If you are running an existing business or thinking of starting a new one then you may have given consideration to forming a private limited company known in Spain as "una Sociedad Limitada" shortened commonly to the letters "SL"
The basic requirements to form a company with a view to trading or indeed purchasing a property are:-
Day to day responsibility for running the company lies in the hands of the Managing Director or "administrador" appointed in the Deed of Incorporation or the person to whom Power of Attorney to act on behalf of the company has been granted.
If it proves necessary then more than one "administrador" can be appointed or important decisions can be vested in a "consejo de administracion" which is the nearest Spanish equivalent of an English Board of Directors.
The Company.s Registry place obligations on the company to file accounts on an annual basis that are available for public inspection. Any changes in the management and structure of the company must be registered including changes in share capital, the identity of the "administrador" or persons granted Powers of Attorney.
Equally the company must file tax returns with the Spanish Revenue .Hacienda Publica" on a quarterly basis in respect of income received.
The 2008 standard rate of taxation payable by Spanish companies on net profits is 30%. For small and medium-size qualifying companies the rate is reduced to 25% on profits up to €120,202.and 30% on the remainder. These companies qualify for the reduced rate where the net turnover for the previous year was less then €3 million.
Until 2007, if the company had been formed to own property rather than for trading purposes, it could qualify as a "Sociedad Patrimonial" meaning it enjoyed the benefits of a lower tax rate of 15% in respect of capital gains. However, since 2007 the law has changed and such companies are taxed at standard corporation tax rates of up to 30%. making corporate ownership unattractive.
Finally forming a limited company does not absolve those who control it from responsibility if the company is mismanaged and trades inappropriately.
Spanish law allows the veil of incorporation to be lifted as in other jurisdictions and "administradores" and others considered responsible can be held to account for failing to file returns and for serious misdemeanours such as insolvent trading.