How to Set Up a Legal Entity for an Independent Consultant in Spain

The Independent Consultant's Guide to Selecting and Setting Up a Legal Entity in Spain

Please note that this information is for informational purposes only. Umbrex strongly recommends that you consult with an attorney and tax professional to select the entity type most appropriate for your situation.

Get help setting up an entity in Spain

In Spain, independent consultants can choose from a range of business entities, each with different legal, tax, and administrative implications. The most common options are Sole Proprietorship (Autónomo) and Limited Liability Company (Sociedad de Responsabilidad Limitada – SRL). Some consultants, particularly those working in partnerships or planning to scale, may consider forming a Public Limited Company (Sociedad Anónima – SA) or a Partnership (Sociedad Civil or Sociedad Comanditaria).

Sole Proprietorship (Autónomo)

Overview: A Sole Proprietorship (Autónomo) is the simplest and most common business structure for independent consultants in Spain. The consultant operates under their own name, and the business is not a separate legal entity.
Legal Implications: The owner has unlimited personal liability for business debts and obligations, meaning there is no distinction between personal and business assets.
Tax Implications: Sole proprietors pay personal income tax (IRPF) on business profits. They are also required to register for VAT (Impuesto sobre el Valor Añadido – IVA), although some activities may be VAT-exempt. Social security contributions (Seguridad Social) are also mandatory for autónomos.
Suitability: Suitable for independent consultants looking for a simple structure, but it carries personal liability risk.
Process for Setting Up a Sole Proprietorship:

Register with the Social Security System (Seguridad Social): You must register as self-employed (autónomo) with the Spanish Social Security office.
Obtain a tax identification number (NIF): This is obtained from the Spanish Tax Agency (Agencia Tributaria).
Register with the Spanish Tax Agency (Agencia Tributaria): Register for tax purposes, including personal income tax and VAT (if applicable).
Obtain a license to operate (if required): Some types of consulting may require specific permits or licenses from local authorities.
Open a business bank account: Although not mandatory, it is advisable to separate personal and business finances.

Limited Liability Company (Sociedad de Responsabilidad Limitada - SRL)

Overview: An SRL is a separate legal entity that provides limited liability to its owners (shareholders). It is one of the most common business structures for consultants who want to protect personal assets.
Legal Implications: Shareholders are only liable for the business’s debts up to the amount of their capital investment. Personal assets are generally protected from business liabilities.
Tax Implications: An SRL is subject to corporate tax (Impuesto sobre Sociedades) at a flat rate of 25%. Dividends distributed to shareholders are taxed as personal income, potentially leading to double taxation. SRLs must also register for VAT if annual turnover exceeds €85,000.
Suitability: Suitable for consultants looking to limit personal liability and scale their business.
Process for Setting Up an SRL:

Choose a company name: The name must be approved by the Central Commercial Registry (Registro Mercantil Central) to ensure it is unique.
Draft Articles of Association: These outline the company’s governance and must be notarized by a public notary.
Deposit the minimum share capital: The minimum capital requirement for an SRL is €3,000, which must be deposited in a business bank account.
Register with the Commercial Registry (Registro Mercantil): File the Articles of Association and other necessary documents with the local Commercial Registry.
Obtain a tax identification number (CIF): This is the company’s tax number and can be obtained from the Spanish Tax Agency.
Register for VAT (IVA): If annual revenue exceeds €85,000, registration for VAT is mandatory.
Open a business bank account: Required to deposit share capital and manage business transactions.
Comply with ongoing tax and financial reporting: SRLs must file annual accounts and tax returns with the Spanish Tax Agency.

Public Limited Company (Sociedad Anónima - SA)

Overview: A Public Limited Company (SA) is a more complex corporate structure designed for larger businesses. It offers strong liability protection and the ability to raise capital through the sale of shares.
Legal Implications: Shareholders’ liability is limited to their capital contribution, and personal assets are protected.
Tax Implications: SAs are subject to corporate tax at a flat rate of 25%. Dividends paid to shareholders are taxed as personal income, leading to double taxation. SAs must also register for VAT if annual turnover exceeds €85,000.
Suitability: Suitable for consultants who are planning to grow their business or raise substantial capital, though it involves more administrative complexity and higher setup costs.
Process for Setting Up an SA:

Choose a company name: The name must be approved by the Central Commercial Registry.
Draft Articles of Association: These must be notarized by a public notary and filed with the Commercial Registry.
Deposit the minimum share capital: The minimum capital requirement for an SA is €60,000, with at least 25% paid in at incorporation.
Register with the Commercial Registry (Registro Mercantil): File the Articles of Association and other required documents.
Obtain a tax identification number (CIF): Issued by the Spanish Tax Agency.
Register for VAT (IVA): Required if annual turnover exceeds €85,000.
Appoint a board of directors: Required for oversight of the company’s operations.
File annual accounts and tax returns: Comply with corporate tax obligations and financial reporting.

General Partnership (Sociedad Civil)

Overview: A General Partnership (Sociedad Civil) is a business structure where two or more individuals share the responsibility for the business. It is not a separate legal entity, and the partners have unlimited liability.
Legal Implications: All partners are personally liable for the business’s debts and obligations.
Tax Implications: The partnership itself is not taxed; instead, profits are distributed to the partners, who report them as personal income. VAT registration is required if annual turnover exceeds €85,000.
Suitability: Generally not recommended for independent consultants due to the unlimited liability risk.
Process for Setting Up a General Partnership:

Draft a Partnership Agreement: While not legally required, it is advisable to have a written agreement outlining the roles, responsibilities, and profit-sharing arrangements between partners.
Register with the Spanish Tax Agency (Agencia Tributaria): The partnership must be registered for tax purposes.
Obtain a tax identification number (CIF): This is issued by the Spanish Tax Agency.
Register for VAT (if applicable): Required if the partnership’s annual revenue exceeds €85,000.
Obtain necessary licenses or permits: Some consulting activities may require specific licenses depending on the region or type of services offered.

Limited Partnership (Sociedad Comanditaria - SC)

Overview: A Limited Partnership (SC) consists of at least one general partner (with unlimited liability) and one or more limited partners (whose liability is limited to their capital contribution).
Legal Implications: General partners have unlimited personal liability for the business’s debts, while limited partners are only liable for their investment and cannot participate in management.
Tax Implications: Like a General Partnership, the SC itself is not taxed. Instead, profits are distributed to the partners, who are taxed individually. VAT registration is required if annual turnover exceeds €85,000.
Suitability: Rarely used by independent consultants due to the complexity and liability risk for general partners.
Process for Setting Up an SC:
- Draft a Partnership Agreement: This agreement should outline the roles and liabilities of the general and limited partners.
- Register with the Spanish Tax Agency (Agencia Tributaria): The partnership must be registered for tax purposes.
- Obtain a tax identification number (CIF): Issued by the Spanish Tax Agency.
- Register for VAT (IVA): Required if the partnership’s revenue exceeds €85,000.
- Obtain necessary licenses or permits: Depending on the nature of the consulting services, specific licenses may be required.

Considerations for Independent Consultants

Liability Protection: Consultants who wish to protect personal assets from business liabilities should consider forming an SRL or SA. These entities provide limited liability, shielding personal assets.
Administrative Complexity: Sole proprietorships are easier to set up and maintain, but they expose the owner to personal liability. SRLs and SAs provide better legal protection but require more administration, including annual filings and tax returns.
Tax Efficiency: SRLs and SAs may offer more opportunities for tax planning, especially if profits are reinvested in the business. Sole proprietorships have simpler tax structures but fewer tax benefits.
Partnership Structures: General and limited partnerships (Sociedad Civil or Sociedad Comanditaria) are less commonly used by independent consultants due to the unlimited liability for general partners.