Table of contents
1. Paying over the odds for services in spain
All too often foreign (i.e. non-spanish) business people pay too much for services in Spain. This has been the case since Spain first became an attractive destination for Northern Europeans to settle down, and unfortunately continues today.
Attempts have been made to justify this by arguing that to provide the same service in English should give the service provider the right to charge a premium.
At Advocate Abroad we completely disagree with this attitude and work hard to ensure that our clients pay only the standard market rate for the provision of legal and accountancy services in Spain.
2. Methods of overcharging
A typical practice is to offer low set-up costs, but then charge a monthly retainer that is well over the standard rate. Sometimes clients are told that they need to create a limited company when becoming a sole-trader is much more appropriate - -and cheaper!
However, often clients are simply over-charged for basic services, and it is not uncommon for there to be a variation of more than 100% in the quotations provided for carrying out the exact same service.
Our mission at Advocate Abroad is to support English-speakers trying to build businesses and work and live in Spain. While there are plenty of mercenaries in Spain willing to relieve you of your cash, there are many more solid professionals who can provide you with the support you need to make your business in Spain prosper over the long term.
3. Limited liability
Just as elsewhere, one of the major benefits of creating a Spanish limited company is that this ensures limited liability to the owner of the company. If as a result of the operation of the company a financial liability should arise, then often this is limited to the amount of capital in the company.
As a matter of law in Spain the minimum level of capital that any company can have at any time is set at €3000 though this is sometimes disregarded by less scrupulous business owners.
One of the major drawbacks of registering as an autonomo is that you will be personally liable for any debts or losses incurred by your business and any personal assets could be at risk if your business is in financial trouble - either as a result of damages owed to a client or failure to pay due taxes and social security contributions.
4. Company name - certificado de denominación social
The first step when setting-up a limited company in Spain is to obtain a certificate that specifies that the name of the company is completely unique in Spain.
The certificate is requested from the Commercial Registry in the names of those who are going to own the company. Three proposed company names must be submitted in case one of them is already used by an
Once the certificate has been issued, it is valid for two months and then must be re-issued before being used to incorporate the company.
5. Deeds of incorporation
Once the name of the company has been confirmed as being available, then the company must be incorporated by public deed in a notary's office. This deed, known as the 'escritura' in Spanish, contains similar information to the deeds required to incorporate a company in other countries, namely:
- The identity of the Owners of the Company
- The expressed intention to create a company
- The amount of capital put in by each owner and their share in the company
- The company statutes
- The articles of administration
- The identity of the person who shall act as administrator
One of the major differences between Spain and northern European countries is the fact that the owners of a company (or their legal representatives) must each sign the deed in a notaries office and the deed is prepared by a public notary, which increases the overall cost of incorporation.
6. Incorporation tax
Until 2010 a tax was payable in Spain upon the incorporation of a limited company which amounted to 1% of the starting capital of the company. Now however this is no longer necessary and neither is is necessary to present the certificate of payment of the tax when inscribing the company in the commercial register.
7. Company registration number
On the same day that the company deeds have been signed by the owners and witnessed by the notary, a provisional company number is requested by the notary. This provisional company number is converted to a permanent number when the deeds of incorporation are lodged at the commercial registry.
8. Inscription in the commercial registry
Once the deeds of incorporation have been properly constituted, it next becomes necessary to register them with the relevant local commercial registry, known as the 'Registro Mercantile'.
This can be done either physically, or the notary may do so electronically. A charge is levied by the registry for the registration of the deeds and subsequent publication in BORME (the official publication of the Registry). These charges are normally around €175.
Finally, once the company has been properly constituted and officially registered, it is required to register for the purposes of taxation, VAT, social security and any other relevant licences that may be required as a result of the nature of the business.
Sole Trader v Limited Company
If you are unsure whether you require a limited company in Spain or if registering as an 'autonomo' (sole trader) is more appropriate, the main advantages and disadvantages of each form of business are described in the following article: Starting a Business in Spain: Sole trader vs Ltd Company.
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