Most budding entrepreneurs don’t realize this, but there’s a great advantage to buying a business in Spain (versus opening one up from scratch).
This is especially true if you’re looking to become a bar or restaurant owner, or even a boutique shop owner.
Ahh, the simple life!
In this article, we’re going to take a moment to talk about how to buy a business in Spain, including the paperwork you need and all the little details you need to take into consideration before signing any papers.
So, if you’re looking to move to Spain for a fresh start and want to learn more about buying a business, then keep on reading—you’ll be un tendero in no time!
How to Buy a Business in Spain
Arguably the greatest advantage to buying an existing business in Spain is that many of the licenses, work contracts, permits, etc., are passed over directly to the new owner or company holding. It doesn’t expire just because of a change in ownership.
This alone can save you a lot of money and a lot of time, not to mention resources, since you won’t have to wait for the necessary paperwork such as contracts for employees.
Even if you don’t find exactly what it is that you’re looking for, it’s still much cheaper and quicker to purchase an existing establishment and make plans for renovations and other changes. Of course, if you plan to do renovations, you’ll need the proper construction permits, but you’re already ahead compared to having to go through the long process of obtaining all the required licenses from ground zero.
Important Things to Consider First
Before you do anything, you’re going to want to become familiar with this list of important things to consider when it comes to buying a business in Spain:
- Be very wary about buying directly from the owner. You have no idea what their reputation is or what debts they may be carrying, which could cause you to go broke and lose everything
- Keeping the first point in mind, it’s non-negotiable that you hire a firm of accountants or other professionals to examine the business’s past three years or more of finances. You want to make sure that the business in question has value, and if it has nothing to show for the past three years at minimum, it’s just not worth it
- Seek professional legal advice in terms of what your business structure will be, i.e., will you be a sole trader, partner, etc.? You need to understand the level of liability you’ll be working with
- Carefully consider your tax position. If you’re becoming a resident of Spain, you’ll also be liable to tax in Spain for all your assets
- If you’re purchasing a business for a bigger company, consider whether or not your company will also be purchasing the property, and whether that property will be in your name or the company’s name. A Spanish lawyer familiar with tax laws or an accountant will be able to advise you on this
- Consider the market that you want to capture. Are you attempting to build on top of the business’s existing reputation or are you attempting to change the focus to attract a different audience? Figure out your market and its viability
- Try to get an understanding of why the existing owner wants to sell. This could be directly related to a lack of turnover and revenue, which means you could be buying a dud. Keep in mind that while the market for buying businesses in Spain is hot, selling is actually quite cold
Luckily, Spain is the second-largest country in Western Europe and has been voted the third most attractive country in Europe for setting up businesses as well as for relocation.
Purchase Procedure and Licensing
Now when it comes down to the nitty-gritty, the purchasing processing for businesses in Spain works much like buying properties.
For example, you’ll likely need to pay a 10 percent deposit to show your commitment to buying the business, and if all goes well, over the next 30 to 60 days, you can pay the remaining balance upon signing. The purpose of the deposit, other than to show your commitment to purchasing, is so that the property listing gets taken off the market while you and your lawyers figure out all the legalities.
It’s critical that upon paying the deposit you retain a formal receipt for proof. A copy of that receipt should also be given to the agent or gestor, and not the seller. Also, once the deposit has been paid, in return, the seller should hand over the title deeds (la escritura) or a copy of the lease and inventory of what the price includes to your lawyer.
Your lawyer will then check with the Land Registry to make sure that the seller legally owns or is legally leaseholding the business and has the right to sell. Your lawyer should also verify all the licensing that legally allows you to run the business to make sure everything’s in place.
As for the licensing, the only thing you have to do is register your new business name on it (if you’re changing the business name) and your name, as you’ll be the new owner. You won’t have to worry about waiting months for the proper paperwork to go through, it’s that simple.
Freehold Vs. Leasehold
When you’re buying an existing business in Spain, you also have two options: you can buy a traspaso—a freehold—or a leasehold.
The primary difference between the two types of ownership is the initial investment capital involved and the legality of ownership required.
With a leasehold, you own the business but not the land that it’s on, which is part of what makes it so much cheaper. You’ll also be able to sell your leasehold to a third party for whatever price you choose.
If you purchase a freehold, then you own both the business and the land that it’s on—which is of course, why it’s more expensive. However, you won’t have to pay a monthly rent as you would with a leasehold, and you can sell your business in the form of a leasehold later becoming the landlord of the property to continue your revenue stream.
Ready to Take a Second Look?
Just remember that when you’re buying a business in Spain, it’s always a good idea to take a second look. In other words, visit the establishment more than once, and seek the help of experienced professionals to ensure that the business, licensing, and paperwork are legitimate.
If you’re in the market for such professionals, we’re here to help. At Avalanding, we have an entire in-house team of economists, relocation specialists, accountants, and real estate professionals—all ready to help you with your relocation and business dealings.
Contact us today to learn more about our full-service consultancy for all your professional and personal needs in Spain.
