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When starting a
business it is very
important to ensure
that you have
independent advice
on the options which
are open to you and
their short-term and
long-term cost
implications which
has been provided to
you by someone who
is acting in your
interests.
You know what type
of business you
would like to carry
on but the question
is whether it is
best to take over an
existing one or to
start from scratch.
If you take over an
existing business
then the premises
will be already
fitted out and the
customer base
already established.
You pay the traspaso
(transfer) and take
over the lease and
the opening licence.
However it may be
that the lease is in
the name of a
limited company and
you will therefore
become a shareholder
in the company and
the business
continues unchanged.
This is a common
practise which
avoids the need to
update the premises
for such things as
disabled access and
toilets as the only
change which has
occurred is in the
company´s
shareholdings.
Unfortunately the
maintenance costs
for a limited
company start at
150€ per month and
can be as high as
250 – 300€ or 3,000
– 3,600€ per annum
in just one year for
bookkeeping and the
submission of tax
and VAT returns all
of which to avoid
the need for paying
for a few minor
improvements to the
premises which would
probably cost less
initially than the
costs of bookkeeping
for a year. In this
case the limited
company could be
dispensed with and
replaced by a much
more economical
entity such as a
partnership or a
sole proprietorship.
On the other hand
renting a business
premises and fitting
it out to your own
taste can be a more
economical option.
The landlord of the
premises will
require a deposit of
two months rent in
advance and you will
need to pay for the
costs involved in
obtaining an opening
licence which
involves the
preparation of a
surveyor´s report on
the premises and the
measures to be taken
to ensure that it
complies with health
and safety
regulations such as
toilet facilities,
fire prevention
measures etc. and
that any machinery
is safe and any
fumes are extracted.
The report itself
can cost around
1,000€ for a bar or
restaurant, storage
facility or workshop
but for what are
known as innocuous
activities such as a
card shop then all
that is required is
a safety certificate
which costs around
400€ in addition to
whatever building
and fittings and
fixtures costs may
be necessary. In
addition a rate is
charged by the
townhall for the
licence based on the
floor area of the
premises and at a
rate dependant on
the type of business
proposed.
The next question to
be resolved is that
of the type of legal
entity which best
suits the persons
involved in the
business. By far the
most economical is a
sole proprietorship
(autonomo) which
costs 120€ to
register with the
tax office and
social security
department and 55€
per month for
bookkeeping and the
preparation and
submission of income
tax and VAT
declarations which
are due on a
quarterly basis. |
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If more than one person is
involved in the business
then a partnership (sociedad
civil) might be considered.
Costing 350€ to set up and
75€ per month for
bookkeeping and tax
declaration submission, the
partnership in its own right
being liable for
declarations of VAT and the
partners the income tax on
their share of the nett
income after expenses.
Value Added Tax operates in
Spain in the same way as the
UK, being paid quarterly
after deducting VAT on
expenses incurred from the
VAT charged to customers.
Income taxin Spain is paid
on a quarterly basis at 20%
of the difference between
nett income and nett
expenditure. These payments
are provisional pending the
submission of a full income
tax declaration in the
middle of the following year
when the individual´s
circumstances are taken into
account such as dependents,
mortgage commitments etc.
and the tax already paid is
set off against whatever tax
may be due.
A third option for a vehicle
for carrying on a business
is the Limited Company
(Sociedad Limitada) which
costs around 750 – 800€ to
set up but can be expensive
to maintain. In addition to
liability being limited to
the value of the share
capital the company submits
quarterly VAT declarations
but only pays corporation
tax on the nett profit after
the annual accounts have
been prepared.
This introduction is an
outline of the main
considerations when starting
a business and hopefully
demonstrates the
advisability of looking at
all of the options available
while looking at the longer
term as well as the short
term in the company of
someone who is looking after
your interests.
Call me for a free
consultation.
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