Setting up a Business in Spain Part 1: The Basics and Types of Business Available

 

Starting a business in Spain

Many foreigners who move to Spain do so with the intention of setting up a business. In Spain, the paperwork involved in this can be complex so you’ll probably need to take professional advice on the best and quickest route.

In part 1, we look at the first steps to setting up a business in Spain and the types of business available.

In part 2, you’ll find information on setting up a limited company.

Part 3 looks at taxation considerations

part 4 offers pointers on where to get the best advice and assistance.

First steps to setting up a business in Spain

Learn Spanish

The first step is to make sure you have some command of the Spanish language. Setting up a business in any country is challenging, but this becomes even more difficult if you don’t speak the language.

You might plan to rely entirely on English-speaking professionals to organise the paperwork for you, but you will eventually need to learn Spanish.

Top tip – make an intensive course in Spanish your top priority. If possible, take it before you come to Spain.

MUST READ: A British expat tells us what it was like to move to Spain and start a business

Do your research

The next step is to find out whether your business has customers. This will involve some market research on your part in the area you’ve chosen to live in in Spain.

You should think about:

  • Is there a ready market for your business service or product? If so, are there enough potential clients for you to make a living?

Top tip – don’t just consider the expat population, think about offering your service or product to the Spanish market as well. It’s far bigger and much more stable.

  • What’s the competition? If you have several competitors, how does your business differ from these? What are your unique selling points?
  • Where will you run your business? If it’s home-based, have you got room for a designated spot in your house? If not or it requires bigger premises, where can you find these and how much will they cost?

Top tip – co-working spaces have become very popular in Spanish cities and are an option worth considering if you don’t have space at home. You can rent a space from around €75 a month.

Get your number

Working or setting up a business in Spain means you need to obtain your Spanish tax number.

This is known as a número de identificación de extranjeros (NIE for short). If you own property in Spain, you will already have a NIE.

To get your NIE you need to apply to a national police station with a foreigners’ department (departamento de extranjería – you can find a list here) where  you’ll be required to present proof of identity and your reason for needing a NIE. The authorities can take several weeks to issue a NIE so apply for yours well in advance.

Work permits

EU citizens do not require a work permit to set up a business in Spain. Non-EU citizens do, however, and you should take advice on the correct procedure for doing so from the Spanish Consulate in your country of origin.

Note: at the time of writing, UK citizens did not need a work permit in Spain. This situation may change in the light of BREXIT negotiations.

Types of businesses

Setting up a business in Spain can take several formats, each with their own advantages and disadvantages. We list the two most common below. You may wish to take professional advice on which suits your circumstances best.

Self-employed

This is similar to the Sole Proprietor model in some countries and known as autónomo in Spain.

Pros – this is the easiest and quickest set-up; it doesn’t require you to register any company names or liability; and it’s also the cheapest set-up as it doesn’t require any initial capital.

Cons – all liability rests with you; the self-employed pay tax on a sliding scale based on their earnings; and there are fewer tax breaks for the self-employed than for businesses.

Limited company

This is known as a sociedad limitada (SL) in Spain. Its business model and paperwork are broadly similar to limited companies in most western European countries.

Pros – an SL releases you from personal liability in case of bankruptcy; it gives you more scope for expansion; companies pay a fixed tax rate; loan providers regard an SL more favourably than a sole proprietor; and you may qualify for tax breaks.

Cons – the paperwork requires assistance from professionals; you need a minimum capital of €3,000 to set up; and you must present annual accounts for the company.

For more details on setting up a limited company, please see here