Understanding Business Legal Structures

Business Legal Structures

When several individuals decide to pool money, capital, or project work to start a business, they typically form a company or business entity.

Limited Liability Company (LLC)

A key characteristic of an LLC is that liability is limited to the capital contributed by each partner. Its capital is divided into shares, and the minimum capital cannot be less than 3,005 units (currency implied). Partners must fully pay their capital contributions from the company's inception. Members may freely transfer their shares, though they must notify the company. Transmission to ascendants, descendants, and spouses is also free. However, transferring shares to third parties may have restrictions outlined in the company's bylaws.

Shareholders in a Limited Company typically have the following rights:

• Participate in profits in proportion to their shares.
• Preferential right to purchase shares of members who wish to leave the company, especially when dealing with external third parties.
• Influence decisions at general meetings in proportion to their shareholding.

New Business Limited Company (SLNE)

This is a newly created company type, designed for easy formation and establishment, often through electronic means. The company name is formed by the full name of one of the founding partners, followed by the acronym SLNE. The minimum capital is 3,012 units, and the maximum is 120,202 units. It can have a maximum of 5 partners, all of whom must be individuals. It can be established with a single document, often via mail or electronically.

Governing Bodies of a Limited Company

• Annual General Meeting: This consists of all partners and must convene at least once a year. A Board of Directors is required if the number of partners exceeds 15.
• Manager (or Administrator): This individual is responsible for managing and representing the company, appointed by the General Meeting. The manager does not necessarily have to be a partner.

Public Limited Company (PLC) / Corporation

This type of company originated in the 17th century. It is characterized by liability limited to the capital contribution. The minimum capital of a corporation is divided into shares. To establish a corporation, the minimum capital is 60,101 units, and at least 25% of the nominal value of each share must be disbursed at the time of subscription. The nominal value is the value assigned to each share.

This company is governed by the principle of free transfer of shares. Partners are not personally liable for the company's debts beyond their capital contribution. The name of the corporation is freely chosen, accompanied by the initials SA (Sociedad Anónima) or 'Corporation', provided it does not match an existing company. Therefore, a certificate of name availability is required.

Governing Bodies of a Corporation

• General Meeting of Shareholders: This is a meeting of all shareholders and serves as the highest governing body, where members make decisions by majority agreement within its jurisdiction.
• Board of Directors (or Governing Body): The General Meeting appoints the Board, whose role is to represent and manage the company. Directors of the corporation do not necessarily have to be shareholders.