While the term “Incorporated” or “Inc.” is long familiar to business people in the United States (see our article on Limited Liability Entities), and while most American business people are now familiar with the newer United States concept of Limited Liability Companies (“LLCs”), those engaging in international transactions will soon encounter the entities known as Sociedad Limitado (in Spain) and Sociedad Anonima (in Spain and many other nations listed below.) This article shall briefly describe what these foreign entities are.



As with a corporation or limited liability company in the United States, SAs and SLs are types of entities that exist for the purpose of engaging in business and investment and provide limited liability for their owners. Limited liability is a key goal for most business people which is why corporations, limited partnerships, limited liability companies and nonprofit corporations exist in the United States. See our article on such entities referenced above. The difference is that these particular types of entities provide businesses abroad their limited liability rather than the typical corporate or LLC structure familiar to United States business people.

What is the difference between a Sociedad Limitada (SL) and a Sociedad Anónima (SA)?

Answer: To simplify, SAs are companies with liability limited by shares ("Sociedad Anónima" or "SA") as opposed to companies with liability limited by owners being granted limited liability by the nature of their activities within the entity, the method of their participations ("Sociedad Limitada" or "SL")[1]. SAs would be equivalent to the American corporation in which owners have shares while SLs are more akin to limited partnerships or limited liability companies which are subject to much more informal requirements but still provide limited liability provided the owners act in certain ways..

SLs are generally used for businesses owned by a reduced number of members or where a lesser degree of formalities is required. SAs may be more suitable for wider shareholding structures or where it is anticipated that financing from capital markets may be necessary. Most nations in Europe use SAs on a regular basis. Fewer have their versions of the SLs.

In either case, single member companies are permitted.

An SL is similar to the British "Ltd" or the American "LLC". Accounting for an SL is fairly simple, and in the first three years, you can apply for "simplified accounting". Accounting for an SA is more complicated, and yearly auditing is required. In Spain, in 2005, a SL requires capital backing of 3005.60€, while an SA requires 60,101.21€. In an SL, there is wide flexibility regarding who can be named as director. In an SA, administration is normally strictly regulated. The task is usually performed by a group of paid professionals who represent all the shareholders.

Unlike the SA, the SL is a so-called "closed" company, in which the transfer of participations is, by operation of law, restricted. A SL may not access capital markets (flotation is not allowed) or issue debentures. However, procedures for SLs are simpler than those for the SA (for instance, no experts' report is required for capital increases with contributions in kind).

SLs allow for more restrictive provisions in their by-laws regarding transfer of participations. Further, SLs (as opposed to SAs) may in certain cases be suitable for the "check-the-box" election, under which a United States parent company may elect that a subsidiary entity be treated as tax transparent for U.S. tax purposes. This facilitates elimination of double taxation of the same profits and can create a hybrid entity with the potential for a double dip.

You might choose an SA:

-if you want to be able to sell stock or company bonds, or go public (IPO).


-as part of international estate planning.


-to establish a nonresident company.


Otherwise, if deciding to engage in a non public business in Spain, you would choose an SL. Most companies formed in Spain are now SLs, and not only for small businesses.


Comparison Chart:


Sociedad Limitada (Limited-liability Company) Sociedad Anónima (Corporation)


Liability: limited to the extent of the contribution Liability: limited by shares

# of Partners: 1 to 50 # of Partners: 1 or more

Backing Capital: minimum 3,005.60€ Backing Capital: minimum 60,101.21€

Taxation: corporate taxation, VAT, local taxes Taxation: corporate taxation



Before acting on any of the information in this memo, the reader is advised to obtain more detailed legal and accounting advice. The international tax ramifications of business can be both complex and vitally important for a business and the business person is well counseled who does his or her homework before beginning the dream of a foreign based business.

[1] SAs exist in the following countries: Brazil, Belgium, France, Greece, Italy, Ivory Coast, Luxembourg, Mexico, Morocco, Poland, Portugal, Romania, Switzerland, and Spain. SLs are specific to Spain but other nations, such as Britain, have variations on them called “Ltd” or “limited” companies