Business Structures: A Comprehensive Guide

Posted on Nov 11, 2024 in Law & Jurisprudence

Company Topology

Topology

Companies are ranked according to various aspects:

  • Size: (Large, Medium, and Small)
    • Criteria: Asset value, income volume, number of employees.
    • Most common criterion: Number of workers (Large: >250, Medium: 50-250, Small:
  • Activity: (Primary, Secondary, and Tertiary Sectors)
    • Primary Sector: Activities related to natural resources (e.g., agriculture, fishing).
    • Secondary Sector: Industry-related activities (processing) and construction.
    • Tertiary Sector: Services-related activities (e.g., catering, transport).
  • Ownership: (Private, Public, and Mixed)
    • Private: Capital owned by individuals or legal entities.
    • Public: State-owned entities (e.g., RENFE, EMT).
    • Mixed: Capital shared between private and state entities (e.g., Repsol).
  • Legal Form:
    • Sole Proprietorship (1 person).
    • Partnerships (group of people)
      • Unlimited Liability: General Partnership.
      • Limited Liability: Limited Liability Company (LLC).
      • Mixed Liability: Limited Partnership.

Limited Liability: Members are liable for company debts only up to their contributed capital.

Unlimited Liability: Members are liable for company debts with all personal assets (present and future).

Sole Proprietorship

A person who conducts commercial, industrial, or professional activities under their own name.

Features:

  1. Must be of legal age.
  2. Full availability of assets.
  3. Unlimited liability.
  4. No minimum capital required.
  5. Company name matches the owner’s name.
  6. Personally manages the business.
  7. Pays income tax.

In Spain, most sole proprietors are considered “autonomous”.

Limited Liability Company (LLC)

Features:

  1. Formed by one or more partners (single-member LLC is called transferable).
  2. Limited liability.
  3. Minimum share capital: €3,000, divided into shares with restricted transmission.
  4. 100% of capital must be subscribed upon founding.
  5. Company name: Company Name + SL or LLC.
  6. Corporate income tax (30%).

Administration and Management Bodies

General Board

Formed by all partners. Responsible for deliberation and decision-making on corporate management, annual accounts, profit sharing, appointment and dismissal of administrators, and amendments to the company’s statutes. Decisions require a majority vote.

Administrators

Execute the decisions of the General Meeting. Present annual accounts and represent the company to third parties. Can be a Sole Administrator or a Board of Directors (usually odd number).

Corporation (SA)

Features:

  1. One or more partners (single-member SA is called transferable).
  2. Limited liability.
  3. Minimum capital: €60,101, divided into freely transferable shares.
  4. At least 25% of capital must be subscribed upon founding.
  5. Company name: Company Name + SA.
  6. Corporate income tax.

Management and Administration Bodies: General Meeting of Shareholders and Board of Directors (same functions as in an LLC).

General Meeting Forms:

  1. Ordinary General Meeting: Held within the first 6 months of the year to approve annual accounts and profit sharing.
  2. Extraordinary General Meeting: Any meeting outside the ordinary criteria.
  3. Universal Board: Held automatically when all members are present and unanimously agree.

Other Company Types

  • General Partnership: All members contribute labor and capital, with unlimited liability.
  • Worker-Owned Company: Less than 51% of capital is owned by permanent employees.
  • Cooperative: Non-profit association of individuals or legal entities with common interests. Financial results (called “accedents”) are distributed among members based on their contributions.
  • Limited Partnership: Two types of partners: General partners (contribute labor and capital, unlimited liability) and Limited partners (contribute capital only, limited liability).