Complete guide to understanding the types of companies in Spain

Choosing the right type of company is one of the most important steps when starting a business in Spain. This decision determines key aspects such as partner liability, minimum required capital, applicable taxes, and how your company can grow and operate. In this inclusive and accessible guide, we’ll explore the main types of companies in Spain, their characteristics, and how to select the most suitable one for your needs.

Summary

1. What is a company and why is choosing the right one important
2. Most common types of companies in Spain
3. How to choose the right type of company
4. Sole trader vs Limited company – key differences

What is a company and why is choosing the right one important?

A company is a legal entity that enables one or more entrepreneurs to join forces and carry out an economic activity. Each type of company has specific rules that define:

• The number of partners allowed
• The minimum capital required to establish it
• The liability of the partners regarding the company’s debts

Selecting the correct structure directly affects the long-term sustainability and success of your business. Let’s break down the key legal structures available in Spain.

Most common types of companies in Spain

Limited liability company (S.R.L. or S.L.)

The S.L. is the most popular type of company among small and medium-sized enterprises (SMEs). Its key advantage is limited liability, meaning partners are only liable up to the capital they contribute.

Minimum capital: €1 (though €3,000 is commonly recommended)

Partners: At least 1 (can be a single-member company – S.L.U.)

Taxation: Corporate tax

Advantages:

• Fast, simple formation (often in 48 hours)
• Accessible for new entrepreneurs
• Asset protection for partners

Disadvantages:

• Shares are not easily transferred
• May not suit businesses aiming for large investment

Example: Many Spanish tech startups start as S.L. for its flexibility and low entry barrier.

Public limited company (S.A.)

Best suited for larger businesses or those intending to raise significant capital and operate nationally or internationally.

Minimum capital: €60,000 (25% must be paid at registration)

Partners: At least 1 (can be S.A.U.)

Taxation: Corporate tax

Advantages:

• Shares can be freely traded
• Suitable for stock market listing
• Attracts investment more easily

Disadvantages:

• High capital requirement
• Complex formation and regulation

Example: Large corporates like Telefónica use this structure.

Cooperative society (S. Coop.)

Ideal for collaborative projects where all members participate equally.

Minimum capital: Defined in bylaws

Partners: At least 3

Taxation: Subject to special regime

Advantages:

• Democratic: one member, one vote
• May receive regional tax incentives
• Strong community focus

Disadvantages:

• Complex governance structure
• Less flexibility in raising external capital

Example: Agricultural cooperatives in La Rioja use this model.

General partnership (S.C.)

More traditional structure based on close personal collaboration.

Minimum capital: Not required

Partners: At least 2

Taxation: Corporate tax

Advantages:

• Simple to establish
• No initial capital needed

Disadvantages:

• Unlimited liability for all partners
• Not scalable or investor-friendly

Labour public limited company (S.A.L.)

A variant of S.A. that encourages long-term employment.

Minimum capital: €60,000

Partners: At least 2 initially, 3 after 36 months

Taxation: Corporate tax

Advantages:

• Employees must hold the majority of shares
• Greater involvement and commitment

Disadvantages:

• Investment restrictions
• Complex share rules

Limited partnership (S. Com.)

Has both general and limited partners.

Minimum capital: Not required (unless it's a partnership by shares)

Taxation: Corporate tax

Advantages:

• Limited partners enjoy liability protection

Disadvantages:

• Complex role structure
• Legal and management complexity

Economic interest grouping (A.I.E.)

Not-for-profit structure designed to support shared economic goals.

Minimum capital: None required

Taxation: Income flows to partners

Advantages:

• Encourages cooperation
• Supports flexible project partnerships

Disadvantages:

• Not designed for profit-making ventures

How to choose the right type of company

Start-up capital

• Have personal funds? → S.L. might be best.
• Need investment? → S.A. or S.A.L. is more suitable.

Risk tolerance

• Don’t want to risk personal assets? → Choose S.L. or S.A.

Team size

• Solo entrepreneur? → S.L.U.
• Collective effort? → Consider S. Coop. or S.C.

Purpose

• For-profit? → Go for S.L. or S.A.
• Collaboration-focused? → Consider A.I.E. or S. Coop.

Sole trader vs limited company – key differences