Launching Your Startup in Spain? Avoid These Legal Mistakes from the Start

Imagine you have a revolutionary idea and want to turn it into a successful business. You're motivated and eager to start, but there's one problem: you don't know where to begin. Establishing a startup in Spain involves more than just registering a company; there are key legal aspects that can make the difference between the success and failure of your venture.

In this article, which we hope won't be too lengthy, we cover the essential legal aspects that every founder should consider to avoid future problems and build a startup with solid foundations.

1. Choosing the Right Legal Structure

The first step in establishing a startup is deciding which legal form suits you best. This choice affects everything from the taxes you'll pay to the partners' liability for business debts. In Spain, the most common options are:

• Self-employed (Autónomo): Ideal if you're starting alone with minimal initial expenses. However, you have unlimited personal liability, which means you're responsible with your own assets for any debts.
• Limited Liability Company (SL): The most common option for startups because it limits partners' liability to the capital contributed.
• Public Limited Company (SA): Recommended for large projects that need to attract investors, although its establishment is more expensive and requires more initial capital.

2. Steps to Establish a Startup in Spain

While this article covers in greater depth the detailed steps to establish an SL or SA in Spain, here's a summary of the main procedures you need to follow to register your startup if you choose this legal form:

2.1. Reserve the Company Name

You must request a Certificate of Company Name at the Central Mercantile Registry to ensure that your startup's name is not already in use.

2.2. Draft the Articles of Association

The articles of association are the operating rules of the company. They establish key aspects such as:

• Company purpose (what the startup will do)
• Distribution of shares among partners
• Management body

2.3. Sign the Deed of Incorporation before a Notary

All partners must sign the deed of incorporation before a notary. This document makes the creation of the startup official. If one of the partners is a foreigner and doesn't reside in Spain, we explain the steps to follow and the different options you have to resolve this issue in another article.

2.4. Obtain the Tax ID and Register with the Tax Agency

To operate legally and, among other things, be able to issue invoices, you need a Tax Identification Number (NIF) and to register with the Tax Agency.

2.5. Register the Startup in the Mercantile Registry

This procedure gives the company legal personality and makes it official in the eyes of the Administration.

2.6. Register with Social Security

If you're going to hire employees or if you're the administrator of the startup, you must register with Social Security.

2.7. Certification as an Emerging Company

Additionally, to benefit from the particularities of the Startups Law, you must certify your company as an emerging company.

Startups interested in the benefits of this law must request ENISA to evaluate whether their characteristics meet the required criteria and if their business model is innovative and scalable. This process can be lengthy and tedious due to the need to compile a large volume of information. We can help you manage this process quickly and effectively.

3. Shareholders' Agreement: Avoid Conflicts from the Start

Many startups fail not because of a lack of customers, but due to conflicts between partners. To avoid problems, it's essential to draft a shareholders' agreement, a document that regulates:

• Rights and obligations of each partner
• Distribution of shares and voting rights, including anti-deadlock clauses
• Founders' commitments: tasks to perform, dedication, exclusivity, permanence, and non-competition
• Entry of new investors and exit rules
• Liquidity events
• Incentive policies (stock options/phantom shares)
• Non-compliance regime and conflict resolution mechanisms

4. Protection of Intellectual Property

If your startup is based on an innovative idea, you must protect it legally. Some options are:

• Trademark registration: Protects your company's name and logo.
• Patents and utility models: If you've developed a novel technology, you can register it.
• Copyright: To protect software, texts, designs, and other creative content.

5. GDPR Compliance and Data Protection

If your startup collects personal data from users or customers, you must comply with the General Data Protection Regulation (GDPR). This involves:

• Informing users about how their data is managed.
• Obtaining their consent to use it.
• Implementing appropriate security measures.

6. Tax and Accounting Obligations

From day one, your startup must meet its tax and accounting obligations. Some of the main ones are:

• Registering with the Tax Agency and Social Security.
• Filing taxes such as VAT and Corporate Tax.
• Maintaining orderly accounting.
• Submitting annual accounts to the Mercantile Registry.

7. Preparing to Attract Investment

If you need external financing, it's important that your startup is well-structured legally. To ensure your startup is ideally structured to attract investment, make sure to:

• Have the company's activity well documented
• Be up to date with legal obligations
• Clearly define the terms of investment before starting the funding round

Conclusion: Avoid Mistakes and Launch Your Startup with Confidence

Establishing a startup in Spain requires planning and knowledge of key legal aspects. Avoiding mistakes from the beginning will save you problems and allow you to focus on growing your business.

If you want to ensure everything is in order, consult with our team of lawyers specialized in startups. We help you legally protect your company from day one.