Business Structures: Types and Legal Forms in Spain
Types of Companies
Property of Production or Capital Resources
- Private: Capital belongs to private individuals or legal entities.
- Public: Capital is wholly or partially owned by the State, Autonomous Communities, or municipalities.
Size
- Small: Fewer than 50 employees.
- Medium: Fewer than 250 employees.
- Large: 250 or more employees.
Fields of Activity
- Primary Sector: Use of natural resources (agriculture, livestock, and fisheries).
- Secondary Sector: Industrial enterprises.
- Tertiary Sector: Service companies (laundry, hairdressing).
In Spain, to start a business, any employer must obtain a license with a code for the activity they will develop. This is the National Classification of Economic Activities (NACE).
Legal Status
Sole Trader
A natural person with the legal capacity to pursue an economic activity allocates this activity to themselves, usually, and it is exercised on their own behalf.
Characteristics: A single owner has full control of the company, with unlimited liability.
Advantages: Easy creation, great autonomy.
Disadvantages: High risk, survival problems when the founder disappears, difficulty obtaining financing.
Corporate Entrepreneur
A voluntary group of natural or legal persons who have decided to pool capital and/or work to create a business to obtain a benefit. They have a legal personality separate from the partners, which is born with the inscription of the founding commercial document in the Registry.
1. General Partnership
Two or more partners contribute capital and work. They actively participate in the management of the company. No minimum capital is required. Unlimited and joint liability leads to great risk.
2. Limited Partnership
Two types of partners are needed for its founding: general partners (contribute work and have unlimited liability) and limited partners (contribute capital and have limited liability). It does not require a minimum capital.
3. Limited Liability Company (LLC or SL)
One or more founding partners are required. Liability is limited to the capital contributed. A minimum capital of 3,000 euros is required, fully subscribed and paid. This subscribed capital is divided into shares.
Advantages: Small capital and limited liability lead to low risk.
4. Joint Stock Company (SA)
One or more partners are necessary for its founding. Liability is limited to the capital contributed. A minimum capital of 60,100 euros is required, fully subscribed and paid at least 25%. The unpaid portion is called the dividend payment liabilities. The capital is divided into shares.
Advantages: Easy to get financing, limited liability, free transmission of shares, diversification of ownership leads to low risk.
Disadvantages: Conflicts between owners and managers.
5. Worker-Owned Limited Liability Company
At least 51% of the capital belongs to the workers. No partner may have more than one-third of the capital. A minimum of three partners is required.
6. Worker-Owned Joint Stock Company
Same as a worker-owned limited liability company.
7. New Enterprise Limited Company
A special type of limited company to encourage the creation of companies. There is a maximum of five founding partners. Limited liability. Capital: minimum of 3,000 euros and a maximum of 120,000 euros.
8. Cooperatives
An association of natural or legal persons with joint socio-economic interests acting for the benefit of all. The number of partners needed for the foundation is three for first-level cooperatives and two for second-level cooperatives. The partners are not personally liable, except when statutes state otherwise. Liability is limited to the contributed social capital. Capital is variable; the minimum is set by statute.