When starting a new business or commercial project, it is natural for an entrepreneur to focus on the development of the idea. However, it is crucial from the outset to consider the legal structure of the business, the first fundamental step being the incorporation of a company.
Benefits of Incorporation Companies offer the advantage of limiting liability to the initial capital invested in the business, thus protecting the personal assets of the partner in the event of insolvency. In contrast to this, an individual entrepreneur (self-employed) is unlimitedly liable with his personal assets for the debts of his economic activity.
Common types of companies
The most common company forms for economic activity in Spain are the Sociedad de Responsabilidad Limitada (S.L.) and the Sociedad Anónima (S.A.). The former is more common, with more than one million S.L. registered compared to around one hundred thousand S.A. There are also the sociedad colectiva and the sociedad comanditaria por acciones, but these are less common and will not be dealt with in this article.
Steps to Incorporate a Company
Although incorporating a company is not excessively complicated, professional advice is advisable due to the particularities of each case. The essential steps for incorporation are described below:
1. Application for Negative Certificate of Name The first step consists of reserving the name of the company. One of the founding partners must apply for a Negative Certificate from the Central Commercial Register to ensure that the chosen name is unique. This certificate is valid for six months, and if the company is not incorporated within that period, a new one must be applied for.
2. Opening a Bank Account A bank account must then be opened in the name of the company and the minimum capital required by law (3,000 euros for Limited Companies and 60,000 euros for Public Limited Companies) must be deposited. The bank will issue a certificate of this deposit, which is necessary for the public deed of incorporation.
3. Drawing up the Articles of Association The Articles of Association are the rules that will govern the internal functioning of the company and must be included in the deed of incorporation. They must contain, as a minimum
- Name of the company
- Object of the company
- Registered office
- Share capital
- Organisation of the company’s administration
- Procedures for the adoption of resolutions
In addition, other important provisions may be included, such as the regime for the transfer of company shares and the grounds for separation or exclusion of shareholders.
4. Execution of the deed in the presence of a notary With the above formalities completed and the necessary documents, the founding shareholders must execute the deed of incorporation of the company in the presence of a notary. If a partner is represented by a third party, a power of attorney is required. The deed must include:
- Identity of the founding partners
- Will to incorporate a capital company, specifying the type (S.L. or S.A.).
- Contributions of each partner, including the bank certificate if in cash.
- Articles of association of the company
- Identity of the initial directors
- Act of beneficial ownership if any individual controls more than 25% of the company.
5. Certificate of Beneficial Ownership Establishes and certifies who the beneficial owners of a company are, detailing owners, shareholders and their percentage shareholding, complying with legal regulations on transparency.
6. Obtaining the Provisional N.I.F. Once the deed of incorporation has been granted, the provisional N.I.F. must be requested from the AEAT, a procedure which is free of charge if carried out without intermediaries.
7. Registration in the Mercantile Register The deed of incorporation is sent to the corresponding mercantile register for registration. Once registered, the company acquires legal personality and can apply for the definitive N.I.F., which will be the same as the provisional one.
8. Finally, with the company registered and the definitive N.I.F., Form 036 must be filed with the Tax Authorities to report the start of activities.
Additional Documentation for Foreign Partners
Spanish law requires all individuals or legal entities with economic interests in Spain to have a N.I.F. (for legal entities) or a N.I.E. (for individuals). Foreign companies wishing to set up a subsidiary in Spain must obtain the N.I.F. from the AEAT, and foreign partners or administrators must obtain the N.I.E. from the Dirección General de la Policía.
Additional Relevant Documents
Once the company is incorporated, it is essential that entrepreneurs consider certain additional documents to ensure continuity and resolve possible conflicts. In cases of multiple partners, it is advisable to establish a Partners’ Agreement that regulates the relations between them, decision-making and conflict resolution.
Frequently Asked Questions (FAQs) Company formation
- What is the Negative Certificate of Denomination and why is it necessary? The Negative Denomination Certificate is a document issued by the Central Companies Registry that certifies that the name chosen for the company is not in use by another entity. It is a crucial step to ensure that your company name is unique and does not infringe on the rights of other companies. This certificate is valid for six months, and if the company is not incorporated within that time, a new one must be applied for. Obtaining this certification ensures that your company will not face naming-related legal problems in the future.
- What information should be included in the articles of association of a new company? The articles of association are the rules governing the internal workings of the company and should be included in the articles of association. They should contain, as a minimum: the company name, the corporate purpose (activity to be carried out by the company), the registered office, the share capital, the management structure of the company and the procedures for the adoption of resolutions. They may also include additional provisions such as the regime for the transfer of company shares and the grounds for separation or exclusion of shareholders. The articles of association provide a solid legal and operational basis for the new company.
- Is it compulsory to execute the deed before a notary to set up a company? Yes, it is compulsory. Once the preliminary formalities have been completed and the necessary documents have been obtained, the founding partners must execute the deed of incorporation of the company before a notary. This document formalises the creation of the company and must include key information such as the identity of the founding partners, the intention to form a capital company, the contributions of each partner, the articles of association of the company and the identity of the initial directors. The execution of the deed before a notary guarantees the legal validity of the company’s incorporation.
- What is the provisional N.I.F. and how is it obtained? The provisional Tax Identification Number (N.I.F) is a temporary code assigned to the company being formed by the State Tax Administration Agency (AEAT). It is obtained once the deed of incorporation has been executed before a notary. This number allows the company to operate legally while the process of registration in the Companies Register is being completed. The provisional N.I.F. is free of charge if applied for directly without intermediaries. Once the company has been registered in the Mercantile Register, the definitive N.I.F. is requested, which will be the same as the provisional one.
Do you need help with the incorporation of your company?
At Gutiérrez Pujadas & Partners, we have a team of lawyers specialized in commercial law who can guide you through the whole process. Contact us through our contact form