If you’re considering forming a Limited Liability Company (Sociedad Limitada (SL)) in Spain, you’ve probably already heard about the role of partners/shareholders (socios) and the company director (administrador). But what exactly does each one do? Who makes the big decisions? Who is responsible before the tax authorities?
In this article, we explain it all with simple examples so you understand how an SL is organised before taking the plunge.
Legal Advisor
Abigail Sked, Legal Advisor (Subtitles available in Spanish and English)
The partners/shareholders provide the initial capital, which can be in the form of money, assets, or rights. In exchange, they receive company shares.
For example, if you contribute €3,000 and your partner contributes €7,000, you’ll hold 30% of the company while they’ll hold 70%.
Partners have the right to share in profits, attend general meetings, and vote on major decisions.
They also have duties: to provide the agreed capital, comply with the Articles of Association, and act in the company’s best interests.
It's important to note that although partner liability is limited to the capital invested, this protection can be lost in cases of fraud or if personal and company finances are improperly mixed.
Our tip: even with just a few partners, it’s vital to regulate your relationship clearly through the company’s Articles and, if necessary, a shareholders’ agreement. Deciding in advance what happens if someone wants to sell their shares or if serious disagreements arise can prevent disputes that sometimes end up in court.
The director (administrador) is legally responsible for representing the company and running its day-to-day business. This can be one person, several acting jointly, or even a Board of Directors.
Their role involves:
Signing contracts and representing the company before third parties.
Convening shareholder meetings.
Filing annual accounts with the Commercial Registry.
Ensuring compliance with tax and employment obligations.
Careful! A director may become personally liable if there is proven mismanagement or serious breaches.
It’s important not to confuse this role with the secretarial or administrative tasks which can be delegated to your accounting firm or legal team. Choosing who will take on the role of administrator is a strategic decision that can directly impact the company’s operations and liabilities.
While the director handles everyday management, key decisions are reserved for the General Meeting of Partners. These include:
Approving annual accounts.
Deciding on dividend distribution.
Admitting or removing partners.
Amending the Articles of Association.
Think of the General Meeting as the company’s parliament, where partners hold ultimate control.
Every meeting must be recorded in official minutes, which have legal value. In certain cases, such as a share capital increase, these must also be notarised and registered with the Commercial Registry.
Our tip: even if you’re a sole shareholder (SLU), you are still required to keep written minutes of your decisions. This is mandatory and ensures full legal transparency of the company.
Although not compulsory, some companies may also involve the following figures:
Forming a Limited Liability Company (Sociedad Limitada) means dividing responsibilities clearly: partners/shareholders (socios) provide capital and make strategic decisions in the General Meeting; the director (administrador) manages the daily business; and additional roles may be added as needed.
The important thing is that everyone understands their role and its limits because clarity today prevents conflicts tomorrow.
If you’re planning to set up your company or want guidance on which role is right for you, get in touch. We’ll help you organise everything so your business starts off on the right foot.