Legal and tax aspects of different companies in Spain

Selecting the right legal structure for your business is key. It shapes your company’s legal responsibilities, tax obligations, and how you operate day-to-day. Spain offers various company types tailored to different needs. This guide explains the legal and tax features of each one, helping you make an informed choice.

Summary

1. Main types of companies in Spain
2. Special company types
3. Tax overview and general notes
4. Choosing the best legal form

Main types of companies in Spain

Limited liability company (Sociedad Limitada - SL)

The most common option for entrepreneurs, offering flexibility and protection against personal financial risk.

Legal structure and incorporation requirements

• Minimum share capital - €3,000
• One or more partners allowed (including single-member companies)
• Liability limited to the capital invested
• Incorporation involves a public deed and registering with the Mercantile Registry
• Takes about 4 to 7 working days to set up

Legal obligations

• Submit annual accounts to the Mercantile Registry
• Hold general meetings for partners
• Keep company books up to date
• Comply with commercial and accounting regulations
• Enjoy limited liability protection

Tax obligations

• Corporate tax is 25% (reduced to 15% for the first two profitable years for new businesses)
• VAT (IVA) is declared quarterly (model 303) with an annual summary (model 390)
• Withhold income tax on salaries (model 111), rents (model 115), and dividends (model 123)
• Additional declarations may be required (models 180, 190, and 347)

Public limited company (Sociedad Anónima - SA)

Ideal for larger companies that want to attract investors.

Legal structure and incorporation requirements

• Minimum share capital - €60,000 (at least 25% must be paid upfront)
• One or more shareholders allowed
• Liability limited to share value
• Incorporation through a public deed and Mercantile Registry registration
• Setup typically takes 15 to 30 working days

Legal obligations

• More formal governance and management rules
• Stricter reporting and disclosure requirements
• Possible listing on stock exchanges
• Formal administrative structures

Tax obligations

• Corporate tax and VAT obligations similar to SLs
• Additional rules if listed on public markets

General partnership (Sociedad Colectiva - SC)

A traditional form where partners personally commit and trust each other.

Legal structure and requirements

• No minimum capital required
• At least two partners
• Partners have unlimited and joint liability
• Requires a public deed and Mercantile Registry registration

Legal obligations

• Partners are personally liable for business debts
• Partners manage the business directly
• Admin responsibilities are simpler
• Accounting requirements are reduced

Tax obligations

• Pays corporate tax
• In some cases, income tax (IRPF) applies
• Fulfils regular VAT and withholding tax duties

Limited partnership (Sociedad Comanditaria)

Combines partners with full liability and others with limited liability.

Legal structure and requirements

• No minimum capital necessary
• At least two partners (general and limited)
• General partners face unlimited liability
• Limited partners are responsible only for the amount they have invested.
• Requires public deed and registration

Legal obligations

• General partners handle management and full liability
• Limited partners are passive investors

Tax obligations

• Subject to corporate tax
• Profits shared according to partners' contributions
• Must meet tax reporting standards

Special company types

Cooperative society (Sociedad Cooperativa)

Focuses on democratic control and shared benefits.

Legal structure

• Capital set in bylaws
• Requires at least three members
• Liability limited to capital invested
• One member, one vote principle

Tax advantages

• Special tax regime with benefits
• Corporate tax at favourable rates

Labour limited company (Sociedad Limitada Laboral - SLL)

Encourages employee ownership and participation.

Legal features

• At least 51% of capital owned by workers with permanent contracts
• Limits on non-owner employee hours
• Required special reserves

Tax benefits

• Standard corporate tax applies
• Possible incentives aimed at job creation

Tax overview and general notes

Corporate tax rates

• Standard rate: 25%
• Reduced rate for new companies: 15% for first two profitable years
• Cooperatives: 20%
• Non-profits: 10%

VAT and other taxes

• Standard VAT - 21%, with reduced (10%) and super-reduced (4%) rates
• Economic Activities Tax (IAE) applies if turnover exceeds €1 million
• Local taxes including property tax (IBI) and municipal fees

Accounting and filing requirements

• Maintain mandatory books (daily journals, inventories, minutes, etc.)
• File annual accounts including balance sheet, profit and loss statement, notes, and cash flow (for larger companies)
• Comply with filing deadlines (generally within 7 months of fiscal year-end)

Choosing the best legal form

Consider these factors:

• Number of partners and initial capital
• Financing needs and tolerance for liability
• Administrative complexity you’re comfortable managing
• Growth plans and industry specifics

Small family businesses often choose the limited liability company (SL), while social enterprises tend to go for labour limited companies (SLLs) or cooperatives. For tailored advice, consult a legal or tax expert specialising in Spanish company law.