Limited liability company

The constitution of companies under the model of society, has become a basic aspect. If you are thinking of establishing a company, you should spend some time choosing under which model of society you want to act, consider the number of partners that are going to participate, the initial capital to contribute, the responsibility due to them and taxes to be paid in each case.

There are several types of commercial company, in turn the provisions of them vary in some countries, then we are going to see the limited liability company, which is one of the most used models worldwide in the incorporation of companies in society.

What is a limited liability company?

SRL (limited liability company) or SL limited company, is one of the most recurrent types of commercial company in the constitution of small companies, used in various countries of the world.

With this form of society, the liability is limited to the capital contributed, so that the partners have their personal assets safe from the debts of their businesses.

Characteristics of the Limited Company

Number of partners

It can be constituted with a minimum of one partner, without a maximum limit, in the case of a sole partner, a one-person limited partnership is constituted.

The people who can participate in this type of society could well be natural or legal persons.

Liability of the partners

The responsibility is joint and several and limited to the capital that each one has contributed, so that no partner should respond with his personal assets.

Class of partners

According to those who participate agree, the partners can be: worker partners and / or capitalist partners.

· Name or Company Name

This must be a name that has not been registered before, for this a query is made in the commercial register and accompanied de ñas initials SRL (Limited Liability Company) or SL (Limited Company) depending on the country of origin and its conditions.

· Social capital

Depending on the country, there is a legal minimum which must be fully paid, there is no maximum limit.

The capital can be formed from monetary contributions (money) or species (equipment, machinery, a vehicle or other good that is useful and of valuation accepted by the different founding partners.

· Registered office

Normally it is the address where the company is located, however, a change of address can be approved at the shareholders' meeting.

· Business name

It is the activity to which the company will dedicate itself, usually a wide list of activities is prepared, including the activities initially planned and other potential ones, thus avoiding limitations and administrative expenses generated by expanding activities.

· Constitution

It is carried out by public deed and according to certain regulations, presented and signed before the notary and finally presented in the Mercantile Registry.

The document must detail the contributions of each partner and the corresponding percentage share of capital stock.

· Administration and management

There are several options and one of them must be chosen when making the bylaws.

• Sole administrator, carried out by a single person.
• Solidarity administrators, each one acts on their behalf and it is everyone's commitment.
• Joint administrators, act jointly, this limits the power of representation.
• Board of Directors, three or more people act as administrator.

The responsibility for the management falls on the administrator (s) and not on the partners.

Board of partners

It is the deliberative body and responsible for decision-making, it is summoned by the administrators, in general the first months of the year in order to present the management carried out, approve annual accounts and carry out the distribution of the results.

It can also be cited for other specific matters if an important decision is necessary, the call can be of an ordinary or extraordinary nature.

· Fiscal obligations

A limited company has the obligation to pay taxes and corporation tax, in addition to VAT.

· Legislation

This type of company is regulated by statutory decrees according to its country of origin.

Advantages and disadvantages of the Limited Company

Advantages of the SRL

• Liability for debts is limited to the capital stock including the assets in the name of said company.
• There is a relative simplicity in terms of processing, constitution and operation.
• The management of the LLC is simpler than the management of a public limited company, which is the other most common form of company.
• The minimum capital required is relatively low, compared to other types of company.
• The number of partners has no limits, and can even be one-person.
• The incorporation costs of the LLC are affordable.
• In the case of SRL, the self-employed can determine a salary and be deducted as an expense.
• They have easy access to bank loans.

Disadvantages of the SRL

• The participation of the partners is not transferable.
• The sale of shares is regulated by the law and the bylaws of the company, with the rest of the partners obtaining priority.
• It does not represent an adequate form of society if it seeks to attract a large number of investors.

Finally, it is worth mentioning that this type of company, like other forms of business, are regulated by relevant state agencies, which varies according to the country of origin and the type of policy and type of government that in the same work.