Buying a Business in Spain
Spain provides plenty of opportunities for running a successful
business. As a foreigner your business really needs to be aimed at other
foreigners or holidaymakers, the Spanish do not usually patronize foreign
businesses unless they are offering something unique. However with the large
increase in residential tourism taking place at present there are new
opportunities springing up all the time. Owning and operating your own business
in a foreign country does present problems but with proper advice and planning
any risks can be minimalised. The following is a guide and is no substitute for
Don't get taken for a ride
There are many examples of being duped to greater and lesser
extents. In Spain if you are not buying the freehold of the premises then you
will be paying for the "Trespasso". This is for the goodwill, internal
fittings, plant and stock of the business. You will then rent the premises from
a landlord, who will require a deposit. These are all critical areas where
problems can arise.
Opening Licence. See it and get a copy. This should be available at the
premises. If the actual licence or a copy cannot be provided then the business
does not exist legally. You can agree to buy the business without the licence
and negotiate the price accordingly, but get quotes on the costs and likelihood
of eventually obtaining a licence first. The final costs of meeting the various
criteria and obtaining an opening licence ('Apertura' in Spanish) for a
particular business is a large variable. If a business you are considering
buying has applied for a licence, and is running pending acceptance of the
application for an apertura, then ascertain exactly (from the authorities, not
the seller) why the apertura is delayed and what the current status of the
Rental contract. You must get a copy of this. It will show;
How much longer it has to run
- Who is responsible for what type of wear
- What percentage of the trespasso relates to the landlord, what
fittings belong to whom
- If the seller has the right to sell the lease
it is renewable at the end of its term
- When and what any rent increases
- Whether you can sell the business on again
- Who pays
for what-refuse collection, electricity, water, rates, taxes etc.
the other terms a tenant is required to comply with
Trespasso. Don't pay too much. If you pay more than its worth (fittings, etc) a
lot of your capital will have been consumed immediately. Goodwill is
intangible, so be sensible about this. The higher the past trading figures the
higher the price of the Trespasso, a difficult one because Spain is primarily a
cash economy and some of the turnover may not have been declared!
Landlord. It is a legal requirement that you contact this person when the
tenancy is changing hands. Paying too much rent is probably the biggest single
cause of business failure in Spain so make sure you agree with the landlord the
exact rent required and any contract changes.
Contract of sale. Get a copy beforehand-you must read and understand everything
in the contract, so that you can check everything carefully well before the day
of signing. The contract should specify every item which is included in the
sale, the terms and timescales involved and guarantee that the business is free
of encumbrance, debts and liabilities.
Notarial approval. If you don't "Notarise" the signing of the contract and
handing over of the money your ownership may be challenged at a later date and
you may not be able to claim tax allowances against your capital outlay.
Limited Companies (SL). Beware they can have all sorts of hidden
liabilities and a thorough check must be carried out on them by a professional.
Also bear in mind;
Taxes are higher than a "sole proprietor"(34% compared with 25%).
of formation are comparatively high.
- Annual audited
accounts are necessary and the appointment of an "administrator" is mandatory
to comply with all the statutory obligations of a limited company.
cannot be bought off the shelf.
Legalities of buying a business in Spain
Bear in mind that with the exception of a "residencial/work
permit (required by any foreigner) all other legalities must be complied with
by everyone-not just you. Many people think that the bureaucracy is there just
to make life difficult for them but the truth is we all have to live with it.
Most documents in our modern, complex world are necessary to prove that you;
Are legally identifiable and entitled to be where you are doing what you are
- Can produce the documents necessary to prove you are the real
owner of anything you claim to own.
- Have met every statutory
requirement relating to either of the above.
Make sure you can produce any necessary documents, e.g.,
residencial, trade licence, statutory payment receipts (social security, rates,
licence fees) when required to do so.
Don't use a lawyer to fight a case, use him to avoid a case by
consulting him before problems arise. Ensure that any documentation associated
with your business (from the rental contract through to your terms of business
with your clients) has been correctly worded and is legally effective in
protecting your interests. A good accounting service will always save you
money, more so in Spain than in other places.
Don't overstretch yourself. Remember that your higher than
normal start up costs and lower turnover will call for some funds in reserve.
Whether you are beginning an enterprise you have no previous
experience in, or continuing your own profession, you must do it well. Do not
start something beyond your capabilities. Verbal recommendations can make or
break a business-forget get rich quick schemes, long term these never work. No
matter whom you are providing a service to, offer a good service at fair prices
and word will spread. With patience and hard work you will succeed.