How to Set Up a Company in Spain: A Complete Guide for Entrepreneurs   

Introduction

Spain, with its vibrant culture, growing economy, and excellent quality of life, is an attractive place for entrepreneurs to set up their businesses. Whether you’re a freelancer, startup founder, or looking to scale a larger company, this guide will take you step-by-step through the process of establishing your company in Spain.  

With Freeberry by your side, you can focus on growing your business while we help with legal and administrative hurdles. 

Why Set Up a Company in Spain? 

Spain offers more than just sunny beaches and vibrant cities—it’s an increasingly attractive destination for entrepreneurs and freelancers alike. Here’s why:  

✅ Startup Ecosystem: Spain is home to over 11,000 startups, with thriving hubs in Barcelona and Madrid, making it one of Europe’s top destinations for innovation. 

✅Strategic Location: Spain’s position connects Europe with Latin America and North Africa, giving businesses easy access to multiple markets. 

✅Quality of life: In addition to business opportunities, Spain boasts an excellent healthcare system, high-quality food, and water, and a perfect climate to support your business endeavours. 

✅Supportive Business Environment: Spain has a well-established network of business incubators, accelerators, and government support systems that are aimed at helping entrepreneurs succeed. Whether you’re looking for funding, mentorship, or advice, there’s plenty of help available. 

Setting up a company in Spain goes beyond operating a business—it involves thriving in a dynamic entrepreneurial environment while residing in a country that prioritizes both work and lifestyle.  

Types of Companies You Can Set Up in Spain

When setting up a company in Spain, it’s crucial to choose the structure that best fits your business needs. Notably, in Spain there are more than 10 types of organizations, let’s take a look at the main types of companies you can establish: 

1. Sole Trader/ Proprietorship (Autónomo):  

Best For: Freelancers, independent professionals, and small business owners. 

Description: Operating as a sole trader is the simplest option for freelancers and solo entrepreneurs. As an autónomo, you’re personally responsible for your business’s financial obligations, but it’s easy to manage and quick to set up. 

Pros: Less paperwork, easy registration process, flexible management. 

Cons: Unlimited personal liability, higher tax rates at higher incomes. 

2. Limited Liability Company (Sociedad Limitada or SL) 

Best For: Small to medium-sized businesses or entrepreneurs looking to grow. 

Description: The most popular business structure in Spain, the SL protects your personal assets, meaning you are only liable for the company’s debts up to your capital contribution. It’s ideal for businesses with more than one partner. 

Pros: Limited liability, easier to secure investment, scalable. 

Cons: More paperwork and higher administrative costs than a sole trader. 

3. Public Limited Company (Sociedad Anónima or SA) 

Best For: Larger businesses or those planning to go public. 

Description: The SA structure is suited for larger companies that may want to attract significant investment or issue shares to the public. It’s also the required structure for some regulated industries. 

Pros: Ability to issue shares and raise capital, limited liability, suitable for large-scale operations. 

Cons: High initial capital requirements, complex administrative procedures, and more stringent regulations. 

4. Sociedad Cooperativa 

Best For: Individuals or companies aiming to address social issues, often operating as non-profits.  

Description: A cooperative is a company owned by its members, who share profits and decision-making responsibilities. This structure is ideal for small businesses where collaboration and equal ownership are key principles. 

Pros: Shared responsibility, democratic decision-making, flexible management. 

Cons: Lower profit potential, complex governance structure. 

5. Civil Partnership (Sociedad Civil) 

Best For: Professionals or partners in service-based businesses. 

Description: This structure allows two or more individuals to create a business partnership, sharing both profits and responsibilities. It’s commonly used by professional service firms such as lawyers, architects, or consultants. 

Pros: Easy setup, shared resources, flexible business structure. 

Cons: Unlimited liability, which means partners are personally responsible for debts.

Which Company Structure is Right for You? 

Choosing the right company structure depends on your business goals, potential growth, and how much liability you’re willing to take on. Whether you’re a freelancer starting out or an entrepreneur planning to scale, Spain offers a range of business structures to meet your needs. 

How Much Does It Cost to Start a Company in Spain? 

The price depends on many factors, what type of company you have chosen as well as the types of services you need.  

1. Registration Fees 

Cost: €60 to €300 

What It Covers: All companies must be registered with the Spanish Commercial Registry (Registro Mercantil). The registration fee depends on the legal structure of your business. Sole traders (autónomos) typically pay lower fees, while limited liability companies (SLs) and public companies (SAs) face higher costs. 

2. Notary Fees 

Cost: €150 to €500 

What It Covers: If you’re establishing a limited liability company (SL) or public company (SA), you’ll need to formalize the company’s deed at a notary. The notary fee can vary based on the company’s share capital and legal complexity. 

3. Share Capital 

Cost: 

SL (Limited Liability Company): Minimum €3,000 

SA (Public Limited Company): Minimum €60,000 

What It Covers: For limited companies, you’ll need to deposit share capital into a bank account. This amount varies based on the company type, with SAs requiring significantly more capital than SLs. 

4. Legal and Administrative Fees 

Cost: €400 to €2,000 

What It Covers: It’s common to hire a lawyer or tax advisor to handle the paperwork and ensure you comply with local laws. The fees will depend on the complexity of the business and the services you need. If you’re doing it on your own, you might spend less but professional advice can help avoid costly mistakes. 

5. Business License (Licencia de Apertura) 

Cost: Depending on the type of your business, approximate prices listed here 

What It Covers: Depending on your business activity and location, you may need a business license from the local government. The cost varies by municipality and the type of business. 

6. Ongoing Costs for Autónomos (Freelancers) 

Cost: Social Security Contributions: Minimum €230/month (may vary based on income and benefits) 

Tax Payments: Varies based on income and VAT obligations 

What It Covers: Freelancers are responsible for paying monthly social security contributions and tax obligations, which can vary depending on your income level and applicable deductions. 

7. Accountant and Tax Advisor Fees 

Cost: €50 to €200/month (optional but recommended) 

What It Covers: Keeping your finances in check is crucial, especially with VAT regulations and other tax responsibilities. Many entrepreneurs hire an accountant to manage monthly invoices, tax declarations, and VAT filings. 

Total Estimated Costs 

Depending on the type of company and your individual needs, the initial costs to start a business in Spain can range from around €500 for a sole trader to over €4,000 for a limited company. Additionally, freelancers (autónomos) and small businesses should factor in ongoing costs like social security contributions and accounting services.

Steps to Registering a Company in Spain 

Let’s consider the scenario where you are a foreigner looking to start a business in Spain. What are the main steps for opening and running a business in your situation? As a foreigner, you have the option to choose between two main types of companies: Sole trader or Limited Liability Company. If your business is projected to generate an annual profit of less than 60,000 euros, you can register as a sole trader. However, in this case, you will be personally responsible for all your assets. 

After you identify what type of company is suitable for you, let’s see some essential steps that are required to take when you open your business (on the LC example) in Spain.  

1️⃣Grab your NIE (Número de Identidad de Extranjero) number  

The NIE is required for any foreigner who comes to Spain to work or live. This number serves as your legal identity for various activities. You will need it for tasks such as buying a car, renting a property, or entering into contracts. If you do not have your NIE number yet and plan to stay in Spain, it is crucial to obtain one. Without it, you will not be able to engage in any legal, governmental, or peer-to-peer transactions.  

2️⃣Create a company name  

After obtaining your NIE number, you can proceed to request a company name at the Central Mercantile Register. It’s important to have at least five alternative names for your company, listed in order of priority. The Central Mercantile Register will check the availability and appropriateness of the name for business use and will grant the top name on your list if it’s available and makes sense.

You can also conduct your research to save time and assess the general market.  

3️⃣Open your business bank account  

After obtaining your NIE number, claiming your company name, and most importantly, having your passport, you can proceed to open your business bank account. Keep in mind that if you want to establish an LC company immediately, you must have at least 3000 euros in your account to use for your business expenses. You can also use your assets to secure the deposit and distribute it among shareholders based on the amount owed to the company.   

4️⃣Create and sign an Article of Authorization / Deed of the incorporation  

In this case, you would need some help from a notary to declare your public deed. The notary will help you to designate and specify the roles and responsibilities of your company members:  
 

🟢 Director of the company  

🟢 Shareholders and their contact information  

🟢The official address of the company  

🟢The type of activities your company is going to provide  

Keep in mind that you would need to speak Spanish or have a company member who speaks Spanish, otherwise you would need to have a translator.  

After you get your Article of Authorization it is necessary to bring it to the Central Mercantile Office for registration.  

5️⃣Prepare the share capital – 3000 euros, as an individual or a group of activity members and get your tax identification number (CIF) from the tax authorities.  

6️⃣ Once you’ve got everything done and you got your company stamp – start doing your great business and keep pushing.  

Meanwhile, steps might be overwhelming, but we want to encourage you to start your own business because if you have these thoughts that means that you have the full capacity to do so.  

Keep in mind that once you open your company, the success of your accounting, marketing activities, and commercial efforts depends on your hard work. If you believe it’s important to build your portfolio before investing in the company, we recommend considering services that can assist freelancers in reaching their goals.  

For example, Freeberry offers invoicing services for freelancers who want to work with companies and provide them with professionally designed VAT invoices without the hassle of extra paperwork and the exhausting process of managing a company.  

This allows you to concentrate on your portfolio, dedicating maximum effort to creating and delivering your best for your clients, while we provide you with a robust platform for invoicing and receipt management. 

Documents Needed to Run Your Company in Spain  

In Spain, businesses must register with the Agencia Tributaria (Spanish Tax Agency) and obtain a CIF (Corporate Tax Identification Number) before they can start operating. Once registered, you’ll need to familiarize yourself with the main tax types that affect your business, including the Impuesto sobre Sociedades (Corporate Tax), which varies depending on your company’s profits, and the Impuesto sobre el Valor Añadido (VAT), which is charged on most goods and services. 

Checklist of Documents for Company Incorporation in Spain: 

⚫️ NIE (Foreigners’ Identification Number) of all shareholders 

⚫️ Company name certificate from the Central Mercantile Register 

⚫️ Business bank account 

⚫️ Articles of Association or Deed of Incorporation (Escritura Pública) 

⚫️ CIF (Tax Identification Number) 

⚫️ VAT Number (NIF or IVA number) 

⚫️ Registration form from the Mercantile Registry (Registro Mercantil) and Social Security registration 

These are the key documents required to incorporate a company in Spain. 

5 Common Challenges When Starting a Business in Spain

1️⃣Regulatory environment  

🔹Bureaucracy: get ready for the long and draining process of passing all the possible levels of government regulations from the local to national level.  

🔹Licenses and Permits: To start and run your business you have to get the appropriate license from the local institution that ensures that your business is compliant and follows all the safety, health and environmental standards.  

2️⃣Legal and Tax Considerations  

🔹Tax systems: Understanding and complying with Spain’s tax laws can be daunting. This includes corporate tax, VAT (IVA in Spain), social security contributions, and regional taxes.  

🔹Labour Laws: Spanish labour laws are protective of employees, which can make hiring and firing processes more rigid and costly for businesses. 

3️⃣Economic situation  

🔹Economic Instability: Spain has been experiencing an economic downhill during the financial crisis and is still at the stage of recovery, hence some of the aspects of monetary politics might affect businesses and expats.   

🔹Market Competition: Sectors like tourism, real estate, and certain manufacturing industries are highly competitive, making it tough for new entrants. 

4️⃣Cultural aspects of the Spanish business environment  

🔹Language barriers: might be a challenge for those entrepreneurs who are entering the Spanish market without knowing the language.  

🔹Interpersonal connection: Spain culture appreciates person-to-person relationships and having a strong network of personal connections with Spanish people might be the key to your success.  

5️⃣Financial challenges  

🔹Funding: It is advantageous to have an established company and a budget for expansion into a new market. However, aspiring entrepreneurs may encounter challenges in securing funding. The Spanish government offers grants and support for entrepreneurship, but the application process can be demanding, and the selection of recipients is a lengthy procedure. 

🔹Sustainability: Due to intense competition in almost every market niche, it is challenging to survive and maintain profitability. Tax policies also do not contribute to the company’s profitability, along with labour policies in the Spanish market.  

Considering the challenges of establishing and maintaining your company helps to better prepare yourself for the possible barriers to your business.  

Final thoughts:

Starting a company in Spain can be an exciting and rewarding venture, though it comes with its share of challenges. With Freeberry by your side, you’ll have expert support every step of the way, from navigating legal requirements to managing VAT invoicing.

Let us handle the complexities, so you can focus on what truly matters—building and growing your business.

Reach out to us today and simplify your VAT invoicing with ease.