How to create a limited company step by step?
Do you want to create a limited company but don't know where to start? How to establish a limited company? What documents are needed? These are questions commonly heard in a notary's office. Many clients, interested in starting their own business, need to create a Ltd, as it is simpler in terms of operation than a public limited company or PLC, and in this article I want to briefly explain how to do it.
Procedures to create a limited company
For those who want to know how to create a limited liability company, three main steps are needed:
- The granting of the deed of incorporation.
- Comply with tax obligations.
- Register the company in the competent Commercial Registry.
1. Requirements to obtain the deed
According to article 21 of the Capital Companies Act, this requirement is essential to create an SL, and it cannot be constituted in a private document. For the granting of the notarial deed of incorporation of a limited company, the following requirements must be met:
A. The company name and the Negative Certificate of Company Name.
Every company must have a name or denomination, in order to identify the company. As each company has a unique name, to certify that the denomination is valid and is not being used by another entity, it is necessary to obtain from the Central Mercantile Registry the so-called Negative Certificate of Company Name.
It is important that the Negative Certificate of Company Name is requested by one of the founding partners, in order to prevent third parties from reserving and hoarding denominations, with the name of this same partner appearing on the certificate. The applicant can request several denominations in order of preference, and the first available one will be reserved for the company.
Once the certificate with the selected denomination has been issued, you should know that it will have a validity of 3 months to officially create a limited company. If the deed is not granted within this period, a new one can be requested. After six months from the initial request, the reservation of the denomination is lost, and it will be free for a third party to request it.
How can I obtain the Negative Certificate of Company Name?
You can request it online from the Mercantile Registry (https://www.rmc.es) or your manager or lawyer can process it for you. It can also be requested quickly and easily from the notary's office through the notarial platform.
B. The share capital of the limited company, contributions and payments.
The company must have a minimum capital to be able to start the activity. This minimum share capital, in limited companies, was previously €3,000, according to article 4 of the Capital Companies Act. However, with the new Law 18/2022, of 28 September, on the creation and growth of companies, it is reduced to €1, although logically, more can be contributed.
These contributions may be monetary or non-monetary (such as computers, furniture, vehicles, etc).
Regarding monetary contributions, it is common to present a bank certificate proving that the money has been deposited in the name of the company. This money will be immobilised until the company is established, and an account can be opened in its name upon presentation of the negative certificate of company names. However, following the reform of 28 December 2018, this requirement is no longer necessary, although it is important to know that the current article 62.1 of the Ley de Sociedades de Capital states, "it will not be necessary to prove the reality of monetary contributions in the establishment of limited liability companies if the founders declare in the deed that they will be jointly liable to the company and to the company’s creditors for the reality of such contributions."
The share capital must be divided into social shares, similar to shares in public limited companies. Each of these shares, which must be numbered, must be acquired by all the founding partners.
C. The governing body.
The administration is the corporate body responsible for managing and executing the company's decisions and representing it in its activities. The administrators can be joint, several, a board of directors, or a sole partner. However, the appointment must be recorded in the public deed, along with the form adopted by the company.
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The administrator, who must attend the incorporation act, must accept the position and expressly state that they are not subject to any of the incapacities provided for in the Capital Companies Act (article 213).
D. The articles of association of the SL
In the deed of incorporation, the articles of association must be included, which are the set of rules that will govern the company, regulated in article 23 of the Capital Companies Act and articles 176 and following of the Mercantile Registry Regulations. The articles can be provided by the client, either drafted by them or by their lawyer or manager, or their preparation can be delegated to the notary office itself, which is also common and we do frequently in our notary office in Barcelona.
By way of summary, some of the elements that the articles must contain are the following:
- The company name, in the same terms as those indicated in the Negative Certificate of Company Name.
- The corporate purpose. This refers to the activity or set of activities that constitute its business and for which the main aim of the company is intended to be achieved, the obtaining of profit or gain. To comply with this requirement, the activities must be defined through a coding system called CNAE (https://www.cnae.com.es/). A single purpose or multiple purposes can be included, but it should be borne in mind that to change or add any in the future, it must be agreed at a meeting and the resolution of the meeting must be formalised in a public deed.
- Registered office, which must be located in the place within Spanish territory where the centre of its effective administration is situated.
- The share capital and the shares into which that capital is divided.
- Duration of the company, if not indicated it will be understood as indefinite.
- Form of organising the administration.
How much does a deed of incorporation for a limited company cost?
The price of the deed of incorporation of a limited company will depend mainly on the share capital. The most common is to incorporate an SL with its minimum capital, that is, €3,000. With this minimum capital, the incorporation costs of the limited company corresponding to the deed of incorporation are approximately between €400 – €500, always following the notarial fee schedule established by law.
2. Tax obligations related to the creation of an SL
Other steps you should know to understand how to create a limited company are the following:
A. Obtaining the NIF.
Once the notarial documentation has been signed, the tax identification number or NIF must be obtained, which must be requested within one month from the granting of the deed, and always before carrying out any economic act.
To obtain it, form 036 must be submitted to the Tax Office, duly completed, along with the signatory's ID and a simple copy of the deed. However, if the client wishes, the NIF can be obtained automatically from the notary's office through the notarial telematic platform.
This first NIF is provisional, valid for 6 months, and to obtain the definitive one it will also be necessary to prove registration in the Mercantile Registry.
B. The settlement of the Property Transfer Tax.
The incorporation of companies is subject to the TPOAJD tax, specifically under the category of corporate operations, with the taxpayer being the company itself; however, following the reform of the Royal Decree-Law 13/2010, of 3 December, the incorporation is exempt from this tax, so the incorporation of a company does not pay taxes.
C. The registration of the SL in the IAE.
The Economic Activities Tax is a local tax, which aims to tax economic activity, in order to report the start of the activity. To register, in addition to the NIF, the forms 840 or 848 must be completed or, if applicable, only the form 036 of the census declaration with the headings to which the company subscribes.
D. VAT census declaration.
To register, it will be necessary to complete the form 036, declaring the start of the economic activity (this would also apply if the activity is modified or ceased).
3. Register the company with the competent Commercial Registry
Finally, the last step of the process to create a limited company, without prejudice to obtaining the definitive NIF, is the registration in the Mercantile Registry. This registration is mandatory and must be submitted within two months from the granting of the deed, with the administrators and founding partners being responsible for any damages caused to the company (article 32 Capital Companies Act).
To carry out the registration, the following must be submitted to the Mercantile Registry:
- Certified copy of the Company's deed, which includes the documents provided, such as the aforementioned Negative Certificate of Company Name.
- Settlement of the Tax on Property Transfers and Documented Legal Acts.
- Provisional NIF.
This registration will be carried out in the competent Mercantile Registry, which is that of the province where the company is domiciled. Once the registration has been made, in accordance with article 35 Capital Companies Act, the constitution of the company will be published in the BORME (Official Gazette of the Mercantile Registry).
During the intermediate period from the granting of the deed to the registration in the Mercantile Registry, the company may begin to operate, thus article 36 of the Capital Companies Act states that "for acts and contracts entered into in the name of the company before its registration in the Mercantile Registry, those who entered into them shall be jointly liable, unless their effectiveness was conditioned on the registration and, where appropriate, subsequent assumption of the same by the company." However, it should be borne in mind that while the company is not registered in the Mercantile Registry, no registration of contribution or acquisition of real estate may be made in the Property Registry, according to article 383 of the Mortgage Regulations.
We hope that this guide to creating a limited company has been helpful for those who are starting a new activity and are thinking of creating an SL. If you need more information, or advice on the steps to follow to carry out this procedure, do not hesitate to contact our team of professionals, we will be happy to help you. You can contact us by email at bcn@jlanotarios.com or write to us from the website contact form.
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