What is a limited society

What is a limited society

When it comes to creating a company, there are many company forms to choose from. However, there is one that stands out from the rest. We are talking about the Limited Liability Company, also known as the Limited Company. In Spain it is one of the most chosen together with the Public Limited Company. But what does this refer to?

If you want to know What is a limited society, what are its characteristics, advantages, disadvantages and more information about it, keep reading because we present it to you below.

What is a limited society

If you want to know what a limited company is, you should know that this SL, or SRL, the acronym by which it is recognized, is a commercial company. It is mainly focused on SMEs, that is, small and medium-sized companies (or entrepreneurs) and with it they can carry out their business activity without their assets or savings coming into play. Nor do they have to ask for a loan to create it.

Each person that is part of the limited company contributes money x to the capital, and it is for that money that it contributes that it limits the responsibility before third parties. For example, imagine that there are three of you in society and that each one puts 1000 euros. The final capital of the company would be 3000 euros. But, if something happens and a third party has to be compensated, with for example 3000 euros, it does not mean that a single partner should put that money, but that he will only put what he has put into the capital, in this case 1000 euros .

In addition to providing capital, all partners receive in exchange social shares, which are indivisible and accumulative, but leave aside the individual assets of each person.

Characteristics of the limited company

Characteristics of the limited company

Now that you know what a limited company is, for you to understand it perfectly, you must know what characterizes it, that is, the requirements that are required to be able to create it. And these are:

  • Number of partners. It is necessary that the limited partnership has at least one partner, but there is no maximum required, that is, there can be as many as they want. In addition, it can be a company with legal or natural persons. These partners can be workers (who contribute their work to society) or capitalists (who put the money).
  • Responsibility. As we have explained before, the responsibility of the partners is limited to the capital contributed, in such a way that they will not respond to the debts or problems that arise with anything else, and much less with their personal assets (because it is exempt).
  • Social denomination. In this case, the limited company must be registered in the Central Mercantile Registry and, in its name, the Limited Liability Company must appear, or in its case SRL or SL
  • Social capital. The minimum to create a limited company is a capital of 3000 euros. There is no maximum to put. This money does not have to be only monetary, but can be in kind, for example with the furniture of the company. In turn, for the capital that is contributed, social shares will be obtained that have legal limitations and that will be based on the capital that is contributed (whoever gives more, receives more shares).
  • Constitution of the limited company. This, in addition to registering, must have statutes and a public deed that must be signed before a notary, and also presented to the Mercantile Registry. In these papers it must be clear the number of contributions of each partner and the percentage of share capital that they have placed. It must also be established which are the administration and management bodies, that is, if there is a sole administrator (and who he is), the joint administrators, the joint administrators or the Board of Directors.

Advantages of a Limited Company

Advantages of a Limited Company

It is clear that the Limitation of liability based on the capital contributed is one of the great advantages of what a limited company is (compared to other companies or labor figures). But it is not the only advantage it offers us. There is more:

  • It is easy to create. It does not have as many bureaucratic procedures as others may have.
  • Callable capital is relatively low. In addition, the fact of being able to contribute both in money and in goods or species helps to make it easier to obtain. And although you have to add the incorporation expenses, which can be between 600 and 1000 euros, it is totally affordable.
  • It does not take more than one person to create it.
  • It facilitates access to loans and credits in banks, because they see it as a better "match" compared to individuals or the self-employed.

Disadvantages of a Limited Company

However, although everything seems good, the truth is that there are some aspects that can slow you down when creating it. For example:

  • The fact that the units are not transferableIn other words, they cannot be passed on to another person, nor can they be sold. The only people you could sell to are the partners of that company, but not to someone outside.
  • There is a period more or less long (40 days) for the incorporation of the Limited Company to be completed, so when you need the process to be fast, it is not the figure that is chosen.
  • When ask for a credit or loan, many banks require "personal guarantees", something that goes against the characteristics of the limited company, so in the end, if you accept, the whole essence of it disappears because you have already involved your assets.

What taxes must be paid when creating an SL

What taxes must be paid when creating an SL

When creating an SL you should know also the taxes that must be paid with it. And it is not as simple as a freelance. In this case, you should be up to date with:

  • The Corporation tax (IS). It is paid by all companies in Spain and implies that 25% of the net profit obtained in a year must be paid.
  • The personal income tax (IRPF). Only in case you have contracted workers, or that you subcontract services to freelancers.
  • The value added tax (VAT). Something common, since when presenting an invoice, except in specific cases, you will have to collect VAT and collect it and then pay it to the Treasury.
  • The tax on economic activities (IAE). Only for companies that invoice more than one million euros.
  • Other taxes. That of a community, rent, IBI ...

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