Do you want to create a company but do not know which is the most beneficial business form for you?

TheCollective Partnership (SC) and theLimited Partnership (SL) They are two very different figures for the constitution of a company. In this article we will explain the main characteristics of each of them and their most notable advantages and disadvantages.

What is a General Partnership and a Limited Partnership?

The Limited society (SL), also known as Limited Liability Company (SRL) is a type of Mercantile Company that is regulated in the Capital Companies Law and is the most commonly used among Spanish companies, since the liability of the capital contributed by the partners is limited.

Thecharacteristicsthat are more relevant of the Limited Companies are:

  • Theminimum number of partners for the constitution of a SL it is a single person and there is no maximum limit, when it is constituted with a single partner the name of Unipersonal Limited Company will be adopted. These can be both physical or legal persons.

  • Theliability of the partnersis joint and several between them and is limited to the capital contributed, it is an excellent way to protect their assets since they are not liable for the company’s debts with their personal assets.

  • Theshare capitalmust be greater than €3,000 as an essential requirement to establish the company, which can be made up of monetary contributions (monetary) or in kind (for example, a property or machinery)

  • Thecontributions of the partnersare divided into social shares, the more shares a partner has, the greater his control over the company.

  • Thecompany namewill contain the name of the company that cannot coincide with any other name already registered by another company and followed by the initials S.L. or S.R.L., in addition, it must be registered in the Mercantile Registry

  • Theregistered officeof the Limited Company will be the place where the company is located

  • Thecorporate purposemust be defined, which is the activity or activities to which the company is going to engage.

TheCollective Society (SC), is a commercial company of a personal nature that develops a commercial activity under a company name. All partners are personally, unlimitedly and jointly liable for company debts.

Therefore, the partners undertake to respond on behalf of the company, of the debts generated by the company with its assets in accordance with the agreement in the first instance.

Thecharacteristicsthat are more relevant of Collective Societies are:

  • Theminimum number of partnersfor the constitution of a SC is two people and there is no maximum limit.

  • Theliability of the partnersis personal and unlimited, this means that the partners agree to participate in the proportion established in the enjoyment of rights and in the fulfillment of obligations.

  • Theshare capital there is no legal minimum as it is a personalist type society. The contributions of the partners can be financial or in the form of work.

  • Thecontributions of the partnersare divided into parts of social interest of equal value for all without taking into account the percentage contributed by each one or if it was in capital or work.

  • Thecompany name The name of all the partners, of some of them or of only one, will include the name of persons who are not partners and in the event that it is included, this person will be jointly and severally liable for the debts of the company. The name must be followed by the initials S.C. or S.R.C.

  • Theregistered officeof the Collective Society will be the place where the company is located.

  • Thecorporate purposemust be defined by the commercial activity that the company will develop.

What are its main advantages and disadvantages?

Themain advantages of the Limited Company is that it is a very good option for small and medium-sized companies, they have a more flexible legal regime, social responsibility is limited to capital contributions and is a minimum of €3,000, the company name is free as long as when it does not coincide with another company name already registered and there is no minimum or maximum percentage of contribution per partner.

On the other hand, thedisadvantagesmore important are that the guarantee of the corporate creditors is limited to the corporate assets, there is no freedom to transfer shares and they cannot be listed on the Stock Market and the partners are always identifiable.

The main advantages of the Collective Society is that the partners participate directly in the benefits, the minimum for the constitution is two partners, the possibility of raising a greater capital in the company is allowed and each partner has the right to vote, except if what has been agreed contrary.

On the other hand, its disadvantages are the unlimited, joint and subsidiary liability of the partners, for new partners to enter the acceptance of all the participants is needed, the company is dissolved in the event of the death of one of the partners and each one of the partners depends on the acts of others.