A Spain Limited Liability Company (LLC) provides a flexible legal framework with fewer mandatory rules than a corporation. The will of its members prevails as detailed in their Articles of Incorporation.
The law which governs Spain’s LLC’s is the Revised Capital Companies Law (hereinafter, the “Capital Companies Law”) approved by the Legislative Royal Decree of 2010, regulating various legal entities such as the corporation (S.A.), and the limited liability company (S.L.).
Foreigners are permitted to own 100% of the participants’ shares.
Background
Spain, also called the Kingdom of Spain, is a European sovereign nation. Its political system is a unitary parliamentary constitutional monarch with a Prime Minister, and an Upper and Lower House Legislature.
Spain Limited Liability Company (LLC) Benefits
A Spain Limited Liability Company (LLC) has the following benefits:
• 100% Foreign Shareholders: Foreigners can own 100% of the shares in a LLC in Spain.
• Limited Liability: Shareholders’ liabilities are limited to their company capital investment.
• One Shareholder: The minimum number of shareholders is one to form a LLC.
• One Administrator: A minimum of one administrator is required to form a LLC which can be the sole shareholder.
• Low Minimum Share Capital: The required minimum share capital is 3,000 Euro.
• Fast Registration: LLC’s can register online for fast registration.
• EU Membership: As a member of the European Union (EU), Spain offers opportunities to engage with other EU members.
LLC Company Name
The LLC must choose a name which will not resemble any other Spanish legal entity name.
Every LLC must include the words “Limited Liability Company” or “Sociedad de Responsabilidad Limitada” or abbreviated as “S.L.” or “S. R. L.” at the end of their company name.
Registration
The Articles of Incorporation must be signed before a notary and filed with the Commercial Registry (Registro Mercantil Central) which must include the company name, identity of the shareholders, company purpose, and registered address, etc. The registration process can be quickly accomplished by filing online with a Single Electronic Document (SED). This simple quick registration procedure is only available to LLC’s and not formal corporations (S.A.).
A new law was enacted in 2013 called the “Entrepreneurs Law” providing an express registration system for LLC’s.
Limited Liability
Shareholders’ liability is limited to the amount of the capital stock contributed by them.
However, in exceptional circumstances, liability may be permitted from shareholders in order to protect the interests of third parties. The Spanish courts have ruled that the doctrine of “piercing the corporate veil” (levantamiento del velo) can apply when acts of misconduct occurred and the LLC is fraudulently protecting shareholders. In such cases, the courts may hold the company and the individual shareholders liable subjecting their assets to judicial seizure.
Shareholders
LLC’s can be sole shareholder companies. Single owners must register as such with the Commercial Registry and all company correspondence and commercial documents must acknowledge sole ownership. In addition, sole ownership must be recorded in a special company register including all contracts with the company. Compliance with these requirements is mandatory. Failure to comply after six months from becoming a sole shareholder LLC will result in the sole owner having personal liability for all debts and obligations of the LLC.
There are no limits on the maximum of shareholders in a Spanish LLC. Members’ contributions must be divided into shares (called “participaciones”). The shares must be recorded in a public document. Shares are not marketable securities. In addition, debentures and other securities cannot be issued.
Shares can only be transferred to (ascendants, other shareholders, descendants, or companies of the same group) unless otherwise provided in the Articles of Incorporation or its Bylaws.
The law also established pre-emptive rights to acquire other shareholder’s shares or the entire company when a transfer of a shareholder’s shares is to anyone other than those named above. However, the Articles of Incorporation or the Bylaws may provide exceptions to the law.
Management
The law allows a LLC to appoint a Board of Directors of between 3 up to 12 members and one or more Administrators to manage the day to day operations. Directors and Administrators may be natural persons or legal entities. Administrators do not have to be shareholders. They can be appointed for an indefinite time period.
The Articles of Incorporation can provide different types of management structures adapting to the needs of the LLC.
Accounting
Spain chose not to adopt the European Union (EU) standard accounting regulations and standards. Therefore the traditional Spanish GAAP accounting standards apply to every LLC.
The Revised Spanish Corporate Enterprises Law state and Spain’s Commercial Code establish that a financial statement must include an income statement, a cash flow statement, a balance sheet, a report of equity changes during the fiscal year, along with notes regarding other important financial events.
Registered Office and Agent
LLC’s must have a registered office in Spain and appoint a local registered agent.
Minimum Share Capital
The minimum share capital for a LLC is 3,000 Euro. This consists of the contributions from its shareholders which must be fully paid when the company is incorporated.
Shareholders’ contributions may be made in cash or like-kind. Cash refers to payments made in money in exchange for shares. Like-Kind refers to various forms of contributions such as equipment, vehicles, office supplies, computers, and other assets. An evaluation of their value can be performed by an independent expert. Their value must come within 20% of the value claimed by the expert. However, it is not mandatory that an independent expert valuate non-cash contributions.
Annual General Meeting
An Annual General Meeting of the shareholders is mandatory. The Capital Company Act (LSC) establishes the scope of general meetings.
This meeting can deal with the appointment and removal of directors, increasing or reducing the capital, and liquidating the company. The Articles of Incorporation may deviate from the regulations provided by law.
Two types of meetings are provided under the law:
• General Meetings can be in the form of ordinary course of business meetings such as approving annual accounts, appropriation of profits, etc. Board of Directors can meet whenever necessary for the operation of the company. If every shareholder is represented at a general meeting it will become an official Universal Meeting.
• Universal Meetings are the official meeting of the shareholders. Prior notice is not required. However, 100% of the shareholders must agree that a meeting will take place.
A resolution is passed if approved by a majority vote representing at least 1/3 of the votes in association with the capital shares. The Articles of Incorporation or its Bylaws may an increased majority required for approval, but cannot require unanimous agreements.
Taxes
The current (2017) corporate tax rate in Spain is 25%.
New LLC’s must apply for a tax identification number (CIF) from the Tax Authorities. If the LLC will conduct commercial activities within Spain, a formal statement (Declaración Censal de Inicio de Activividad) must be filed with the local Tax Office (Delegación de Hacienda).
The Value Added Tax (Sales Tax) is 21%. However, some products and services are taxed from 4% to 10%.
Dissolution
There are several statutory grounds in which to dissolve a LLC including the following:
• Completing the company’s purpose;
• The prescribed term expires;
• Accumulation of Losses which reduces the company’s net assets to where they are worth less than 50% of the share capital;
• Having less than the required minimum share capital causes dissolution by law;
• The shares value without voting rights exceeds 50% of the total capital; and
• The occurrence of any specified causes for dissolution in the Articles of Incorporation.
Public Records
All records filed with the Commercial Registry are available for public inspection.
Registration Time
Spanish LLC’s can register online which take up to one or two business days for approval.
Shelf Companies
Shelf companies are available for purchase in Spain.
Form a Spain Limited Liability Company (LLC) Conclusion
A Spain Limited Liability Company (LLC) has these benefits: 100% foreign ownership, limited liability, one shareholder, one administrator, low required minimum share capital, fast registration for LLC’s, and EU membership.
