Private limited company

18/01/2023

In a private limited company (sociedad limitada), one or more people gather according to commercial law and become partners to conduct an economic activity to obtain profits.

A private limited company’s main characteristics are:

  • They have their own legal personality, different from the shareholders who hold the company. 
  • The company is liable for its debts and obligations with the company’s equity, not the shareholders’.
  • The company has a corporate headquarters
  • The company is distinguished by its corporate name (official company name).
  • It must be registered with pertinent registers by means of a public deed.
  • The company pays tax through the Corporate Tax
  • Resolutions are reached by majority. These majorities are formed based on the greater or lesser contribution made by each shareholder. 
  • Consider
  • Taxation with fixed contribution rate.
  • Limited liability.
  • Complete accounting
  • Possibility of establishing a Partnership Agreement. The Partnership Agreement is a private document that the partners of any company can sign to regulate certain situations which, due to their characteristics, are not set forth in the company bylaws. The objective is to avoid conflicts and anticipate possible problems and frictions that may arise between partners and/or third parties, and this is why it is so important to properly specify which terms and conditions are set forth in said agreement.
  • With family-owned companies, it is also interesting to consider Succession Agreements regarding inheritance of a partner’s holdings to prevent high capital fragmentation, which can lead to issues in day-to-day management.

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