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Limited Company: Definition, Operation, Advantages and More 

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What is a limited company?

It is part of the limited liability companies, so it also receives the abbreviation of SRL. It is a type of company in which the legal status of the company is subject to rights but also responsibilities that occur within the company. The partners can make contributions of economic value and in case of any eventuality or debt, the assets of each partner will be the one he has contributed at the time of incorporation.

Find out all the information about partnerships in companies

The limited company requires a legal reason, i.e. a company name which will be the name of the company. Likewise, it must have a registered office, which will be the address where the company is physically located and a corporate purpose, consolidated by the commercial activity to which it will be dedicated.

Characteristics of a limited company 

Type of liability: limited to the amount of capital contributed by each of the partners at the time the company is incorporated.

Share capital: the capital can be provided either by money or in kind. This process requires a valuation by an expert and by all the partners. It is essential that the capital is paid up at the time the company is incorporated. The share capital can be divided into shares within the company.

Partners: the company can be set up with a minimum of one partner and does not have a maximum number of members. The person who consolidates the company into a partnership may be either a natural or a legal person.

Requirements: the company must have a commercial register subject to the company and the location. In this regard, you will need a certified copy of the deed with respect to the company name and document the tax accreditation. It requires corporate tax, VAT, current taxes and specialized documentation according to the business activity.

You also need to have your own bank account, in which the initial capital must be at least the share capital. The bank issues a certificate that must be presented at the notary’s office.

Steps to create a limited company

It is important to bear in mind that the incorporation of a Sociedad Limitada SL, can have three ways. The first is to carry out the process personally and directly with the necessary institutions such as the Treasury, Notary and others. The second option is to go to an Entrepreneur Service Point or PAE, where they will help us with the process in the company of an advisor or expert in the area and finally, opt for the third option that proposes to incorporate the company through telematics.

What is a limited company

However, the incorporation of a company involves the following process:

Registration: the limited company must be registered in the Mercantile Registry according to the area of location. There, a certificate of the registered company name will also be requested, the name that the company will have and with which it will be known.

Bank account: as explained above, an account must be opened in the name of the company in which the share capital is deposited. Once this has been done, a certificate of deposit must be requested, which will be issued by the bank and must be presented, later on, before the notary’s office.

Bylaws of the corporation: the partners will agree on the set of rules that will operate within the corporation and over which it will be governed. It is necessary to go to a specialized advisor who will provide the particular guide for the type of society and the activities that will be carried out there, taking into account the specific conditions of the company.

Public deed: this is a document that must be signed by all the partners in front of a notary. Its signature requires registration in the central commercial register, as well as the D.N.I. of each of the partners, the certification issued by the bank with the account created for the company and the rules established as a company for its operation.

Social Security: for this type of company, it is necessary to comply with a series of obligations related to social security according to the particularities of the company. Thus, it must have the Special Regime of Workers and the documentation demanded by the regulatory body of the city where it is located.

The Treasury: once there, the constitution of the limited company requires three more steps. The first is to obtain the temporary tax identification number (NIF), which requires a series of key documents such as a copy of the deed of incorporation of the SL. Subsequently, it will be necessary to have the Tax on Economic Activities (IAE) and finally, to have the census or VAT return, in which the company’s professional activity will be reported.

Advantages of a limited company (SL)

One of the most important virtues of this type of company is that liability is limited to the share capital of the company itself, which involves both money and the company’s assets. It does not have a maximum number of partners, so there is no limit to the number of partners when consolidating.

In terms of bureaucratic procedures, it is a relatively simple company to incorporate, as well as being simple to operate. The costs for incorporation are much lower compared to other types of companies and there is even greater access to bank loans as an alternative financing.

As we have seen, there are many possible advantages when opening a company of this type, given that the requirements for incorporation are not numerous and much less too complex to continue the process. Do not forget that having the guidance of an expert will always be the best decision if you are planning to incorporate your company.

Discover this and all the key information about the types of company to encourage you and incorporate yours.