Understanding Business Structures and Consumer Rights in Spain

Posted on Jan 14, 2025 in Law and Journalism

Individual Entrepreneur

Incompatibilities

Incumbents (public ministers, judges)

Conditionality

CEO, company administrator, member of a collective partnership (involves significant responsibility)

Collaborators of the Entrepreneur

Dependents: Subordination (workers)

Non-dependent: Autonomy (franchises, sales representatives)

Extinction of an Entrepreneurial Endeavor

An individual entrepreneur can cease operations due to natural causes, such as death, or voluntarily. Termination is straightforward; it only requires deregistration from social security and tax authorities.

Social entrepreneurs (legal persons) require a formal decision to dissolve, which must be registered with the commercial registry. All assets and investments must be liquidated.

Consumer Rights

A consumer is a natural person acting outside the scope of an economic activity (trade, business, craft).

Spanish law incorporates European legislation and recognizes the following principles:

The rights of consumers and users are inalienable.

People who use the internet are considered USERS.

Consumer rights include:

Protection against risks that may affect their health or safety.
Protection of legitimate economic and social interests against unfair commercial practices (e.g., false advertising, such as the McDonald’s horse beef incident) and the inclusion of unfair terms in contracts.
Compensation for damages and redress for harm suffered (e.g., finding a foreign object in food).
Correct information regarding different goods or services and the transmission of knowledge related to their consumption (e.g., accurate labeling of sugar-free products, including all ingredients).
Protection of their rights through effective procedures, especially in situations of inferiority, subordination, or lack of proper defense.

Limited Liability Entrepreneur

A limited liability entrepreneur does not have universal or unlimited responsibility before creditors.

This structure protects the entrepreneur’s primary residence if certain requirements are met.

Requirements for Entrepreneurs:

Must possess legal capacity.
Must add their VAT number and the acronym “ERL” to their name.

Operational Requirements:

Declare before a notary their intention to be a limited liability entrepreneur, indicating the activity and details of the primary residence to be excluded from credits.
Register the declaration with the Public Register of Commerce and the Public Register of Property.
Submit annual accounts to the Public Register of Commerce.

Exceptions:

Debts with the Tax Agency and Social Security.
If the primary residence value exceeds 300,000 euros (or 450,000 euros if located in a city with over 1 million inhabitants).
Debts not related to the economic activity.
Debts incurred prior to obtaining the status of a limited liability entrepreneur.
Fraudulent actions by the entrepreneur.

Civil Associations

Civil associations do not engage in entrepreneurial activity. They may or may not be constituted as a legal person.

Comparison between Civil Associations and Mercantile Companies:

Form: A civil association can be a legal person with a specific legal object or a joint ownership (e.g., two people buying a house together).
Object: Mercantile companies are created for profit, while civil associations do not have entrepreneurial activity. Activities NOT considered entrepreneurial include agriculture, stockbreeding, and liberal professions.
Regulation: Mercantile companies are regulated by the Code of Commerce, the Corporate Enterprises Act, and the regulations for the Public Commerce Register.

Social Entrepreneur and Partnership Agreements

A social entrepreneur is a legal person formed to develop an entrepreneurial activity through a partnership agreement.

Profit Motive: Profits are intended to be distributed among the partners.

Associative Element: Partners contribute to a common fund to achieve a shared purpose (with some exceptions).

Partnership Agreement: A contract between all parties involved in starting a partnership, outlining the rights and responsibilities of members, governing relations among members, managers, and officers, and addressing their interests in the company and other internal affairs.

Key Features of Partnership Agreements:

Plurilaterality: Involves two or more persons (natural or legal), excluding single-person corporations.
Contributions: Requires a patrimony represented by movable or immovable goods (e.g., money, assets).
Creates an Order: Establishes rights and duties for each member, internal structures, and procedures, outlining how the company will operate.
Distribution of Profit: The primary distinction from associations is the profit orientation, including the distribution of losses.
Formalities: Must be a public document signed before a notary and registered at the Public Register of Commerce.

Governing Bodies

General Board: The main institution in a company, responsible for major decisions. It must meet at least once a year. Responsibilities include appointing management, distributing profits and losses, and deciding on changes to the legal form or type of business.
Management: Represents the company when the General Board is not in session. Multiple managers can act jointly or individually.
Others (e.g., Cooperative Associations): May have an assembly to assist in decision-making, with members holding shares that influence the administrative council.

Irregular and In-Organization Corporations

Irregular Corporations: Have a defined object, consent, and cause but have not yet been inscribed in the Public Register of Commerce while operating in the market. These are unorganized corporations.

Corporations in Organization: Undergoing the process of creation, from signing before a public authority to registration. If one year elapses without registration, it becomes an irregular corporation.

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Types of Liability

Joint and Several Liability: Sharing of rights and liabilities among members.
Joint Liability: Responsibility falls equally on the parties entering an obligation.
Several/Individual Liability: Responsibility falls individually on each party regarding their commitments. (e.g., if an elevator in a building breaks, all residents pay a percentage based on their ownership share).

Collective Partnership

Empowers all workers to participate in the direction and management of the company unless the bylaws state otherwise.

Involves two or more persons, natural or legal.
Commitment to contribute assets (funding partners) or industry (workforce).
Partners have subsidiary, unlimited, and joint and several responsibilities.
Management is handled by the partners; external management is NOT allowed.

Industrial Partners: Contribute their workforce and require authorization from their partners to engage in other economic activities.

Funding Partners: Are free to engage in other economic activities, even competing with the collective partnership.

Transmission of partner status (both funding and industrial) requires the agreement of ALL partners. Bylaws must authorize mortis causa (caused by death) transfers.
Profits and losses are distributed according to the bylaws. If not specified, proration is applied. Industrial partners do not participate in losses.
Denomination: The Code of Commerce requires the name of a partner(s) followed by “& CIA”.

Simple Limited Partnerships

A partnership that conducts a mercantile activity, characterized by the coexistence of two types of partners: collective partners and silent partners. Collective partners have subsidiary, unlimited, joint, and several responsibility, while silent partners have limited responsibility.

Involves two or more persons, natural or legal.
Collective partners provide capital funds and work, while silent partners only provide funds and do not engage in management.
Collective partners have subsidiary, unlimited, joint, and several responsibility. Silent partners have limited responsibility.
Transmission of partner status is generally not permitted unless all partners authorize it.
No minimum capital is required for creation.
Profits and losses are distributed according to the bylaws. If not specified, proration is applied.
Denomination: The Code of Commerce requires the name of the collective partner(s) followed by “SC” or “& CIA”.

Public Law, Private Law, and Free Market Economy

Public Law: Involves the state as a powerful entity, with citizens subject to its authority.

Private Law: Regulates interpersonal relationships between individuals, where no party holds power over another (e.g., between two citizens).

Free Market Economy: Individuals can choose their economic activity. The state sets regulations to control the economy, but price fixation is generally free.

Juristic Person: A legal fiction, an independent entity with responsibilities, recognized as a person under the law.

Freedom of Enterprise

The freedom of private businesses to organize and operate for profit in a competitive system without government interference, beyond necessary regulations to protect the public interest and maintain economic balance.

Freedom to choose a business, within the limits of the law.
Right to private property.
Free competition, protected from monopolies.
Protection of customers, with the right to claim for poor quality.
State obligation to promote private initiative.
Economic policies determined by the national legislative branch.