Key Legal Elements of a Business Partnership
Explicit Elements of a Company
- Social Nature: It must be organized according to one of the types provided by law.
- The Pool (Capital): The contribution required of each partner.
- Common Purpose: The objective for which the society is formed and exists.
- Participation in Profits and Losses: Partners must share in both the gains and the losses.
- Number of People: It requires the participation of two or more people for its formation and survival. The reduction to a single member is grounds for dissolution.
A society is distinct from a company (which can be multi-person or single-person). If a society is reduced to a single person, it is expected that another member will be incorporated within 3 months to avoid dissolution. The requirement of multiple partners is a condition for the society’s continued existence.
- Organization: Established through a social contract or statute, it dictates the functioning of the company’s bodies, the rights and obligations of the partners, accounting procedures, and the formation of capital. It also outlines how profits are distributed and losses are borne. The statute sets the company name, address, duration, and purpose, defining the acts partners will undertake for their common goal.
Organizational Details
A) Name
The name or designation identifies the company as a legal entity with rights and obligations and serves to attract customers. The firm name is formed with the name of one or more partners (e.g., “and Company” or “& Co.”). The corporate name is a chosen name accompanied by an abbreviation indicating the company type. The name must satisfy the following conditions:
- It must not be misleading regarding the company’s purpose.
- It must not be confusable with another company’s name.
- It must not be contrary to public order or morality.
B) Address
This determines the jurisdiction where the company is located and which judicial authority is authorized to register it with the Public Registry of Commerce. The headquarters is the specific location (city or town) where the administration and governance of the company take place.
The partnership agreement must include the full address (street and number). Administrators are not empowered to change it within the jurisdiction without amending the statutes and complying with other legal conditions.
Implicit Elements of a Company
- Consent of the Parties: This is the will of each person to form a commercial entity, which must be expressed with discernment, intention, and freedom. The absence of defects in consent is a condition for the contract’s validity, but it does not have the same effects as in bilateral contracts. A defect in consent does not invalidate the entire company but affects the bond of the specific partner whose consent was flawed.
The affected partner’s participation may be essential to the society, either due to their capital contribution or their personal involvement. The absence of valid consent will invalidate the link between that partner and the company, but not the company itself. This is due to the plurilateral nature of the contract, which distinguishes it from a bilateral contract.
- Affectio Societatis: This is the will for active collaboration. It goes beyond mere capital contributions and includes performance in the management and governance of the company’s interests. It requires fair conduct from each member, respecting the company’s interests and sacrificing personal interests when necessary. This collaboration is between legally equal partners (no partner is subordinate to another) and is interested (the ultimate goal is profit to be distributed). The plurilateral contract requires three specific elements:
- The affectio societatis itself.
- Participation in the profits and losses.
- Contribution of each partner to the capital.