The limited liability company (LLC) is the most popular type of legal entity businessmen prefer to incorporate in Spain. The LLC in Spain provides numerous advantages in terms of the shareholder’s liability, and it also provides a high level of flexibility in terms of company’s statutory documents. Our team of lawyers in Spain can offer legal advice on the incorporation requirements and the legal steps which have to followed by both local and foreign businessmen.
Characteristics of an LLC in Spain
The LLC in Spain customarily required a minimum share capital of EUR 3,000, which had to be fully deposited during the incorporation procedure (in this sense, we mention that all companies performing commercial activities in Spain are required to open a corporate bank account for their newly established business).
However, following the enactment of the Law 18/2022, known as the Crea y Crece (Create and Grow) Law, the capital requirements for a limited liability company were lowered from EUR 3,000 to EUR 1. Therefore, investors can set up this company type with only EUR 1 during the initial incorporation stages, but there are certain matters to be aware of.
The new law stipulates that it is necessary to allocate at least 20% of the company’s profit to the company’s legal reserve until it reaches a capital of EUR 3,000 (but this threshold is now imposed after the company becomes operational, not as a prerequisite of the incorporation).
Also, in the case in which the company enters the liquidation procedure, the shareholders will be liable to pay debts of up to EUR 3,000, provided that the company doesn’t have assets that can be valued to a sum of EUR 3,000.
The capital of the LLC must be divided into shares. In an LLC, the shares can’t be transferred, but there are several exemptions, which apply to the transfer amongst the shareholders, or to the close relatives of the shareholders.
The Spanish LLC can be registered by minimum one shareholder, who can be represented by a natural person or a legal entity. In the situation in which the company is incorporated by a single shareholder owning full ownership of the shares, the Companies Registry will need to be notified. The institution will require documents related to the identity of the shareholder and our team of attorneys in Spain can offer more details on such documents.
If you are planning to invest in Spain in 2024, you must know that you can opt to register a simplified version of the limited liability company – the new enterprise limited company in Spain. As an investor, you should be aware that this company type can only be incorporated by shareholders who are natural persons, and that the shareholding structure can comprise a maximum number of 5 investors. Compared to the standard limited liability company, other differences can appear, related to the company’s trading name for instance.
A limited liability company is a designed for the needs of small and medium-sized companies. If you will set up a limited liability company in 2024, please know that your business may benefit from a lower corporate income tax, if certain conditions are met.
In 2024, the standard corporate tax rate is of 25%, but starting with the financial year of 2023, companies can benefit from a corporate tax rate of 23% charged on the income (turnover) obtained in the previous financial year. This tax reduction policy is maintained in 2024 as well.
This rule applies as long as the turnover is less than EUR 1 million and it is applicable to most of business activities. Please know that a new tax regime applies starting with 1 January 2024 to businesses operating in the Balearic Islands.
Legislation on LLC in Spain, in force in 2024
Spanish LLC falls under the regulations of the Law 2/1995 Sociedades de Responsabilidad Limitada.
Under the regulations of the Law 14/2013 – The Entrepreneur Law, the incorporation of an LLC in Spain was simplified, offering a more rapid regime for the registration of this type of entity. The law for the simplified LLC was enforced in 2003.
However, the simplified procedure can be applicable only under certain requirements, for example, when the company is registered by a sole founder.
Businessmen are invited to contact our law firm in Spain for more details on the registration of a Spanish limited liability company.