Limited Partnership Versus Corporation: Key Distinctions

Differences Between Limited Partnerships and Corporations

Occasionally, questions arise concerning the constitution of a limited partnership or a corporation. What follows are some features that can lead us to choose one or the other:

Type of Activity

The type of activity can influence the election. In principle, a limited partnership may engage in any activity. However, certain activities (banking companies, pension fund management, insurance, etc.) can only be exercised by a corporation.

Number of Members

A corporation is generally a public company, while a limited partnership is a closed or family society.

Both the limited partnership and the anonymous corporation are capitalist societies (what matters is the capital contributed by each partner). However, personal issues are more important for partners in the limited partnership. Therefore, this structure is more suitable for activities that involve a few partners, such as family or professional societies, and for developing businesses with a small initial outlay.

The corporation is an open society in which members can freely sell their shares. (In limited partnerships, transfer is free only when the buyer is another partner, spouse, or children of the seller). Precisely this freedom in the sale of stock is what determines that only corporations can go public.

Minimum Share Capital

The corporation is generally expected for larger businesses.

• Limited Partnership: The minimum registered capital is 3,006 Euros, divided into shares. This capital must be fully paid—that is, credited to the company's account at the time of signing the public deed of incorporation before a notary.
• Corporation (Anonymous): The minimum capital is 60,000 Euros, divided into shares. At least twenty-five percent must be paid upon formation, requiring an initial capital of 15,000 Euros. The remaining shares will be admitted according to the company's statutes.

Procedures for Setting Up

While the procedures for setting up both companies are similar, the formation of a corporation (SL) is more complex. Besides requiring less capital, the statutes require fewer provisions. If contributions "in kind" are made to the company's capital in corporations, it is necessary that an independent expert, appointed by the Commercial Register, issues a report on the value of what is intended to be provided. This report is not needed in the limited partnership.

Moreover, the functioning of corporations is more stringent, requiring that calls for general meetings shall be convened to make press releases in the Official Gazette of the Commercial Registry.