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[ESTABLISHING A BUSINESS ENTITY IN SPAIN]
ESTABLISHING A BUSINESS ENTITY IN SPAIN
1. TYPES OF BUSINES ENTITIES 1.1 Description of the types of entities available in each jurisdiction through which to conduct business
Other options Representative office
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Representative office, as well, is not a separate or distinct legal entity, and its goal is to carry out ancillary, accessory and instrumental activities focused on market prospective, information gathering, scientific research, etc..), but it does not conduct any actual business. The nonresident company is liable for all debts assumed by the representative office. Joint Ventures Joint Ventures mostly use companies (purchasing or incorporating a corporation or limited liability companies) as vehicle, but it could just be agreed on a contract. Acquiring a company The quickest way to open a business is to buy a shelf company (an incorporated company that has not been traded yet) instead of incorporating one. It allows to start operating immediately. It is initially faster because the company is already incorporated and registered with the Commercial Registry and already holds a NIF (Tax ID). However, different corporate changes and director’s appointments have to be made later on to tailor the company to investors’ needs and requirements. 1.2 Matters to be considered when choosing a particular business entity type Vehicles mostly used to start up a business in Spain are (i) a company (Corporation or Limited Liability Company, basically) or (ii) a branch. So, this guide will focus on such options. • Corporation vs Limited Liability Company Choosing between Corporation or Limited Liability Company is basically a matter of considering the following points:
Limited companies: Corporation and Limited Liability Company
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When setting up a business in Spain, either foreign or local investors generally incorporate a company. There are two kind of mercantile companies usually incorporated to operate a business in Spain: (i) Corporations or public limited companies (“Sociedades Anonimas” or “SA”) having their capital represented by shares, which are securities; and (ii) Limited Liability Companies or private limited companies (“Sociedades de Responsabilidad Limitada” or “SL”) having their capital represented by participation units (“participaciones sociales”), which are not securities (hereinafter referred to both of them as “shares”). In both cases, companies have a legal personality distinct from their partners, which are not liable for the company’s debts. Shareholder’s liability is limited to their contribution to capital. Only in exceptional cases, based on a fraudulent use of the legal personality, the shareholders shall be liable for the debts or obligations of the company. Branch Branch is a secondary establishment operating as a representative of its parent company, but without being a separate legal entity even though it keeps certain level of autonomy management. So, the parent company is liable for its obligations and debts. Branch develops, totally or partially, the activity of the parent company. •
ILN Corporate Group – Establishing a Business Entity Series
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