Legal Steps to Incorporate and Operate a Business

Posted on Dec 8, 2024 in Law & Jurisprudence

1. Legally Constituting a Company

1.1. Processing Through the Single Window

The Single Window is an initiative of public authorities and the Chambers of Commerce to avoid problems, streamline procedures, and encourage the creation of new enterprises.

2. Establishing Legal Personality in Companies

1. Negative Certification of Company Name

  • Needed: Because commercial law prohibits corporate name matching.
  • Where it is sought: In the Central Business Register (S. Trade) or in the Directorate General for the Development of the Social Economy (Cooperatives).
  • Data required: Personal data and 3 different names for the company.
  • Requirements:
    • Letters of the alphabet and numbers.
    • Not bear the name of a person without consent.
    • Abbreviation of the type of company.
    • No names against the law.
    • No names of Spain or provinces only.
    • No title which may mislead.
  • Deadline: It is issued by the Registry in a week and must be renewed every 2 months to form the company.

2. Opening of a Bank Account

  • Required: To deposit the minimum capital.
  • Who can open it: The managers of the company. If there is more than one partner, all partners must be present or submit a written transfer of powers from the partners to a representative.
  • After opening: The bank issues a certificate of deposit that is delivered to the notary in order to allow writing.

3. Articles of Association of the Company

  • What it is: The part of the writing on the standards that are set to take over the life of the company.
  • Minimum requirements:
    • Name of the company.
    • Purpose.
    • Duration.
    • Date of commencement of business.
    • Registered Office.
    • Share Capital.
    • Capital division form.
    • Mode of administration organization.

4. Application for Qualification of the Draft Statutes

  • Who must apply: Labor associations and cooperatives.
  • Where to apply: At the central government or administrative body of the Autonomous Community.
  • Documents:
    • Certification of negative company name.
    • Record of constituent assembly.
    • Draft statutes.
    • List of promoters.
  • Validity: 15 days from submission.

5. Grant of Public Deed of Incorporation

  • What it is: An act for which the founding members proceed to sign the Public Deed of Incorporation.
  • What it includes:
    • Identity of the partners.
    • Will to set up a company.
    • Contributions of the partners.
    • Statutes.
    • Determination of the mode of administration.
    • Identity of administrators and representatives.
    • Covenants and conditions of the partners (must not oppose legislation).
  • Time and cost: Notary cost, and it does not expire.

6. Payment of Transfer Tax and Stamp Duty

  • What it taxes and amount: Charged on forming a company, and it is 1% of the share capital.
  • Where it is payable: Paid in the Ministry of Economy and Finance of the Autonomous Communities within 30 days after the deed.
  • Form to be used: Model 600.

7. Application for Tax Identification Code (CIF)

  • Purpose: Identifies the company for its relations with the Treasury.
  • Where it is sought: In the administration or delegation of the State Agency for Tax Administration.
  • Documents required:
    • Model 036 or Form 037.
    • Copy of the Memorandum and photocopy of the ID card of the applicant.
    • Copy of the application for tax classification.
  • Deadline: 30 days from the acquisition of the deed.
  • Validity: 6 months to withdraw the final tax identification card.

8. Registration Fees

  • Where to register: In the commercial register of the province.
  • Documents required:
    • Articles of Incorporation after paying ITPADJ (Property Transfer Tax and Stamp Duty).
    • Cooperatives: 3 copies of the deeds and declaration of the activity.
    • SAL and SLL: Entry in the Administrative Register of Labor Societies of the Autonomous Community or the Central Administration.
  • Once done: The deed is returned, including the volume, folio, and page where the company has been registered.
  • Deadline and cost: Within one month following the deed, except for SL and cooperatives, which have 2 months. Payment of registration fees and advertising in the Official Gazette of the Commercial Registry (BORME).

3. General Procedures for Implementation

3.1. Procedures in the Ministry of Economy and Finance

1. Registration for the Tax on Economic Activities (IAE)

  • What it is: A local tax on the exercise of business, professional, or artistic activities.
  • It must be made within 10 business days before the start of the activity and is valid for one year.
  • Documents required:
    • Model 840.
    • ID or CIF.

2. Census Declaration

  • What it is: A summary of the situation and tax obligations of the company. Due during the initiation, modification, or termination of the business.
  • Deadline: Before starting the activity.
  • Documents required:
    • Model 036 or 037.
    • Photocopy of ID or CIF.
    • Registration for IAE.

3. Presentation of the Books in Finance

  • What it is: Presentation of the books that reflect the various operations of the company. Mandatory for individual entrepreneurs under the simplified direct assessment scheme and for professionals.
  • Timeline: Between the closing of the tax period and the deadline for personal income tax presentation.
  • Documents required: Communication using the existing model; the books do not need to be submitted physically.

3.2. Procedures in the City Council

1. Licensing of Activities and Facilities

  • Description: This certifies that the facilities of the firm comply with the rules and regulations.
  • Documentation to submit for License for Harmless Activities and Facilities:
    • Registration for IAE.
    • Lease or deed of the premises.
    • ID and CIF.
    • Descriptive report.
    • Maps.
    • Map of the location of the premises.
    • Facilities budget.
  • Documentation to submit for License for Classified Activities and Facilities:
    • Proposed facilities signed by a competent technician, including plans, budget, and report.
    • List of adjacent and affected neighbors.
  • Period of validity: 6 months are available for starting up.

2. Building Permits

  • Description: This is necessary if works are to be carried out on the premises.
  • Documents required:
    • Budget of the works.
    • Map of the current state and the proposed changes.
    • Specification of works.
    • Plot plan of the property where the premises are located.
    • If the works affect the structure, a stamped project must be submitted.
  • Period of validity: 6 months to start work.

3.3. Procedures in the Ministry of Labor and Social Affairs

1. Registration of the Company in Social Security

  • Required for: All companies.
  • Deadline: Before starting the activity.
  • Documents required:
    • Registration of workers with Social Security.
    • Registration for IAE.
    • Contract of association with a mutual insurance company or accident insurance policy.
    • Business Corporations: Copy of the memorandum and photocopy of ID.
    • Sole Trader: ID.
    • Cooperatives: Registration Certificate, ID of the representative.

2. Registration in the Self-Employed Regime

  • Required for: Sole proprietors and their family members, partners in public companies and limited partnerships, ownership partners and civil societies, partner managers, or members of administrative bodies of corporations.
  • Timeline: Within 30 days after the commencement of the activity.
  • Documents required:
    • Registration for IAE.
    • ID of the applicant.
    • Self-employed agricultural workers: Certificate from the Chamber of Agriculture.
    • Professionals: Certificate from the professional association.
    • Civil societies and communities of goods: CIF and constitutional contract.
    • Commercial companies: Deed of incorporation and CIF.
    • Cooperatives: Certificate from the register of cooperatives.

3. Registration in the General Social Security Regime

  • Required for: Employees.
  • Deadline: Before starting the activity.
  • Documents required: Photocopy of ID or employee ID document (for foreigners).

4. Communication of Opening of a Workplace

  • Required for: Companies that open a new workplace.
  • Timeline: 30 days after the start of the activity.
  • Documents required: Company data, workplace data, workforce data, and activity data. Sealing of the Visitor’s Book.

3.4. Proceedings before the Mercantile Registry

3.4.1. Corporate Documentation

  1. All companies:
    • Book of Proceedings: Must state the agreements of the general meetings and other corporate bodies, with a summary of issues discussed, statements, and voting results.
  2. Limited Partnerships:
    • Membership Record Book or Participations: Records the ownership of shares and their transmission, indicating the identity and address of the holder.
  3. Corporations:
    • Book of Bearer Shares: Indicates the issued shares for which the owner is unknown.
    • Book of Registered Shares: Records the identity and address of owners.
  4. Cooperatives:
    • Record Book of Partners.
    • Record Book of Partner Contributions.

3.4.2. Accounting Documentation

  1. Journal: A record of the accounting operations of the company in chronological order, according to the General Accounting Plan (PGC) and other applicable accounting rules.
  2. Inventory and Annual Accounts Book: Includes the initial detailed balance sheet, quarterly trial balances, and the year-end inventory and annual accounts.