Business Fundamentals: Operations and Legal Structures

Business Concept and Purpose

A business concept is an entity that combines the factors of production to obtain goods and services that satisfy needs and obtain benefits.

Purpose

• Social: To satisfy needs.
• Economic: To obtain gain.

Key Elements of a Business

Technical Capital

Technical capital includes all those elements required for the development of business activity. Certain items may last long in the business, such as machinery and computers, while others are often short-lived, such as goods sold.

Human Capital

• Employee: One who serves in exchange for wages.
• Employer: The person or persons who control and direct the business.
• Owner: The individual who creates the company, bringing their capital to achieve profitability.

Core Business Functions

• Commercial: Making the product known through advertising and selling it.
• Production: Manufacturing or processing goods and providing services.
• Human Resources (HR): Managing all matters relating to company personnel, such as hiring and salaries.
• Economic and Financial: Raising funds and investing, including the economic control of the company.

Taxation in Business

All businesses must manage their finances to pay for the benefits they obtain. There are two primary taxes:

• Corporate Tax (IS): The percentage to be paid is the same regardless of the benefits.
• Personal Income Tax (IRPF): The percentage payable varies according to the benefits.

Shares and Participations

Action (Shares)

This represents the capital of a Public Limited Company (Sociedad Anónima). At least 25% must be paid up. It can be divided and sold freely.

Participation

This represents the social capital of a Limited Liability Company (Sociedad Limitada). It must be 100% paid up. It is indivisible and cannot be sold freely.

Rights of Owners and Participants

• Attend the general meeting and vote.
• Participate in corporate profits through dividends.
• Participate in the assets of the firm if it disappears.
• Pre-emption rights for new shares.

Governing Bodies by Company Type

Public Limited Company

• General Meeting: The meeting of all members to vote and make decisions.
• Administrators: Those who represent and manage the company.
• Auditors: The body responsible for the accounting review.

Limited Partnership

• General Board: Meeting of all members to vote and make decisions.
• Administrators: Those who represent and manage the company.

Cooperative

• General Assembly: Meeting of all members to vote and make decisions.
• Board of Regents: Those who represent and manage the company.
• Auditors: Responsible for the national review of accounting.
• Appeals Committee: The body that resolves the claims of the members.

Other Business Forms

• Community Property: When a property is owned by two or more people.
• Civil Society: A structure where goods provided to create the company are proprietary.
• Labor Company: A company in which the majority of capital is held by working partners who have a permanent, full-time contract.
• Franchise: An agreement between the franchisor and the franchisee under which the second exploits an already established business in exchange for money.