STARTING A NEW BUSINESS

What type of company?

A self-employed person (trabajador autonomo) or a sole trader (empresa individual) does not have the protection of a limited company should the business fail. It may be advantageous to operate as a limited company but ‘limited companies’ cannot be purchased off the shelf. A gestor (a person who specialises in dealing with administrative and legal work) can do this, but it usually takes some time.

A business may assume various legal titles. Most small business people operate as sole traders and must register with the appropriate trade association, pay a small joining fee and a monthly subscription. They are taxed as an individual. A small company is usually a private limited company (Sociedad de responsabilidad Limitada) designated SL. It is the simplest and most common form of limited company, does not have any public shares and is subject to corporate taxation. A large limited company is a public company (Sociedad Anonima) designated SA which is similar to a British Plc or an American Inc. To form an SA requires significant share capital, at least 50 employees and one director.

In order to create a new business entity the most important prerequisite is patience. It is necessary to visit a range of offices and officials. The hurdles are too great for some, so 40%of businesses remain unlicensed. There is little doubt setting up a company is a specialised task – even a small SL. It is important to appoint someone who has experience in doing it. The core document is a Deed of Incorporation which must be signed before a Notary (see page 171 for more information on Notarios). However, registration of the company name, registration at the tax office and payment of share capital deposit into a bank account, are all necessary before a business is up and running.

Business considerations

• Is there a business plan in existence?
• Most people are too optimistic about the prospects of a new business.
• Lack of capital is the most common reason for business failure.
• All banks are wary of lending to a new business.
• Borrowing money? Is it the euro, the dollar or the pound?
• When starting a retail business, people traffic is governed by location.
• Is access to motorways and rail links important?
• Is access to a popular tourist area or local attractions important?
• Are any housing developments or new shopping centres planned nearby?

Grants

Investment incentives are available from the Spanish government and the EU. Incentives include investment subsidies, tax relief, low-interest or interest-free loans, social security rebates and reduced local taxes during the start-up period. There are also regional government incentives for investment in economic promotion zones, declining industrial zones and urgent re-industrialisation zones.

LEGAL REQUIREMENTS

Opening licence

A business having premises such as a shop, workshop or offices, requires an opening licence (licencia de apertua) from the local town hall before starting. For a new building it is necessary to employ the services of an architect to submit a project to the town hall. The council will visit the premises to make sure that they fulfil all legal and sanitary obligations, but it is not unusual to take six months before examining a project and issuing a licence. Many people operate on the basis of a stamped application for a licencia de apertura. This is usually tolerated by the authorities.

If a business is likely to inconvenience the local community, such as noise from a bar or discotheque, the council will insist on certain requirements before granting an opening licence. A licence application is not necessary if the business premises are to be used for the same purpose as previously. The serving of alcohol and food also requires a health licence.

A licence issued for a business owned by a non-EU national may be conditional on the employment of a minimum number of EU citizens. A non-EU citizen wishing to start a business in Spain must also make an investment of around 120,000ε in order to be granted a work permit.

Special authorisation

To be able to carry out certain business activities it is necessary to obtain other relevant authorisation. This will depend on which sector a company is going to operate within. For example, in order to be able to open a bar, restaurant or hotel an authorisation from the Delegation of the General Directorate of Tourism in the region where the business activity is going to be performed must be obtained. There are also several regulated activities which require additional approval, such as travel agencies, security and toxic substances storage.

Building work

When work must be carried out on premises or land where the business activity is going to take place the relevant Works Licence (Licencia de Obras) must be requested from the town hall. Details required include the plans, relevant application form, layout and sketch of the project, description of the works to be carried out and its total valuation.

Declaration of opening a workplace

The opening of the workplace must be declared to the labour authorities –Declaracion de Apertura del Centro de Trabajo within 30 days following the commencement of a business activity. The official form obtained at the Direccion Provincial del Ministerio de Trabajo y Seguridad Social gives information about the company, employees and activity.

Social security

All self-employed people, even those who work part time, must contribute to the social security system. Not only are social security contributions under this scheme higher than for employees, there are also fewer benefits. There are various levels of social security payable, depending on the size of pension on retirement and if aged over 50. The autonomo scheme will cost a minimum of around 230ε per month.

Impuesto sobre Actividades Economicas (IAE)

All self-employed people and businesses must register at the Hacienda (equivalent to Inland Revenue) to pay a tax known as IAE. It is payable if business turnover exceeds 600,000ε per year and is a tax on economic activities. The high sales threshold is designed to help small and medium businesses.

Impuesto sobre el Valor Anadido (IVA)

All self-employed people and businesses must register for valued added tax (IVA) and levy this tax on all services or goods.

Taxation

Small businesses pay an estimated quarterly tax with a refund made or an additional payment demanded at the end of the tax year. Limited companies must file corporate tax returns to the provincial tax headquarters in the area where the business is registered. Various returns must be made including corporation tax, personal income tax and value added tax. Procedures for keeping the books are also defined.