Understanding Partnerships, Limited Partnerships, and Corporations
Partnerships, Limited Partnerships, and Corporations
General Partnership
A general partnership operates under a collective name, with all partners bearing joint and several unlimited liability for the partnership’s obligations.
Key Features:
- Character Personality: Membership is not transferable without the consent of all other partners.
- Title: The partnership name will include the names of all, some, or one of the partners. In the latter two cases, “& Company” must be added, along with the abbreviations “SC” or the word “Partnership.”
- Number of Partners: The minimum number of partners is two.
- Responsibility: Partners have personal, unlimited, and joint liability for all partnership debts. This rule cannot be altered by agreement among the partners.
Limited Partnership
A limited partnership operates under a collective name, with limited liability for some partners (limited partners) and unlimited liability for others (general partners).
Key Features:
- Name: The name must include the names of all general partners or one or more of them, followed by “& Company” and “Limited Partnership.”
- Responsibility: Limited partners’ liability is limited to their capital contribution. General partners have the same liability as in a general partnership.
Corporation (Sociedad Anónima – S.A.)
A corporation is a commercial entity where capital is divided into shares. The minimum capital requirement is €60,101.21.
Key Features:
- Name: The name cannot be identical to that of another existing company and must include the designation “Corporation” or “S.A.”, as granted by the Registry.
- Capital: The minimum capital is €60,101.21. At least 25% of the nominal value of each share must be fully subscribed and paid up at the time of formation.
- Rights of Members: Shareholders have the right to participate in company affairs, preemptive rights, voting rights, the right to information, and the right to transfer shares.
- Responsibility: Liability is limited to the capital contribution.
Organs of a Corporation:
- General Meeting: A meeting of shareholders, duly convened, to deliberate and decide by majority vote on company matters. Agreements bind all shareholders, including dissenting and absent shareholders, unless the agreement is challenged.
- Board of Directors or Administrators: The administrative body composed of individuals or legal entities who manage and represent the company. The board can consist of a single administrator or multiple administrators. If there are at least three members, it is called the Board of Directors.
- Auditors: Independent professionals who audit the annual accounts, financial condition, and results of the company. They verify that the management report is consistent with the financial statements and provide a detailed report on their findings, as required by the audit of accounts act.
Limited Liability Company (LLC)
An LLC is a corporation, regardless of its object, with a minimum capital of €3,005. The capital is divided into social shares that are cumulative and indivisible. These shares cannot be considered securities or actions, and members are exempt from personal liability for corporate debts.