Launching a business in Spain involves more than just a great idea — you need to choose the correct legal structure. This decision affects your taxation, liability, compliance obligations, and investor readiness. Spain offers several business entities, but the most common for foreign entrepreneurs and investors are the Sociedad Limitada (S.L.) and the Sociedad Anónima (S.A.).
In this guide, we explore the main legal structures available, their advantages and disadvantages, and how to decide which is right for your business.
Why Choosing the Right Legal Structure Matters
- Taxation: Your corporate tax rate and obligations vary.
- Liability: Some structures limit personal liability.
- Investment-readiness: Some structures are more suitable for raising capital.
- Administrative burden: The compliance and reporting obligations differ.
- Visa & residency considerations: Your structure may impact your ability to obtain a visa as a business owner. Explore our legal services for foreign entrepreneurs
1. Sociedad Limitada (S.L.) – Limited Liability Company
The S.L. is the most popular form for small and medium-sized enterprises (SMEs) in Spain.
Key Features:
- Minimum capital: €3,000 (fully subscribed and paid up at incorporation)
- Liability: Limited to capital invested
- Management: Can be one or more directors
- Flexibility: Fewer formalities than S.A.
Pros:
- Fast and cost-effective to set up
- Ideal for small teams or family businesses
- Limited liability protection
- Fewer reporting obligations
Cons:
- Not ideal for attracting large-scale investment
- Transfer of shares can be restricted
2. Sociedad Anónima (S.A.) – Public Limited Company
Best suited for large enterprises or businesses seeking external investment.
Key Features:
- Minimum capital: €60,000 (25% must be paid up at incorporation)
- Liability: Limited to share capital
- Management: Requires a board of directors (minimum 3 members)
Pros:
- Suitable for larger investments and public offerings
- Easier to transfer shares
- Better perceived for international operations
Cons:
- Higher setup and maintenance costs
- Heavier reporting and auditing requirements
- More complex governance structure
3. Sole Trader (Autónomo)
An individual operating a business in their own name.
Key Features:
- No minimum capital required
- Full personal liability
- Simple to set up and operate
Pros:
- Easiest and fastest to set up
- Low administrative burden
- Suitable for freelancers and consultants
Cons:
- Unlimited personal liability
- Less credibility with banks and investors
- Less tax-efficient at higher income levels
4. New Entrepreneur Limited Company (SLNE)
A simplified form of S.L. designed to support entrepreneurs.
Key Features:
- Designed for single-founder businesses
- Limits on shareholders and directors
- Can be incorporated online
Pros:
- Simplified online registration process
- Fast-tracked government support for startups
Cons:
- Less flexible than a standard S.L.
- Not suitable for businesses expecting rapid growth or investment
5. Branch of a Foreign Company
Allows a foreign company to operate in Spain without forming a separate legal entity.
Key Features:
- No minimum capital
- Must register with the Commercial Registry
- Taxed as a non-resident entity with a permanent establishment
Pros:
- Leverages parent company’s legal identity
- Useful for market testing or limited operations
Cons:
- Parent company is liable for branch activities
- Less credibility than a Spanish S.L. or S.A.
6. Representative Office
Used to conduct non-commercial activities like market research.
Key Features:
- Not considered a legal entity
- Cannot engage in direct business or revenue-generating activities
Pros:
- Simple and low-cost to set up
Cons:
- Very limited scope of operation
Factors to Consider When Choosing a Legal Structure
- Size and scale of operations
- Initial and ongoing capital needs
- Number of founders or shareholders
- Liability concerns
- Plans to raise external funding
- Visa or residency planning
Legal and Tax Support from Lextax
At Lextax, we specialize in helping international entrepreneurs choose and set up the optimal legal structure in Spain. We guide you through:
- Company formation and registry
- Legal compliance and contracts
- Tax structuring and fiscal representation
- Residency and immigration support for business owners
Explore our full corporate legal services here
Conclusion
Choosing the right legal structure is one of the most important steps in launching your business in Spain. Whether you’re a solo freelancer or an international startup, aligning your structure with your strategy, risk profile, and growth plans is key.
Need help setting up your business in Spain?
Contact Lextax today for expert, personalized advice.