Weigh up the pros and cons of a Spanish entity set up versus using a global PEO partner when expanding your business internationally.
To set up your company in Spain, you will need to establish a legal entity. In doing so, it not only allows you to hire and run your business compliantly from Spain, but it also establishes your long-term interest in operating from Spain.
Despite these clear benefits to establishing an entity in Spain, doing so can be a time-consuming, expensive process. Because of this, growing businesses often turn to a PEO company when looking to expand their company internationally. Here we look at who needs to set up an entity, how to set up a legal subsidiary and how a PEO can help you expand into Spain without a legal entity.
Who needs to set up a Spanish entity?
Any business with a physical presence in Spain must set up a legal entity. All businesses, both foreign and domestic, will then be governed by the Spanish Companies Act (Ley de Sociedades de Capital) which outlines the guidelines for registration, share capital, investors and so on.
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How do I set up a subsidiary in Spain?
The answer to this will vary from business to business and depending on what type of subsidiary you require. But as a general rule to set up a Spanish entity you will need to:
- Obtain an NIE Number - this is a basic identification number you will need to carry out any legal procedure in Spain, such as setting up a company or buying a property. All partners and directors must have an individual NIE Number.
- Request your company name at the Commercial Registry of Companies. You must supply five names for your business in order of priority.
- Open a business bank account.
- Visit the notary and register shareholders, company address and activities the company will carry out.
- Submit bank account statements to the notary.
Once the above have been submitted to the notary, you will receive the company constitution deed which you must submit to the Commercial Registry in Spain in order to complete company registration. This can take around two weeks however in the meantime you will receive a temporary CIF which allows your business to start its operations.
In addition to the above, foreign nationals trying to establish a business in Spain will need to register with the tax agency and request a social security number for your company, especially important if you are looking to hire employees for your company.
Spanish entity laws
In order to ensure the compliant operation of businesses in Spain, subsidiaries are regulated by the Spanish Companies Act (Ley de Sociedades de Capital). In addition to ensuring companies have all the relevant registration documentation listed above, The Company Act also regulates on taxes, company accounts and company owners on an ongoing basis.
As you can see, compliance with Spanish entity laws is an ongoing process. First, initial registration processes must be met and then compliance must be maintained throughout a company's operation within Spain. Compliance requires an in-depth knowledge of the Spanish Companies Act and Spanish entity laws which can cost you considerable time, money and resource. Meanwhile, non-compliance causes an abundance of risk for your business including fines, penalties and even the possibility of being unable to operate in Spain.
Depending on the type of company you set up, you may have to pay upfront fees when establishing your entity. For example, an S.L. company would need to pay a minimum of 3,000 EUR as investment capital at the time of incorporation.
The benefits of setting up a Spanish entity
As the second largest country in The EU with steady economic growth, Spain has long been a popular choice for business expansion. With thriving pharmaceutical, manufacturing, textiles and automotive industries as well as a bustling tourism industry, Spain has a strong and diverse economy that attracts growing businesses.
By setting up an entity in Spain, your company establishes its long-term intentions for growth within the country, making your business appealing for clients and employees alike.
Why use a PEO partner instead of setting up a legal entity?
Setting up a legal entity is a costly, not to mention risky, venture. From initial registration to ongoing compliance, Spanish subsidiaries need to be able to dedicate repeated resource, money and time to setting up an entity. This is on top of the day-to-day logistics of expanding your business into Spain. Meanwhile, setting up a subsidiary in Spain can take at least six-eight weeks, delaying your business operating in Spain.
By outsourcing your business expansion to a PEO or EOR, you can start reaping the benefits of Spain's thriving business network without the burden of a legal entity. This means your business can start operating abroad within a matter of days, rather than weeks, as well as providing you with more flexibility. Likewise, opting for a PEO means you can focus on the key aspects of business growth knowing that the legalities of tax, national insurance, onboarding employees, work permits and employment contracts are handled compliantly. As such, you can focus on your expansion into the European Union's second largest country.
If you want to find out more about how our PEO Services in Spain can support your international expansion, call our experts today on +44 (0) 1625 537 555 or email [email protected].
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"For the last few years, we have worked very closely with Simon and the team at Leap29 on a number of different projects in multiple countries across the globe. Leap29 have been a fantastic partner for us and are always willing to think with us to find the best solution. The communication with the team at Leap29 has always been excellent and Simon, in particular, is great to work with! They come highly recommended from us!"
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