Bylaws, the public deed of incorporation and the procedures of the Treasury.
What are the steps in the Formation of a Limited Company in Spain?
Although there are many reasons why you can start a company, usually, when we have an idea that we believe is viable it is because it responds to a little exploited market niche, we are experts in a certain subject and we want to create something very specific, or we create a simple business with high demand. This idea must have proven some degree of viability for your company to be profitable.
This is the first thing you must do in order to start working. It is the working document where the business idea to be carried out is developed and detailed.
There are a couple of essential things that you should take into account in your business plan:
Choice of the legal form: Limited Company (Ltd.)
At first, it is necessary to see the legal form that we choose, what minimum capital we must have, and what responsibility it implies, among other things.
You can see some types of companies in one of our Instagram posts.
Present the business initiative you want to develop, its objectives, etc.
Here the following steps should be recorded:
- Technical Description: it outlines vital details about your company, such as its product(s), mechanisms, processes, how it will work, etc.
- Geographical location: where you will develop your activity.
- Economic – financial structure.
- Legal structure.
- Organization chart.
Register the company name
The first procedure to create a Limited Company is to register the name of your company, and for this, you must go to the Central Mercantile Registry and request the negative certificate of the company name, which is the document that proves that the name chosen for your company does not coincide with an existing one. This procedure can be done online on the page of the Mercantile Registry for only 16 euros.
To obtain this certificate you must present a document with three possible names for the company, to know more about this procedure you should read our post where we explain what the company name is and how to request it.
Once the certificate has been granted, the name will be reserved for six months, although it will only be valid for three months until it is registered at the notary. In case of exceeding this period, you will have to renew it. After six months without its use, the name is available to anyone again.
Open a bank account for the Limited Company
Once you obtain the certificate, the fourth step to create a Limited Company is to open a bank account specifically for the company that you are going to set up and enter the minimum initial capital, that is, 3,000 euros, in full.
The bank will issue a certificate of said income that you must present to the notary. You usually will not be able to dispose of the money until you show in the bank the registration with the Treasury (Hacienda) and the deeds sealed by the Mercantile Registry, but from that moment you will be able to have the 3,000 euros of the share capital to use them for any expense or investment of the company.
Drafting of the Company Bylaws
The partners must draft the Company Bylaws, that is, the set of rules that will govern the company and that will later be incorporated into the public deed of incorporation.
You can do this with a lawyer or order it directly from the notary. However, this procedure has been simplified if you create a Limited Company through the PAE since simplified bylaws are also used.
There are a series of minimum elements that any Company Bylaws must contain, such as the name of the company, which must necessarily include the expression “Limited Company”; the corporate purpose or activity to which the company is going to dedicate, the closing date of each fiscal year, the registered office within the Spanish territory, the capital stock, the shares into which it is divided, the nominal value of each share and the numbering of the same, and the company’s administration system.
You can download a model of the bylaws of the Ltd. on our section of Companies and Organizations Statues Forms.
Public deed of incorporation
The signing of the public deed of incorporation of the company by all partners is done before a notary. It is a procedure prior to subsequent registration in the Mercantile Registry.
To obtain this deed, you must provide the following documentation:
- Company Bylaws.
- Negative certification from the Central Mercantile Registry (original).
- Bank certification of the monetary contribution to the Capital Stock.
- Original DNI of each of the founding partners.
- Declaration of foreign investments (if any of the partners is a foreigner).
Property Transfer Tax Settlement
The next step to create a Limited Company is the Property Transfer Tax Settlement, which with the approval of Royal Decree-Law 13/2010, of December 3, was exempt from the Tax on Property Transfer and Documented Legal Acts, in its modality of corporate operations: the incorporation of companies, capital increase, the contributions made by the partners that do not entail an increase in capital and the transfer to Spain of the effective management headquarters or the registered office of a company when neither one is previously located in a Member State of the European Union.
The Tax on Property Transfer and Documented Legal Acts is a tribute that was levied on the incorporation of the company and that had to be settled at the Treasury offices of your Autonomous Community within 30 days from the granting of the deed. For this, you must provide Form 600 duly completed, along with a simple copy of the public deed or a photocopy of it.
Procedures at the Treasury
Obtaining the Tax Identification Number
The next step in the formation of a Limited Company in Spain, after signing the deeds, is going to the Treasury to obtain the provisional Tax Identification Number (NIF) of your company, as well as labels and identification cards. For this, it is essential that you provide the duly completed Form 036, a photocopy of the signatory’s DNI, and a photocopy of the company’s deeds of incorporation obtained at the notary.
This way, a provisional NIF with a validity of 6 months, a period in which the Company must exchange it for the definitive one.
Registration with the IAE
When creating a Limited Company, you must also register in the Economic Activities Tax (IAE).
This is a local tribute that taxes the activity of companies, professionals, and artists and requires as many registrations as there are activities to be developed. To carry out the procedures for registering, modifying, or canceling this tax, it is necessary to provide Form 840 along with the NIF in the Tax Administration corresponding to the place where the activity is carried out.
For those exempt from this tax, that is, those with a turnover of less than 1,000,000 euros per year, it is only necessary to provide Form 036 of the census declaration indicating the IAE headings to which it applies.
Census declaration (IVA)
This statement details the beginning, modification, or termination of the activity. It must be submitted by businessmen, professionals, artists and all those with tax obligations. For its issuance, it is necessary to provide the official Form 036, the Company’s NIF, and the document certifying your registration in the Economic Activities Tax.
Registration in the Mercantile Registry
When creating a Limited Company, it must be registered in the Mercantile Registry of the province in which the registered office has been established. To carry out this procedure, there is a period of two months from obtaining the deed of incorporation and the following documentation must be supplied:
- Authentic copy of the deed of incorporation of the Company.
- Negative certification of the company name.
- A document certifying that the Tax on Property Transfer and Documented Legal Acts has been paid.
- Copy of the provisional NIF.
Obtaining the definitive NIF
As the last step to set up a Limited Company, you must return to the Treasury to exchange the provisional NIF for the definitive one, once the incorporation of the Limited Company has been effectively registered.
By overcoming these steps to form a Limited Company, the setting up of the same is already effective. However, in order to start an activity, it is required that you complete a series of obligations with Social Security and the City Hall of the town where you have established the social address of your company, such as registration in the Special Regime for Self-Employed Workers (RETA), the application of the employer’s number in case of going to hire workers or the application for the Opening License.
At Entre Trámites we have a team willing to help you with your company incorporation procedures and we also want to be your support when starting up, so if you need help or have any questions about the formation of a Limited Company in Spain, you can contact us or read more about our company incorporation service.