Step-by-Step Creating a Startup in Spain (Part II)
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In the today’s edition of How to land in Venture Capital, I want to give you the second piece of research on the Spanish Startup Ecosystem, the creation of a startup step-by-step. Also, this series consists in three parts:
Part I: Spanish Startup Law 28/2022
Part II: Creating a startup Step by Step in Spain
Part III: Public funding in Spain: free money?
Today’s deep dive: Spanish Startup Ecosystem 2nd part: Creating a startup in Spain Step by Step
Creating a startup in Spain under the new Law 28/2022 involves several streamlined steps, specifically, 8 steps spotted on this post.
Thanks to the new Startup Law 28/2022, there has been a significant step forward in Spain's efforts to foster a dynamic and innovative startup ecosystem.
Startup Definition and Longevity
What is a startup? Before explaining how to create a startup from scratch, it's important to understand the concept well.
The new Law 28/2022 provides a clear definition of a startup in Spain. A startup is defined a newly created or early-stage company characterized by having a scalable business model that leverages new technologies, and is less than 5 years old (or 7 years for strategic sectors). The definition says a startup company must not distribute dividends and must have its headquarters or a permanent establishment in Spain.
Let’s go with the creation of our Startup:
Creating a startup in Spain under the new Law 28/2022 involves several steps:
Step 0: Ensure Compliance with Startup Certification Requirements
According to Law 28/2022, to qualify for certification as a startup in Spain, a company must:
Be newly created or up to 5 years since its registration in the Mercantile Registry or since the date of the public deed of incorporation registered in the competent cooperative registry. For biotechnology, energy, industrial companies, strategic or deep-tech companies up to 7 years old.
Not have resulted from mergers, spin-offs, transformations, concentrations, or segregations (including mergers and segregations), except those arising from other startups.
Not have distributed or be distributing dividends (or returns in the case of cooperatives) since the company's incorporation.
Not be listed on a regulated market.
Have its registered office, corporate domicile, or permanent establishment in Spanish territory.
Ensure that at least 60% of the workforce has a labor contract in Spain. For cooperatives, partners, worker-members, and work associates with a corporate relationship will be counted as part of the workforce, for the purposes of this percentage.
Develop an innovative entrepreneurship project with a scalable model.
Have an annual turnover not exceeding €10 million.
Not be founded or directed by oneself or by a person acting on behalf of others who are not in compliance with tax obligations and Social Security.
Not be founded or directed by individuals convicted by final judgment for offenses such as embezzlement, punishable insolvency, corporate crimes, money laundering, terrorism financing, offenses against tax and Social Security, prevarication, bribery, influence peddling, misappropriation of public funds, fraud, and illegal exactions, or urban planning offenses, as well as the penalty of losing the possibility of obtaining public subsidies or aid. Also, not having lost the possibility of contracting with the public administration.
Not engage in activities that cause significant harm to the environment in accordance with Regulation (EU) 2020/852 of the European Parliament and of the Council of June 18, 2020, regarding the establishment of a framework to facilitate sustainable investments and amending Regulation (EU) 2019/2088.
Not have partners holding, directly or indirectly, at least 5% of the share capital or whose directors have been convicted by final judgment for any of the criminal offenses detailed in requirement number 11 of this page.
To ensure compliance with the aforementioned requirements throughout the certification process and/or once certified, the applicant must notify any changes that may affect compliance with these requirements.
Step 1: Preparation and Planning
Validate:
Gather a team.
Conduct market research.
Build an MVP.
Test in on the market. See if it works…
Choose a Legal Structure:
Decide on the legal structure, commonly in Spain is a Sociedad Limitada (S.L.)
Step 2: Initial Setup
Choose a Company Name:
Verify and register your company name with the Central Mercantile Registry (Registro Mercantil Central).
Obtain a Digital Certificate:
Obtain a digital certificate for electronic transactions via the Spanish Royal Mint (Fábrica Nacional de Moneda y Timbre).
Step 3: Drafting Legal Documents
Draft the Constitution Article of Association:
Set-up the Partners’ agreement establishing the rules for the internal relations of a company and help to avoid possible conflicts.
Prepare and notarize the statutes or articles of association.
Open a Bank Account:
Open a business bank account and deposit the initial share capital.
(€1 minimum for an S.L. that compliance with the Startups Law)
Step 4: Notarization and Registration
Notarization:
Sign the deed of incorporation before a notary.
Mercantile Registry Registration:
Register the deed with the local Mercantile Registry. The new law reduces this to five business days or six hours if using standard statutes.
Step 5: Obtaining Tax Identification Numbers
Obtain the CIF:
Notaries can now request the company’s tax identification number (CIF) directly, simplifying the process.
Step 6: Additional Administrative Steps
Social Security Registration:
Register the company with the Spanish Social Security system and enroll employees.
Municipal Licenses:
Obtain any necessary local licenses for your business operations.
Step 7: Benefiting from the Startup Law
Certification as a Startup:
Apply for certification from the National Innovation Company (ENISA) to be recognized as a startup. Incentives:
Tax Rate: Reduced corporate tax rate of 15% for the first four years of positive taxable income.
Deferred Taxes: Deferred tax payments for the first two years without interest.
Stock options: Improved tax treatment for stock options, with exemptions up to €50,000 annually.
Investment Deductions: Leverage increased deductions for investors.
Digital Nomad Visa: Utilize the new digital nomad visa to attract international talent.
Step 8: Ongoing Compliance and Continuous Monitoring and Adaptation
Accounting and Reporting:
Maintain accurate financial records and comply with periodic tax filings.
Annual Filings:
Submit annual financial statements to the Mercantile Registry.
Stay Informed:
Keep up to date with any changes in the legal and fiscal environment.
Adapt and Scale:
Continuously adapt your business strategy and scale your operations.
By following these steps, you can efficiently establish and grow your startup in Spain, taking full advantage of the new law's incentives and streamlined processes. For further details, you can visit the official government resources.
Disclaimer 1: I am not gaining any financial or other personal benefits from announcing or promoting this startups. My purpose is solely to provide information based on the available data.
Disclaimer 2: the information provided is for informational purposes only and does not constitute investment advice. I encourage readers to conduct their own research and due diligence before making any investment decisions.