Limited liability company (SL) in Spain: setup guide, advantages & risks

If you're wondering which legal structure is best when starting a business in Spain, the SL is one of the most popular options. With its flexible setup and ability to limit partner liability, it's ideal for many entrepreneurs and small businesses.

In this guide, we explore the pros and cons of the SL, its core features, the legal steps required to create one, and the different types that exist, such as the SLU and the SLNE.

Summary

1. What is an SL?
2. Advantages
3. Disadvantages
4. How to set up an SL in Spain
5. Types of SL
6. Is an SL the right legal structure for you?

Want to compare all possible legal forms before deciding? Explore our complete guide to understanding the types of companies in Spain for a comprehensive overview.

What is an SL?

The SL, also known as Sociedad de Responsabilidad Limitada (SRL), is a commercial legal entity in Spain where the liability of each shareholder is limited to the capital they invest. This means their personal assets are protected if the company faces debts or insolvency.

The share capital is divided into membership interests, which are not equivalent to public shares as their transfer is restricted by law and the company's articles of association. This sets the SL apart from other types like the Sociedad Anónima (SA).

Wondering about the differences between a Limited Liability Company (SL) and a Public Limited Company (SA)? Check out Legal and tax aspects of different companies in Spain for a detailed comparative analysis.

Key facts about SLs

• Shareholders: Minimum of 1, no maximum limit
• Liability: Limited to the contributed capital
• Minimum share capital: From €1 (depending on the format)
• Taxation: Subject to corporate income tax

Advantages of an SL

Choosing an SL offers many benefits:

• Limited liability. Shareholders are not personally liable for business debts — their risk is limited to their investment.
• Simple incorporation. The process to set up an SL is straightforward, with fewer requirements than structures like an SA.
• Accessible capital requirements. You can start an SL with as little as €1, although €3,000 or more is common to ensure financial stability.
• Tax efficiency. SLs pay a flat corporate tax rate (typically 23% for SMEs), which can be more favourable than progressive personal income tax (IRPF) beyond a certain profit level.
• Professional credibility. Compared to sole traders, SLs can offer greater trust to clients, suppliers and banks — often helping secure credit.
• Flexible management structure. SLs can be run by a sole director, multiple directors, or a board, depending on what best suits the business.

Disadvantages of an SL

Some drawbacks to consider:

• More bureaucracy and cost. You’ll need to keep formal accounts and submit annual reports to the Companies Register, which adds administrative cost.
• Restricted transfer of participaciones. By law, participaciones can’t be freely transferred — existing shareholders have priority.
• Slower incorporation process. Creating an SL can take 30–40 days, which may not suit urgent launches.
• Tax on profit distribution. Although corporate tax is flat, dividends paid to shareholders are taxed again — a so-called "double taxation" effect.

Looking for an even more flexible option for small businesses? Discover the Communal partnership: a flexible choice for small businesses.

How to set up an SL in Spain

Establishing an SL in Spain involves several legal steps:

1. Choose a company name. It must be unique and registered with the Central Companies Register. It must include "Sociedad Limitada" or "SL".
2. Define share capital. Decide your start-up capital — this can be cash or physical assets, provided all shareholders agree on their value.
3. Draft the estatutos sociales (articles of association). This internal rulebook sets out business purpose, organisational structure and shareholders' rights. It must be notarised.
4. Formalise public deed of incorporation. This is done in front of a notary, who validates capital contribution and shareholder agreements.
5. Register with the Registro Mercantil (Mercantile Registry). You must file the notarised deed at the regional Companies Register — this gives your SL legal status.
6. Meet tax and social obligations:

• Get a provisional Tax ID (NIF)
• Register for business tax (IAE)
• Register shareholders and staff with Social Security

Types of SL

There are different SL variations to suit different business models.

SLU (Sociedad Limitada Unipersonal): An SL owned by just one shareholder. Great for sole traders wanting limited liability.

SLL (Sociedad Limitada Laboral): Most participaciones (at least 51%) must be owned by employees. Ideal for collaborative or worker-led projects.

SLNE (Sociedad Limitada Nueva Empresa): Designed to speed up business formation — registration can be completed online within 24–48 hours.

Interested in faster company formation? Learn about the New limited company (SLNE) in Spain: an entrepreneurial legacy, which can be registered online within 24–48 hours.

Is an SL the right legal structure for you?

SLs are the most widely used company form in Spain for good reason: they combine flexibility with limited liability. But before you decide, assess your business model, risk level, and the kind of economic activity you’ll be carrying out.

If you're running a small enterprise, know your shareholders, and want to protect personal assets, the SL might be just what you need.

Tip: In legal and business documents, it’s common to see the abbreviation SL used alongside the English name, e.g., “limited liability company (SL),” to avoid confusion and ensure clarity for international readers.