If you have considered starting your own project in Spain, then you should know what a limited liability entrepreneur (ERL) is. Do you know this form of business activity? Continue reading and discover its characteristics and associated advantages.
What is a limited liability entrepreneur?
A limited liability entrepreneur corresponds to a natural person who, as its name indicates, has limited liability under certain conditions, and carries out for his own personal and direct account, an economic or professional activity for profit.
In this way, the entrepreneur will be able to limit his liability for the debts that may arise from the exercise of an activity without adversely affecting his habitual residence.
Through the Entrepreneurs Law of 2013, the figure of the limited liability entrepreneur was created with the intention of increasing the number of self-employed in Spain; which was ideal for starting small projects at a low cost.
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Characteristics of a limited liability entrepreneur
In Spain, a limited liability entrepreneur will be recognized by complying with the following characteristics:
A person of legal age who exercises full control of the company as owner and manager.
The ERL is responsible for all payment obligations associated with its business activity.
The legal personality of the company corresponds to that of the owner.
The minimum number of members is one person
You may have employees at your own expense, if you so desire.
The capital contribution to the company is governed solely by the ERL, so there is no minimum capital requirement.
Requirements to become a limited liability entrepreneur
However, in order to be able to act as a limited liability entrepreneur in Spain, you must meet certain requirements. These are:
You must register as an ERL with the Mercantile Registry of your domicile.
The habitual residence must be excluded from liability, so it must not be related to the business activity.
The value of the principal residence may not exceed 300,000 euros and, in the case of towns with more than 1,000,000 inhabitants, a coefficient of 1.5 will be applied to this value.
The property must be registered in the Land Registry.
You must state in all documentation your status as a limited liability entrepreneur with expression of the registration data.
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How to become a limited liability entrepreneur?
The procedure to become an ERL in Spain is usually quite simple. You already know the key requirements to be fulfilled, now we tell you the step by step:
According to the Entrepreneurs Law, the person must go to the Entrepreneur Service Points (PAE) and fill in the Single Electronic Document (DUE).
Afterwards, the requested documentation must be provided in order to be registered at the Commercial Registry and the Land Registry
Once the PAE sends your information, the Mercantile Registry will have 6 working hours to telematically submit the application to the Business Creation Information and Network Center (CIRCE) system.
Subsequently, the Commercial Registrar will request from the Land Registry the registration of assets that cannot be seized for professional debts, concerning the habitual residence of the limited liability entrepreneur.
Likewise, the Property Registrar must carry out the process within a maximum period of 6 business hours and report the registration to the Information Center and Business Creation Network (CIRCE), which will transfer it to the competent tax authority.
Remember that, from the moment you start the application for the necessary procedures, you can be kept informed of the current status if you wish through the Entrepreneur Service Point.
Obligations of a limited liability company
Like any company or self-employed person operating in Spain, the limited liability entrepreneur is also obliged to issue invoices when carrying out his activities.
In this case, the issuance of invoices is defined as follows:
You have a customer that corresponds to another company, self-employed person or public administration.
In the event that private customers require it for tax purposes
When exporting goods free of VAT, or carrying out intra-community operations
On the other hand, the ERL will be responsible for certain tax obligations such as:
Presentation of form 303, corresponding to VAT, on a quarterly basis.
Filing of form 390, annual VAT summary, in January
In case of applying income tax withholdings on invoices, you must declare them every quarter.
Form 111 declaration, in case of applying withholdings in employees’ payrolls.
Form 115 declaration concerning the rental of commercial premises (if applicable).
Advantages of a limited liability company
In addition to the various opportunities that Spain offers as an attractive country for entrepreneurs, encouraging you to develop as an ERL also offers beneficial aspects for your business objectives, such as:
It is an entrepreneurial way to start small businesses such as micro SMEs, and scale over time.
As already mentioned, it allows limiting the liability for debts arising from the professional practice.
Corresponds to a more economical form of business investment.
It is not necessary to carry out procedures for the acquisition of legal personality.
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If you have any doubts when applying as a limited liability entrepreneur in Spain, remember that at TAS Consultancy we have experts in tax, legal and accounting matters who will advise you on how to successfully manage your procedures. Visit our website and make your first consultation free of charge!
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