Changing the Company Type in SpainUpdated on Thursday 28th July 2016
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The legal system applicable in Spain follows the rules and regulations imposed by the European Union (EU), that prescribe the way in which commercial legislation should be handled. Businessmen interested in setting up a company in Spain or those who have already established their business presence on the market should know that they are allowed to change the type of the legal entity under which they carry their operations. Our team of Spanish lawyers can offer assistance to those who want to change the business form of their company.
Why change the company type?
The local legislation prescribes that the type of a legal entity can be changed if the investors may choose to do so. One of the main reasons why this regulation is available is related to the needs of the company that are no longer fulfilled under the current legal entity. At the same time, the investors can change the business form if they consider that another legal entity would provide other investment opportunities or other rights and obligations; our team of Spanish attorneys can offer more details on the procedure.
Change a sole proprietorship into a limited liability company in Spain
One of the most common changes of the business forms refers to the statute of the sole proprietorship, which is the simplest form of business available in Spain. A sole proprietorship is recommended for small businesses, in which the investors represent themselves. There is no legal distinction between the investor and the company and this could become a liability once the business grows.
In this situation, the investor could opt to change the business form into a limited liability company (LLC), which, customarily, is the preferred legal entity in Spain, due to the rights and obligations prescribed for the shareholders.
The LLC is a distinctive legal entity and the liability of the investor is limited to the amount of shares he or she owns in a company. It is important to know that the level of taxation applicable to the company will also change, as the owners of a sole proprietorship are exempted of various taxes. The LLC is required to pay the corporate tax, while in a sole proprietorship, the owner pays the personal income tax on the company’s profits.
Businessmen interested in receiving further information on the ways in which a company type can be changed in Spain, may address to our Spanish law firm for legal assistance.