Essential Tips for Successfully Establishing a Startup

Establishing a startup involves much more than a good idea and enthusiasm. The legal aspects of the foundation will lay the groundwork for your company's future, either facilitating or hindering its growth. In this article, we share the most important advice based on our experience advising hundreds of entrepreneurs.

Choosing the Legal Form: A Strategic Decision

The legal form you choose for your startup will have important implications for taxation, liability, and investment. The most common options are:

• Limited Liability Company (S.L.): The most common option for startups in Spain. Minimum capital of €3,000, liability limited to the capital contributed, and relatively simple management.
• New Enterprise Limited Company (SLNE): A variant of the S.L. with some specific advantages for very early-stage projects.
• Public Limited Company (S.A.): Requires a minimum capital of €60,000. More suitable for larger companies or those planning to go public in the future.
• Self-employed: Simple to start, but implies unlimited personal liability. Generally not recommended for projects with ambitions for scalability or external investment.

The S.L. is usually the most balanced option for most startups, but each case requires an individualized analysis. Factors to consider: number of partners, future investment plans, sector of activity, and desired tax regime.

Company Bylaws: Beyond the Standard Model

The bylaws are the "internal regulations" of your company and will define essential aspects of its operation. A common mistake is to use standard bylaws without adapting them to the specific needs of the project. Key aspects to customize:

1. Company purpose: Should be broad enough to cover all current and foreseeable future activities, avoiding later modifications.
2. Management system: Sole administrator, joint, several, or board of directors. Each option has implications for decision-making.
3. Share transfer: Regulation of the right of first refusal, valuation of shares, and procedures.
4. Reinforced majorities: For strategic decisions such as capital increases, sale of relevant assets, or substantial changes in the business.
5. Exit clauses: Establish mechanisms to resolve deadlocks or conflicts between partners.

Shareholders' Agreement: The Essential Complement

The shareholders' agreement is a private agreement that complements the bylaws and allows for more flexible regulation of aspects that are not convenient or possible to include in them. Critical points:

• Vesting: System of progressive consolidation of shares for founders and key employees, incentivizing their permanence.
• Dedication and exclusivity: Commitment of time and exclusivity of the founders to the project.
• Intellectual property: Clear assignment of ownership of developments made by partners and collaborators.
• Confidentiality: Protection of know-how and business secrets.
• Conflict resolution: Mediation, arbitration, or other mechanisms to resolve disputes without going to court.

Incorporation Procedures: Process Optimization

The incorporation process can be optimized to save time and reduce costs. Recommended route:

1. Negative name certification: Request with several alternatives to avoid rejections that delay the process.
2. Capital contribution: Open a bank account and make the deposit with sufficient time.
3. Public deed: Prepare all necessary documentation before going to the notary.
4. Obtaining the provisional Tax ID: Process it immediately to be able to start activities.
5. Registration in the Commercial Registry: Active monitoring to resolve possible incidents.
6. Registration for tax and labor obligations: Plan in advance the implications of each regime.

Common Mistakes to Avoid

Our experience has allowed us to identify frequent errors that can complicate the future of your startup:

• Unbalanced distribution of capital: Distributing shares without considering the real contribution (work, knowledge, contacts, capital) of each partner.
• Absence of vesting: Not implementing mechanisms that ensure the permanence and commitment of the founders.
• Inadequate corporate structure: Choosing a legal form that complicates future investment rounds.
• Inadequate IP registration: Not properly protecting intellectual and industrial property from the beginning.
• Non-optimized taxation: Failing to take advantage of tax incentives for entrepreneurs and newly created companies.

Initial Tax Planning

Adequate tax planning from the beginning can mean significant savings:

1. Reduced Corporate Tax rate: 15% for newly created companies during the first two years with positive taxable base.
2. R&D&I deductions: Up to 42% deduction for research and development activities.
3. Incentives for investors: Personal Income Tax deductions for investment in newly created companies.
4. Deferral of tax debts: Possibility to defer tax payments under advantageous conditions for startups.
5. Hiring bonuses: Reductions in social security contributions for certain worker profiles.

A well-planned and executed incorporation not only avoids future problems but also establishes the solid foundations for the growth and scalability of your startup, facilitating the entry of investors and providing legal security to all stakeholders.