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How to Start a Business in Spain

Step 1 - The Basics

Starting a business is hard and unfortunately the chances of success are low. Even if you have an amazing business plan and an impressive founding team, you may still be unlucky. As such, when considering starting a business you should think carefully about the consequences and obligations involved. Some questions to consider:

  • What problem is your business solving? How will you solve this problem? What is unique about the way you are going to solve this problem? How big is the potential market and how much of this market will you be able to address?

  • What is the competition? What alternatives are customers using? Has someone else done this business already and failed? If so, why?

  • Who will be involved in the business? Does your team have the right skills to start this business? Will you need to recruit additional talent?

  • How much cash are you going to need to setup? How long will it be before the business starts generating positive cash flow?

Once you have answered these questions, you can start the administrative process.

Step 2 - Create a Business Plan

Once you have a good idea of the answers to the questions above, putting together the business plan should be fairly straight forward. Keep the business plan as simple as possible and realise that plans will change but also make sure you cover the key issues.

If you require financing for the business make sure the sections on the problem you are addressing, your competitive advantage, competition, market size and financials are comprehensive and clear.

Having both a Spanish and English version of your business plan will be helpful if you need external funding.

Step 3 - Choose a Business Structure

There are a number of different types of business entity depending on the type of business. Each comes with a different set of legal and fiscal responsibilities and liabilities. In this regard, it is a good idea to get your own legal advice. However, the types of legal entity available include:

  • Sole Trader / Sole Proprietor (Empresario Individual or Autónomo)

  • Jointly Owned Company (Comunidad de Bienes, C.B.)

  • Partnership (Sociedad Civil)

  • Public Limited Company (Sociedad Anónima, S.A.)

  • Limited Liability Company (Sociedad Limitada Nueva Empresa)

  • Worker-Owned Company (Sociedad Laboral)

  • General Partnership (Sociedad Colectiva)

  • Limited Partnership (Sociedad Comanditaria)

  • Cooperative (Sociedad Cooperativa)

The requirements for setting up a company will differ depending on what type of business entity you decide to proceed with.

Step 4 - Choose a Business Name

In Spain, sociedad businesses can have a brand of commercial name that is different from their official business name. Business name registration is optional but registering the business name gives an exclusive right to use that name for commercial purposes within Spain. Registration is handled by the Spanish Patent and Trademark Office.

Step 5 - Find Financing

There are a number of different potential sources of financing available to you:

  • Personal financing

  • Friends and family members

  • Loans (Préstamos)

  • Lines of Credit (Cuenta de crédito or póliza de crédito)

  • Grants (Subvenciones or Ayudas) - Check the local Chamber of Commerce and DYPME for availability of grants.

  • Angel investors

  • Venture Capital

Step 6 - Secure Licences and Permits

Depending on the type of business, you will likely require some licenses.

You will need to charge Value Added Tax (Impuesto sobre el Valor Añadido, IVA which ranges from 4 - 21%))on any goods and services you sell. Tax rules vary depending on the type of business so seek advice from your financial advisor and the Agencia Tributaria on your requirements.

You will also need a "Visitors Book" (Libro de Visita) and have it available at all times for potential labour and social security inspections. The book can be obtained from your province’s Dirección Provincial del Ministerio de Trabajo y Asuntos Sociales.

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