Comparing Business Structures: Liability and Capital Needs
Classified in Law & Jurisprudence
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Individual Employer (Sole Proprietorship)
- Input
- No specific input required as there is no legal separation between business and personal assets.
- Responsibility / Liability
- Personal and unlimited liability for the owner.
- Representation
- The owner represents the business. Attorneys or agents can be appointed.
- Minimum Capital
- No minimum capital required. There is no distinction between business assets and personal assets.
- Observations
- For married individuals, liability for business debts may depend on the applicable marital property regime.
Civil Society
- Partners
- Minimum of 2 partners.
- Contributions
- Contributions can include work (job), money, assets, or rights.
- Responsibility / Liability
- Personal, unlimited, and joint liability for all partners.
- Management (Government)
- All members are typically administrators, unless management powers have been specifically assigned to one or more partners in the agreement.
- Representation
- Representation can be freely defined in the partnership agreement. If not stipulated, all partners may be authorized to bind the company.
- Minimum Capital
- No minimum capital required. Contributions may be paid in full at formation, or subsequent disbursements can be agreed upon.
- Comments
- These are typically considered non-commercial entities. If it engages in commercial activities but is formed as a civil society, it might be treated as an irregular commercial entity unless specified otherwise in the contract.
Collective Society (General Partnership)
- Partners
- Minimum of 2 partners.
- Contributions
- Contributions can include work (job), money, assets, or rights.
- Responsibility / Liability
- Personal, unlimited, and joint and several liability for all partners.
- Management (Government)
- All partners are entitled to manage, unless this right has been specifically attributed to one or more partners.
- Representation
- Representation is typically limited to partners who have been expressly conferred this authority.
- Minimum Capital
- No minimum capital required. Contributions may be paid in full at formation, or subsequent disbursements can be agreed upon.
- Comments
- An industrial partner contributes only work (job). They typically do not bear losses unless otherwise agreed.
Limited Partnership (LP)
- Partners
- Minimum of 2 partners (requires at least one general partner and one limited partner).
- Contributions (Inputs)
- General Partners: Contributions can include work (job), money, assets (goods), or rights.
- Limited Partners (Backers): Contributions typically include money, assets (goods), or rights.
- Responsibility / Liability
- General Partners: Personal, joint, and unlimited liability.
- Limited Partners: Liability is limited to their contributions made or pledged.
- Management (Government)
- All general partners are typically entitled to management, but this can be attributed to one or more specific general partners.
- Representation
- Only general partners who have been expressly conferred the authority can represent the partnership. Limited partners cannot typically represent ('have signs of') the partnership.
- Minimum Capital
- No minimum capital required by law, though contributions are defined. Contributions may be paid in full at formation, or subsequent disbursements can be agreed upon.
- Remarks
- Note: This structure is distinct from a partnership limited by shares, where the capital contributed by limited partners is represented by shares.