Choosing the Right Legal Business Structure

Posted on Oct 15, 2025 in International Business Economics

Individual and Non-Corporate Business Structures

Sole Proprietorship (Individual Entrepreneur)

To operate as a sole proprietor, the owner must have full availability of personal assets. This structure implies total control of the company by the owner, who personally directs its management and responds to business debts incurred against third parties with all present and future personal wealth (unlimited liability).

  • Taxation: The owner is taxed through Personal Income Tax (PIT).

Private Civil Partnership

These partnerships are formed by more than one person but are often treated similarly to individual entities because they lack legal personality.

  • Liability: Unlimited liability.
  • Capital: There is no minimum capital limit required to constitute the partnership.
  • Taxation: Partners are taxed through Personal Income Tax (PIT).

Corporate Business Structures

Public Civil Partnership

This structure shares the same objective and characteristics as a Private Civil Partnership, but the agreements between partners are public and must be constituted by a public deed before a notary. This formal process grants the entity legal personality.

General Corporations (Mercantile Societies)

Corporations are formed by several individuals who assemble a joint capital fund to assist in the exploitation of commercial enterprises. All such companies must formalize their constitution through a published written document.

These companies are generally classified into two types:

  • Partnerships: Management is primarily handled by the partners.
  • Capitalist Societies: The most important factor is the contribution of capital. The primary responsibilities and benchmarks do not necessarily lie with the individual partners.

General Partnership (Collective Company)

  • Minimum/Maximum Members: Minimum 2 members, no maximum limit.
  • Management: All partners are involved in the management of the company, often contributing only work (labor).
  • Liability: Partners respond to social debts personally (unlimited liability).
  • Capital: No minimum capital requirement.
  • Membership Transfer: Membership can be transferred freely.
  • Corporate Name: Must include the name of all partners.
  • Taxation: The company is taxed Corporate Income Tax (CIT).

Limited Partnership (Simple)

This structure involves two types of partners:

  • General Partners: Directly involved in the management of the company (unlimited liability).
  • Limited Partners: Only participate in economic performance (liability usually limited to contribution).

Key Characteristics:

  • Minimum Members: Minimum number of members is 2.
  • Membership Transfer: Membership can be transferred freely.
  • Capital: No minimum capital required for constitution.
  • Taxation: Always taxed Corporate Income Tax (CIT).

Limited Partnership by Shares

This structure is very similar to the simple Limited Partnership, but the participation of limited partners is represented by shares, which are equal parts of the capital. Rules governing corporations are often applied here.

Key Requirements:

  • Limited Partners: Must be at least three.
  • General Partners: Must be at least one.
  • Business Name: Can be any name chosen by the partners.
  • Taxation: Taxed Corporate Income Tax (CIT).

Limited Liability Company (LLC)

  • Partners: Can be one or more. If there is only one partner, it is a single-member company (unipersonal).
  • Liability: The liability of the partners is limited to the capital contributed.
  • Capital Division: Social capital is divided into shares (or participations). These are equal parts of the capital.
  • Shares Characteristics: Shares of an LLC are generally not negotiable, their transmission is restricted, and they cannot be called “actions” (stocks).
  • Taxation: Taxed Corporate Income Tax (CIT).

LLC Constitution Requirements

These companies must include a charter (Articles of Incorporation) containing, at a minimum:

  1. The name of the company.
  2. The corporate object (purpose).
  3. The address (registered office).
  4. The social capital.
  5. The mode of organization and management.
  6. Any lawful agreements established by the partners.

Organs of the LLC

  • General Meeting of Partners.
  • Administrators (Management).

Partner Rights

Partners typically hold the following rights:

  • Right to participate in the distribution of benefits (dividends).
  • Right of first refusal on the acquisition of shares from outgoing partners.
  • Right to participate in social decisions.
  • Right to information during the periods set out in the governing documents.