Some of the situations described below may seem pretty obvious for you but you would be surprised of how many foreign investors fall into these common pitfalls

1.-Paying a deposit for a “Traspaso” of an established business without a proper legal and binding contract. A receipt it is not enough.

2.-Paying a deposit without a thorough search on the business: Taxes, Social Security, trading licenses

3.- Asking for a copy of the rental contract or Title Deed of the commercial premises

4.-Contact details of the vendor (owner or landlord) must be requested to the agent.

5.-Setting up a Spanish limited company from day one (50/50 owned and joint administration - 2 signatures required) may not be a good idea

6.-In Tourist areas certain activities require special administrative permissions (i.e. pubs, excursions, diving and sea activities, holiday lets, timeshare etc).

7.- Long term rentals may require registration in the land registry office to protect your business for bank repossession on unpaid mortgages (foreclose on an landlord´s mortgage).

9.- Your partners non resident beneficiaries own the deceased partners´ shares on a Spanish limited company by law. They may not be interested or involved in running the business and difficulties may arise to make important decisions that affect the business.

10.- The first dispute in a 50/50 owned company may paralyze the same. This situation may lead the partners to the dissolution and liquidation of the company. The procedure to wind up a company is complicated and very expensive under the Spanish law.

There are many other economic and fast solutions to start a business than a Spanish limited company. Ask first and pay later.

Jose Escobedo
Abogado - Lawyer

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C.C San Eugenio local 81
Playa de las Américas, Tenerife