Business Entity Types: Legal Structures for Companies

Understanding Business Entities and Company Structures

Choosing the right legal form for your business is a crucial decision. This document outlines various types of business entities and company structures, detailing their characteristics, liabilities, and capital requirements.

Sole Proprietorship (Empresario Individual)

A Sole Proprietorship is a business entity where an individual operates in their own name and through their commercial, industrial, or professional enterprise.

Key Characteristics:

• Legal Age: The individual must be of legal age.
• Total Control: The proprietor has complete control over the enterprise.
• Unlimited Liability: The proprietor's personal assets are not separate from the business assets, meaning their liability is unlimited.
• No Minimum Capital: A specific minimum capital is not strictly required.
• Trade Name Holder: The individual is the direct holder of the trade name.

Civil Partnerships

Civil partnerships involve agreements between individuals to share in profits from contributions of money, goods, or industry.

Private Civil Partnership

Two or more individuals agree to contribute money, goods, or industry, with the desire to divide profits. These are often private agreements between members where the actions of individual members are not strictly limited by capital. The corporate name can be any chosen name.

Public Civil Partnership

Similar to a private civil partnership, but the agreements between partners are public and constituted by a public deed. These partnerships must be registered in the Commercial Register.

Mercantile Companies (Commercial Companies)

Mercantile companies are formed by several individuals who pool common equity funds to collaborate in the operation of an enterprise, aiming to benefit from its profits and participate in the distribution of earnings. They are generally classified based on the importance of personal characteristics versus capital contributions.

Classifications of Mercantile Companies:

• Personalist Companies: Management is primarily based on the personal characteristics and involvement of the partners, rather than solely on capital contributions.
• Capitalist Companies: The most important aspect is the contribution of capital, rather than the personal characteristics of the partners.

Specific Mercantile Company Types:

General Partnership (Sociedad Colectiva)

A General Partnership requires a minimum of two partners. All partners are involved in managing the enterprise, though their contributions may vary. A key feature is the partners' liability:

• Unlimited and Joint Liability: Partners are personally, unlimitedly, and jointly liable for company debts to third parties.
• No Minimum Share Capital: There is no legally required minimum share capital.
• Company Name: The company name must include the name of all partners (or some, followed by "and Company" or similar designation).
• Taxation: The company is subject to corporate tax.

Simple Limited Partnership (Sociedad en Comandita Simple)

This partnership involves two distinct types of partners:

• General Partners (Colectivos): These partners intervene directly in the management of the company and are personally, unlimitedly, and jointly liable for company debts.
• Limited Partners (Comanditarios): These partners make a monetary contribution to the company and participate solely in financial results, without intervening in company management. Their liability is limited to their capital contribution.

Key Characteristics:

• Minimum Partners: At least two partners are required (one general partner and one limited partner).
• Transferability: Partnership interests may not be freely transferable.
• No Minimum Share Capital: There is no legally required minimum share capital.
• Taxation: The company is subject to corporate tax.

Limited Partnership by Shares (S. en C. por A.)

Similar to a Simple Limited Partnership, but with significant differences regarding limited partners' participation and capital requirements:

• Share Representation: The participation of limited partners is represented by shares.
• Minimum Capital: A minimum capital of €60,101.21 is required. This capital must be fully subscribed and at least 25% paid up at the time of constitution.
• Minimum Partners: The company must have at least two partners, with at least one being a general partner.
• Company Name: The company name can be any name chosen by the members, followed by "S. en C. por A." (Sociedad en Comandita por Acciones).
• Taxation: These companies are subject to corporate tax.