Business Legal Structures: Liability and Taxation

Individual Enterprise (Empresa Individual)

Companies are classified according to their legal form into individual enterprises or corporate partnerships. The individual enterprise is a single personality type owned by one physical person.

Sole Proprietorship

A Sole Proprietorship is an individual who performs commercial, industrial, or professional activities on their own behalf.

• You must be of legal age and have full availability of your assets.
• It implies total control by the entrepreneur, who is personally liable for debt management and social commitments using all present and future assets.
• The liability is unlimited.
• To establish such an enterprise, a minimum capital is not required.
• The corporate name must be the holder's name.
• Taxed by the Personal Income Tax (PIT) because the company's benefit is considered individual income.

Private Civil Society

It is based on a contract by which two or more people oblige themselves to pool money, goods, or industry, with the aim of sharing profits.

• They have unlimited and personal liability to third parties.
• It is formalized through a private document and is governed by the provisions regarding community property.
• There is no capital limit.
• The corporate name can be any name chosen by the membership.
• Taxed using Personal Income Tax (PIT), as the benefit of the enterprise is considered individual income, because the members act as individuals.

Corporate Enterprise (Sociedad)

A company with its own legal personality, distinct from its owners. It must be formalized in writing and registered in the appropriate Registry.

Public Civil Society

This structure has the same goal and characteristics as a Private Civil Society, but the agreements between the partners are public and are constituted by public deed before a notary.

Trading Company (Mercantil)

Trading companies are formed by several people who combine assets to collaborate in the exploitation of a company with the goal of obtaining profit and participating in distributions.

Personalistic Companies

The management responsibility lies with the partners. The personal aspect of each partner is more important than the capital itself.

Capitalist Companies

The capital contribution is more important than the personal characteristics of the members. Management does not necessarily rely on the partners; a professional can be hired to manage the company.

Internal Social Society

This type of society is not intended for profit, but rather to meet the common needs of its members.