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Setting up a business on Spain's Costa Blanca - Part 1

Setting up a business on Spain's Costa Blanca - Part 1

14 August 2012

Setting up a Business on Spain's Costa Blanca – Part One

Every year many businesses are set up on the Costa Blanca. Whilst setting up a business is straightforward, it can be time-consuming making sure you have all the correct forms and licences.

The nature of the business you propose to establish will determine the type of business structure to be formed. Usually this comes down to a choice between incorporating the business as a limited company (SL) and setting up as a self-employed sole trader (Empresario Individual or Autónomo) or unincorporated partnership (Sociedad Civil) if there is more than one person involved.

EU citizens may set up a business in Spain without restriction once they have their NIE number (Número de Identificación de Extranjero). Any non-EU citizen arriving in Spain with the intention of staying longer than three months requires a Residence Visa (Visado de Residencia). This must be requested from and issued by the Spanish Embassy of the applicant's home country, before departure for Spain. It is different to the standard three-month tourist visa in that it allows the holder to begin the residency application process.

Sole Trader/Sole Proprietor (Empresario Individual or Autónomo)

There is no minimum financial investment when establishing oneself as self-employed in Spain. There is unlimited liability and the person is responsible for all debts incurred. Non-EU citizens will need to apply for a combined self-employment work and residence visa as well.

Anybody who wishes to work as self-employed, regardless of their nationality, will then need to carry out the following steps:

• Register to pay IAE (Impuesto de Actividades Económicas); • Register a declaration for starting a business (Declaración Censal de Inicio de Actividad) - this can be done at the tax office (Delegación de Hacienda); • Register for Spanish Social Security within 30 days of registering to pay IAE, as a self-employed worker - trabajador autonomo. It is illegal to work in Spain without paying Spanish Social Security.

Once registered for social security, the self-employed worker will need to make monthly payments into the self-employed persons system, known as the RETA (Régimen Especial de Trabajadores Autónomos). This must be paid even if the person has had no income or is on sick leave or maternity leave.

Partnership (Sociedad Civil)

A partnership is formed of two or more people and no minimum investment is required. Any debts or financial obligations are divided between the members of the partnership. To set up a partnership, the following steps will need to be completed:

• Sign a partnership agreement (contrato de constitución) before a notary; • Register to pay IAE; • Register a declaration for starting a business; • Register for social security; • If there are business premises, the person must apply for an opening licence (Licencia Municipal de Apertura) at the Town Hall.

Co-ownership (Comunidad de Bienes)

Similar to a partnership, this form of company is made up of two or more people who share ownership of a common property or the right to something. There is unlimited liability for each of the partners. A Comunidad de Bienes (CB) is relatively simple and quick to set up and there is no minimum financial investment. To create a CB, a partnership agreement will need to be drawn up by the members (comuneros) stipulating the amount contributed by each partner. Once this is done the partners will need to:

• Register to pay IAE; • Register a declaration for starting a business; • Register for social security; • If there are business premises, the person must apply for an opening licence at the Town Hall.

IAE (Impuesto de Actividades Económicas)

New companies are exempt from this tax for the first two tax periods and companies with a turnover of less than a certain amount will not have to pay it. Companies must register for this in order to have the correct code number (epígrafe) for their specific activity.

How to Set Up a SL or SLNE

The Sociedad Limitada (SL) is the most common form of company in Spain and is similar to a limited company in other countries. The advantage of this sort of company structure is that there is a minimum of capital required and limited liability to the owners.

The New Business Limited Company is a simplified form of the SL but has its own naming requirements. The company name must include one of the founder's names and a registration number. It must also have the words SLNE or Sociedad Limitada Nueva Empresa. Also, there cannot be more than five shareholders at the start.

That concludes part one of setting up a business on the Costa Blanca, in part two we will look into what requirements are needed in setting up a business.

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