How to Set Up a Company in Spain: A Step-by-Step Guide

Key Points:

• Choice of legal structure: The Private Limited Company (SL) is the most flexible and widespread option for SMEs and entrepreneurs due to its low minimum capital requirement and agility.
• Incorporation process: This requires obtaining the company name, drafting the articles of association, making the capital contribution, signing the deed before a notary, and registering the company.
• Critical points: A shareholders' agreement and a clear definition of the management body's functions are fundamental to preventing future conflicts and deadlocks.
• Professional advice: An error in the initial phase can lead to liability for directors or the voiding of agreements, making legal support essential.

Choosing the Legal Structure: Private Limited or Public Limited Company?

The first strategic decision is to choose the corporate structure. Although there are several options, most business projects in Spain are channelled through a Private Limited Company (Sociedad de Responsabilidad Limitada, or SL) or a Public Limited Company (Sociedad Anónima, or SA).

The Private Limited Company (SL) is favoured by SMEs, self-employed individuals transitioning to a company structure, and projects with few shareholders. Following the reform introduced by Ley 18/2022, the statutory minimum capital is €1. While capital remains below €3,000, specific safeguards apply: an enhanced legal reserve and, on liquidation with insufficient assets, joint and several shareholder liability for the shortfall up to €3,000.

The Public Limited Company (SA), on the other hand, is designed for larger-scale projects. It requires a minimum share capital of €60,000 and is subject to stricter regulation. It is the appropriate structure for companies planning to raise capital from multiple investors or to be listed on the stock exchange.

For most entrepreneurs, directors and investors, the SL offers the perfect balance between protecting personal assets and operational agility.

The Steps to Incorporate Your Private Limited Company (SL)

Once the legal structure has been decided upon, the incorporation process follows a series of well-defined stages. Omitting or incorrectly executing any of them can cause delays in starting the business or lead to future legal problems.

1. Certificate of Company Name

First of all, you must ensure that the name chosen for your company is available. This procedure is carried out at the Registro Mercantil Central (Central Commercial Registry), which will issue a negative name certificate, confirming the exclusivity of the name for a specified period.

2. Drafting the Articles of Association and Shareholders' Agreement

The Articles of Association are the fundamental rules that will govern the company's internal operations: its corporate object (what it will do), registered office, capital, management body, etc. They must be drafted with precision to avoid ambiguity.

At the same time, it is highly recommended to sign a Shareholders' Agreement. This is a private contract between the shareholders that regulates aspects not included in the articles of association, such as lock-in commitments, enhanced majority requirements for key decisions, or exit protocols for a shareholder. A well-designed shareholders' agreement is the best tool for preventing deadlocks and disputes.

3. Share Capital Contribution and Bank Account

The shareholders must contribute the agreed capital. Although the minimum for an SL is €1, if the capital is less than €3,000, the law establishes certain safeguards: at least 20% of the profit must be allocated to a legal reserve until the sum of the reserve and the capital reaches €3,000. Furthermore, in the event of liquidation with insufficient assets, the shareholders will be jointly and severally liable for the difference.

4. Public Deed Before a Notary

With the name certificate and the articles of association, the founding shareholders must go to a notary to sign the public deed of incorporation. The notary will attest to the act, identify the shareholders and directors, and validate the legality of the articles.

5. Formalities with the Tax Agency and the Commercial Registry

Once the deed is signed, a provisional Número de Identificación Fiscal (NIF) (Tax Identification Number) is requested from the Agencia Tributaria. The deed must then be registered with the corresponding provincial Commercial Registry. Upon registration, the company acquires its own full legal personality.

Finally, the start of business activities must be notified to the Tax Agency (registration in the census of entrepreneurs and in the IAE - Tax on Economic Activities), and the company and its employees must be registered with the Social Security system. The lawyers in the ARROWS International network in Spain can manage the entire process, allowing you to focus on your business.

Frequently Asked Questions about the Incorporation Process

1. How long does it take to incorporate an SL? The process can be completed online in a few days using the Puntos de Atención al Emprendedor (PAE) (Entrepreneur Service Points) and standard articles of association. However, if bespoke articles or a complex shareholders' agreement are required, the process can take several weeks to ensure a robust setup.

2. Are there taxes on the incorporation of an SL? No. The incorporation of companies is exempt from the Corporate Transactions modality of the Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (ITP y AJD) (Transfer Tax and Stamp Duty), which represents a significant cost saving.

3. What is the corporate object and why is it so important? The corporate object defines the activities the company will undertake. It should be broad enough to accommodate current and future activities, but also precise. Acting outside the scope of the corporate object can result in personal liability for the directors.

Potential Problems	How ARROWS can help (office@arws.eu)
Corporate deadlock: Inability to make decisions due to disagreements between shareholders, paralysing the company.	Drafting shareholders' agreements: We help you design deadlock resolution mechanisms, drag-along and tag-along clauses, and enhanced majority requirements.
Director's liability: Claims against a director for company debts or for acting negligently or outside the scope of the corporate object.	Preventive advice: We inform you of your duties of diligence and loyalty and the limits of your position to minimise your exposure to personal risk.
Refusal of registration: The Commercial Registry rejects the registration due to formal defects in the articles of association or the deed.	Comprehensive review and management: We review all documentation before it is signed and handle communications with the notary and the registrar to ensure a smooth registration.
Disputes over the valuation of contributions: Disagreements about the value of assets (e.g., a property or machinery) contributed as share capital instead of cash.	Independent expert's report: We coordinate the involvement of experts to value non-cash contributions and prevent future challenges to the share capital.

Final Summary

Setting up a company in Spain is a regulated process that goes beyond mere paperwork. It is the time to lay the legal foundations that will protect your project, your investments, and your relationships with your fellow shareholders. Poorly defined articles of association or the absence of a shareholders' agreement can lead to conflicts that paralyse the company and create personal liabilities.

As an entrepreneur or director, your time is too valuable to risk making mistakes in this initial phase. Delegating the incorporation of your company to professionals provides you with security and allows you to focus on what really matters: the development of your business.

To ensure your company's incorporation is carried out smoothly, with a solid legal structure tailored to your objectives, contact the ARROWS International network in Spain at office@arws.eu.

Frequently Asked Questions about Setting Up a Company in Spain

1. Is it better to start as a sole trader or create an SL? It depends on the risk and expected revenue. As a sole trader, your liability is unlimited. An SL limits liability to the capital contributed, protecting your personal assets. If you anticipate high turnover or plan to hire staff, an SL is usually the safer and more tax-efficient option.

2. What is the liability of the shareholders of an SL? In principle, their liability is limited to the capital they have contributed. However, there are exceptions. For example, if the share capital is less than €3,000, the shareholders are jointly and severally liable for the difference up to that amount in the event of liquidation due to debts.

3. What types of management bodies exist in an SL? You can opt for a sole director, several joint and several directors (each can act independently), several joint directors (they must act together), or a Board of Directors. The choice depends on the number of shareholders and the level of control desired.

4. Do I need a physical office for the registered address? The registered office must be a real location in Spain where the company's effective management is centralised or where its main establishment is located. It can be an office, a commercial premises, or even a co-working space that offers this service.

5. Once incorporated, what taxes does a company pay in Spain? For tax periods beginning in 2026, the general rate is 25%. Qualifying micro-enterprises are subject to transitional rates of 19% on the first €50,000 of taxable income and 21% on the remainder; certain small entities are taxed at 23%; and qualifying newly created entities at 15% in the first tax period with positive taxable income and the following period. Classification must be checked case by case. VAT, withholding taxes and other duties depend on the activity.

6. Can the lawyers at the ARROWS International network help me if my project involves partners or clients in other countries? Yes. One of the advantages of the ARROWS International network is its ability to coordinate cross-border operations. The ARROWS International network in Madrid, with the support of the network in other countries, can advise you on drafting international contracts, tax planning for investment, or resolving disputes with foreign partners.

Disclaimer

Official sources reviewed

BOE consolidated legislation cited, the Spanish Tax Agency and, depending on the subject, the College of Registrars and applicable regional and municipal rules. Editorial review completed on 5 October 2026.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide on the subject according to the legal situation in 2026. Although we take the utmost care to ensure the accuracy of the content, regulations and their interpretation evolve over time. ARROWS advokátní kancelář, the head of the ARROWS International network, is registered with the Czech Bar Association (its supervisory body) and holds professional liability insurance with a limit of CZK 400,000,000. To verify the current regulations and their application to your specific situation, please contact the ARROWS International network in Spain directly (office@arws.eu). We assume no liability for damages arising from the use of the information in this article without prior individual legal consultation.