Company Legal Structures

Posted on Feb 4, 2025 in Law & Jurisprudence

Legal Organization of a Company

A company comprises tangible and intangible assets, primarily aimed at achieving an economic objective. The legal system offers two options for organizing a business:

1. Sole Trader

This refers to an individual operating a business, where the owner and the business are often considered the same entity.

2. Joint Venture

This involves a fictitious entity composed of natural persons, possessing legal personality and its own patrimony. Examples include limited liability companies, partnerships, and corporations. The Individual Limited Liability Company is a more recent addition.

Sole Trader (Individual Entrepreneur)

Commercial law regulates the framework and regulations for businesses to operate. A sole trader is essentially a merchant.

Requirements to be Considered a Trader (Article 7 of the Commercial Code)

  1. Capacity to Contract: This refers to the legal capacity of a person to acquire and exercise rights. Generally, everyone has this capacity unless declared incompetent by law.
  • Married Women Traders (Article 11 of the Commercial Code & Article 150 of the Civil Code): A married woman trader’s activities are considered separate property. Article 150 of the Civil Code (quiet heritage of married women) allows a married woman in conjugal partnership to conduct business, profession, or trade separately from her husband. Assets acquired in this capacity are considered separate property. This differs from the general rule for married women in community property, who typically require their husband’s permission for economic activities.
Engaging in Commerce: A trader must perform acts of commerce, as defined in Article 3 of the Commercial Code. These typically involve mediation between people for profit or gain. For example, Article 3 No. 1 defines trade as purchasing movable property with the intent to sell, lease, or exchange. Making Trade Their Usual Occupation: Commercial acts must be performed repeatedly to be considered a trader. The Commercial Code doesn’t specify a timeframe for this repetition; it’s determined on a case-by-case basis by the court.

Importance of Trader Classification

  • Governance by Commercial Law: If a person meets the requirements of a trader, their actions are governed by the Commercial Code and its complementary laws, rather than civil law. Commercial legislation is generally more flexible and conducive to business development. Custom is a source of law in commercial law, unlike civil law.
  • Specific Obligations: Traders must fulfill certain obligations, including:
    • Maintaining accounting books
    • Registering documents with the Register of Commerce
    • Enrolling in special registers
    • Paying municipal licenses
    These obligations apply only to merchants.

Distinguishing between civil and commercial law is crucial due to the flexible nature of commercial law and its recognition of custom as a legal source.