Limited Liability Entrepeneurs (ERL)

A Limited Liability Entrepreneur, (hereinafter, ERL) is a person who regularly, personally, directly, on his own account and with limited liability under certain conditions, an economic or professional activity for profit, with or without workers for someone else's responsibility.

The ERL exercises absolute control over the company that it owns, manages and directs, responding personally for all obligations, excluding from them the habitual residence except in cases where the debts belong to public creditors.

The quantity and quality of the contribution to the capital stock depends exclusively on the will of the ERL. There are no legally established minimums or maximums.

The registered entrepreneur must state in all his documentation, with expression of the registration data, his condition of "Limited Liability Entrepreneur" or by adding the acronym "ERL" to his name, surname and tax identification data.

Advantage:

When considering the possibility of becoming an individual entrepreneur, you should consider:

»That it is an ideal legal form to manage small businesses.

»That the ERL may limit its financial liability for debts derived from the exercise of said business or professional activity.

»Which entails fewer constitutive procedures, although it does require registration in the Mercantile Registry and in the Property Registry and indication of the data of the habitual residence that will be excluded from the responsibility of the company.

»That, precisely, due to the absence of procedures to acquire legal personality, it may be a more economical choice, in relation to any type of company.

Disadvantages:

As drawbacks, you should assess:

»That the responsibility you assume is unlimited. You respond with your personal assets to the debts generated by your activity, keeping your usual home safe.

»That you must register in Public Registries: Commercial and Property.

»That if the ERL is married, it may happen that the liability derived from his activities reaches the estate of his spouse. To avoid last minute scares, you must take into account the economic regime that governs your marriage and the nature of the assets in question.

We must take into account:

»That the proprietary assets of the ERL are bound by the results of the business activity.

»That the assets intended for the exercise of the activity as well as those acquired by and for said exercise, are always responsible for the result of the business activity.

»That if you are married under the community property regime, when it comes to common property of the marriage, for these to be bound, the consent of both spouses will be necessary, but keep in mind that consent is presumed when the business activity is exercised with knowledge and without express opposition from the spouse and also when, upon marriage, one of the spouses exercises the activity and continues with it without opposition from the other.

»That, unless there is express consent, the proprietary assets of the employer's spouse are not subject to the exercise of business activity. In any case, the spouse can freely revoke both express and presumed consent.

Minimum share capital:

It is not legally required.

Taxation:

Personal income tax (IRPF) applied to income from economic activities.

Responsibility:

The ERL responds with its personal assets for the debts generated in its activity. Your habitual residence is excepted provided that the following conditions are met:

»The value of the home cannot exceed € 300,000. This valuation is made according to the tax base of the Tax on Patrimonial Transmissions and Documented Legal Acts at the time of registration in the Mercantile Registry.

»In the case of dwellings located in a population of more than 1,000,000 inhabitants, a coefficient of 1.5 will be applied to the value attributable to the habitual residence.

»In the registration of the Mercantile Registry corresponding to your domicile, the property, own or common, will be indicated, which will not be bound by the results of the business or professional activity.

»The debtor who has acted with fraud or gross negligence in the fulfillment of his obligations to third parties may not benefit from the limitation of liability, provided that this is established by a final judgment or in bankruptcy declared guilty.

»Unless creditors expressly give their consent, the debtor's universal responsibility for debts contracted prior to their registration in the Commercial Registry as an individual limited liability entrepreneur will subsist.

After seven months from closing of the taxing year without the annual accounts having been deposited in the Mercantile Registry, the entrepreneur will lose the benefit of the limitation of liability in relation to the debts contracted after the end of that period. You will recover the benefit at the time of presentation.