What is the difference between a Public Limited Company and a Private Limited Company?

These are the main differences between the two legal forms

Public Limited Companies (S.A.) and Limited Liability Companies (S.L.) are two of the most prolific legal forms in the business world.

Both societies are classified as capitalist companies, which are companies that give more importance to the contribution of capital than the personal characteristics of their members. The following describes the general characteristics, among others, of these companies:

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The Limited Liability Company (S.L.)

  • The Limited Company or Limited Liability Company is a kind of capital-based companies for companies with few partners that do not need large amounts of capital.
  • One or more partners is needed to incorporate a limited liability company. When formed by a single partner, they are called sole proprietorship. In this case, the partner may be an individual or a legal person. The company may also have been constituted by two or more partners and their shares have become the property of a single shareholder.
  • The partners are jointly and severally liable, but limited to the capital contribution, i.e. they respond to debt only with the capital invested and/or the assets contributed on the company's behalf.
  • Management responsibility: this falls on the administrators, not the partners.
  • The registered company name must be formed of the name followed by “Sociedad de Responsabilidad Limitada” or “Sociedad Limitada”, or the letters “SRL” or “S.L”.
  • The capital is divided into equity interests that are equally accumulatable and individual in the capital of a limited liability company and cannot be included into negotiable instruments; their transmission is restricted (is not free) and cannot be referred to as shares.
  • The minimum capital is 3,000.00 euros, which upon incorporation of the company, must be fully subscribed and paid-up. This capital may be in cash, in assets or in rights, and a valuation of these assets must be accepted by all the founding partners.
  • To transfer equity interests, pursuant to the corresponding articles of association, the director must be informed of the intention to transfer them, the number of equity interests to be disposed of, the identity of the purchaser and the agreed price; priority is given to any other partner who wants to purchase them. This transfer must be performed on a public document.
  • Administrative and Management Body: There are several options, and one set forth in the articles of association must be selected: Single administrator (an individual), Joint and several Administrators (each can act on their own account and this affects all), Joint Administrator (must act jointly, always signing, which limits and slows down powers of representation) or Board of Directors (three or more administrators). The By-Laws will state the duration of the post (typically indefinite) and, if applicable, the retribution.
  • Tax obligations: a limited liability company is required to pay Corporate Tax and VAT.
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Corporations (S.A.)

  • A Corporation is also a capitalist company, as the personal conditions of the members are not of importance: the capital is the only important element. This kind of company is best suited to the needs of large companies.
  • One or more partners is required to incorporate one, and they may be natural or legal persons. As with S.L., if there is a single partner, it is called a sole proprietorship.
  • The liability of partners is limited to the capital contributed.
  • The minimum capital stock for incorporation is 60,000.00 euros. This capital is divided into shares that may be nominative or made out to the bearer. This type of companies can be created by means of simultaneous foundation (all shares are paid at the time of creation) or successively (the shares are paid for successively).
  • At the time of constitution, at least 25% of the capital must be fully subscribed and paid. The amounts pending disbursement are called liability dividends and are paid at a later date, as agreed.
  • The company name must be formed of the name of the company followed by "Sociedad Anónima" or the acronym "S.A."
  • The transfer of shares is free, once the company is registered in the Companies Register.
  • This company pays Corporation tax.

As we can see, there are significant differences between both companies, so, if we want to create a company and there are doubts between one legal form or another, it is important to analyse the project to determine which type of company is more appropriate.

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