Are you considering setting up a business in Spain?
There are more and more businesses being set up on the Costa del Sol, in Spain, by entrepreneurs coming from other countries with the idea of becoming established in the area. The Costa del Sol receives thousands of visitors every year and many non-residents in the area spend long period here, meaning that many businesses have been created, and continue to be created, by people from other countries who will experience no language problems in promoting and running their business.
Before setting up any kind of business in Spain, it would be wise to reflect and inform yourself on the most suitable legal format, as what in some cases is positive, in others could be negative. For this reason, it is essential to be aware of the various formulas and to have a clear idea of what are the requisites, advantages and disadvantages of each. There is a wide variety: Self-employed (Autónomo), joint-ownership arrangements (Comunidad de Bienes), partnerships (Sociedad civil), Public Limited Companies (S.A.), Limited Liability Companies (S.L.), Worker-Ownwd Companies (Sociedad Laboral) …
How to choose the most suitable legal formula?
In order to answer this question, we first have to reply to the following:
- Type of business and size: If we are talking about a small business with no employees, the most likely would be that we do not advice incorporating a S.L. However, if the business is going to operate in highly concentrated sector or as a supplier to large scale companies, the most advisable would be to set up a company, as the big firms with which you would be working will only sub-contract to other companies. If, in addition, your business is to have a high number of employees, as a company you can benefit from deductions in corporation tax.
- Number of partners: The number of partners is essential in deciding on which legal format. If there are several partners, the most advisable would be to set up a company. Each partner is liable for the amount of capital that he contributes and problems are avoided in the event of any irreconcilable differences arising.
- Liability to be assumed: In the case of self-employed, partnerships and joint ownership arrangements, liability can affect the personal assets of the partners. In the case of S.A. or S.L. companies, liability can be limited to the capital invested.
- Financing: The cost of setting up a Partnership is much less than for incorporating a S.L., as there are no Notary or Company Registry fees involved in the case of a Partnership. For a S.L. or a S.A. these expenses are applicable, as well as providing a minimum capital investment.
- Taxation: The basic difference between the different legal formulas lies in how they are taxed, as the self-employed, partnerships and joint ownership arrangements pay tax on the basis of Personal Income Tax, whilst the other types of company are taxed under Corporation Tax. Personal Income Tax (I.R.P.F.) is applied on a scale that increases according to the level of income, whilst Corporation Tax is applied a a rate of 25%-30% depending on the profits obtained.
In MP Accountants Marbella we can look into all these issues with you and help you to decide which formula would best adapt to your requirements.
If you wish to know more about our services or would like to arrange a free initial meeting please talk to us:
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