Many harbour ambitions of starting their own business abroad, but there are some important factors to take into consideration before entering into this very potentially very rewarding, but sometimes risky, way to make a living on the island.
Do the research
Buying a bar or a restaurant is a popular choice for many, so find out the laws that govern this type of business in the area you want to buy – is live music prohibited, what are the opening hours, staffing issues, taxation requirements, etc. In Spain, for example, the loan on a building stays with the property rather than the owner, so any loans against the property or business will be transferred to you once you purchase it.
Take your time
Don’t be rushed to make a commitment. There are many interesting business opportunities on Mallorca, so explore the options and be creative. Many more businesses are actually for sale than what are advertised, due to confidentiality, so contact commercial agents and let them know what types of business you have in mind.
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The holidays are over, the kids are back at school and life returns to a mundane routine once again. Winter has set in and you start to remember your holidays, thinking, wow… wouldn’t it be great to live in Mallorca and have sunshine everyday? Maybe it’s possible you think, if we sold our house, especially now that prices have increased so much in the UK. Could we afford a bar or a restaurant or something?
This is the dream that drives so many to make the move to Mallorca, according to Rosemary Stone who specialises in commercial property sales and has helped numerous couple to realise their dream.But it is certainly not all sunshine. As Rosemary describes, “before starting Bizbalears I was working freelance, helping people who had encountered problems when coming to the island. Many of them had to leave destitute as they had been “conned” out of their money by unscrupulous well-known lawyers and commercial agents”.
“Be careful”, is the message that comes across loud and clear from all the reputable experts. Instead of being more cautious in a foreign country, particularly if one does not speak the language and is not familiar with the legal and taxation system, many fall into the trap of sitting back and letting the nice people they have just met sort out all the details. “Our experience in Bizbalears is that clients had willingly signed everything put in front of them, often including power of attorney papers, and had given their bank details for direct debits. I have to admit that these people should have had more sense, but when faced with a charming lawyer speaking fluent English in an impressive office, they are often mislead.”
Our advice is to act as you would in your home country, but with even greater caution and diligence. Ask for references from existing customers of agents, bankers, lawyers, and tax advisors. Talk to people who have completed similar projects to what you are about to embark upon, and make sure to listen to their advice. They know best because they have been through the process themselves.
For every success story there are ten sad stories of people who did not do their homework and trusted the advice of one or two unreliable people who had a vested interest and, as a result, they lost their money. One banker told me, “People arrive in autumn with their dreams and leave in spring having experienced a nightmare”. So how can you avoid the common pitfalls to make sure your business venture is a success?
Do the research before you buy
Buying a bar or a restaurant is a popular choice for many from the UK, so find out the laws that govern this type of business in the area you want to buy – is live music prohibited, what are the opening hours, staffing issues, taxation requirements, VAT and so on… Make a long list and keep digging until you are satisfied that you fully understand the key issues. It is your responsibility to know and understand the business you intend to buy and manage.
Work with reputable professional advisors
Get recommendations from your network of contacts on the island. In addition, get references from existing customers of the agents and advisors you plan to use.
Learn the language
Moving to a foreign country and getting involved in a business without understanding the native language is like operating with your hands tied behind your back. It is a lot of effort to learn a new language, and in reality it will take at least three months if you work very hard at it. Speaking the local language is a huge advantage and will be one of the principle reasons for your
Dip your toe in the water
Don’t be rushed to make a commitment. If you are a couple, one of you can move over for a few weeks or months before you make your final decision. If you intend to buy a bar or restaurant and have no experience in this business, take a job and decide if you like it or not. Think outside the box. There are many interesting business opportunities in Mallorca, so explore the options and be creative. Buying a bar or a restaurant means working long hours, and if you have a young family this could reduce your quality of life rather than enhance it. Insider Tip: there are many more businesses for sale than what are advertised, due to confidentiality, so contact commercial agents and let them know what types of business you have in mind.
You will need to prepare a business plan, outlining the strengths, weaknesses, opportunities and threats of the business over the next six to twelve months. When taking over an existing business make sure to get this information from the existing manager, staff and customers. If you are starting a business from scratch, do a feasibility study before you making a decision.
Should you opt to get professional support in this area, Dolphin Asesores is a reputable law firm that has over 20 years’ experience in helping foreign-owned companies from their beginnings to their continued success.
For over two decades, law consultancy firm Dolphin Asesores has been providing solid support for foreign nationals making a successful life in Mallorca. […] Dolphin Asesores: Your tax & legal advisors
Budgeting and financing
In my own experience from setting-up a business, you will need to have considerable more money available than you think at the outset. Anticipate that you will experience delays and incur additional expenses. Insider Tip: with VAT payments in the UK and Germany, you get a VAT refund if applicable at the end of each quarter. In Spain, you pay the required VAT every three months, but when there is a credit you can be waiting up to seventeen months for the refund.
Ownership & loans against the business
In Spain, the loan on a building stays with the property rather than the owner. Any loans against the property or business will be transferred to you once you purchase the business. Make sure the necessary clearances and searches have been done before you sign a contract.
Take off the rose-tinted glasses
When you hear the negative stories and read of deals gone wrong, be convinced that it could also happen to you. Don’t let the dream delude you just because you are keen to escape your current circumstances.
Mallorca is one of the best places to live when you have sufficient money that you do not need to work. Earning an income, however, can be quite difficult. As wages tend to be considerably lower than in Northern Europe many have no choice but to buy or establish their own business. This will be much easier if you follow the advice in this article and be prepared. With careful planning you will be one step closer to your dream of living in Mallorca.
Finance & Banking
There are many banking institutions in Mallorca competing for a share of the business from the foreign community. A few words of advice – do not expect the same procedures or conditions that you take for granted in your home country. Decisions take much longer; the requirements are much more stringent particularly for non-residence and most importantly a notary-signed contract is the only document that really means anything. In other words, getting verbal acceptance or even a letter or email from the bank is not sufficient. You must have a notary-signed contract for it to be validated.
Banca March have over 100 branches throughout the island, and in many branches (particularly in tourist areas) they have staff who speak English and/or German. They also offer an excellent online banking system in English, German and Spanish, which makes it easy for foreigners living abroad to manage their bank account in Mallorca. If you need to transfer funds quickly from abroad to pay a deposit on a property or business, you can open a Euro Account online to transfer funds before you arrive.
Banca March has been supporting people and businesses in Mallorca to manage their money and achieve financial success for more than 90 years. […] Banca March
One service you will need, which is unheard of in the UK and Germany, is a Gestoria. The purpose of a Gestoria is to mediate between business and public offices, such as preparing the employee wages, IVA payments and retention tax. You will find many Gestorias on the island but we suggest getting a referral.
If you need an office for your business, an excellent alternative when you start is to use the facilites of a business centre. This means that you can establish your office immediately with telephone lines, business address and have access to secretarial skills in various languages.
Tel: +34 971 495 166
Accountants & Lawyers
Avda. Alejandro Rosselló, 15-5 E
Tel: +34 971 228 177
Passatge Particular Antoni Torrandell, 2 Entresuelo
Tel: +34 971 919 555
More about Business on Mallorca
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We hope you have found this article about Setting up a Business in Mallorca useful and that the process of doing business on Mallorca gets easier as a result of our recommendations.
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