How to create a company: types of companies and recommendations

Are you thinking about creating a company? You should know that it is necessary to establish some kind of company, especially when two or more people decide to undertake a business project together. They must assume the control and responsibility of the part of the company to which they are engaged.

Do you know what types of companies are best suited to your future project? Let’s see how to create a company and the existing options:

Learn how to create a company

If you have an idea and want to make it happen, but you have a lot of doubts to start, continue reading our guide. In it, we will give you the keys to know how to create a company and its possibles forms of incorporation. As we start our business, we can make it as an individual entrepreneur or by forming a company, we explain all its characteristics.

The individual or self-employed entrepreneur

A natural person who regularly, directly and personally carries out the administration of a company. It is a professional activity on its own, without the direction of another person.

It is a form of self-employment, because the autonomous is the owner of the company and worker, regardless of the activity he develops and the type of work he performs. Normally, it is used for retail (shops) and specialized professionals sectors (decorator, plumber, electrician, etc.).

Individual company features

• The employer exercises full control of the company and manages its management.
• It is in turn the holder of the legal person, and it responds of all the obligations that the company contracts. 
• Does not make a division between the commercial patrimony and its personal patrimony. 
• Does not require a special incorporation process.
• The paperwork starts at the beginning of the business activity. 
• The amount of capital investment for the company is to the will of the entrepreneur.

Types of companies

Civil company

For the Civil company incorporation, the interested parties have to sign a private contract in which it’s detailed what they are going to contribute to it (money, real estate, etc.) and the percentage of participation that each partner has in the profits and losses of the company. This society has the advantage of being simple to establish. On the other hand, its disadvantage is that the partners respond with their personal patrimony in case of insolvency.

In the event that the members contribute real estate or rights, the incorporation of the company will not be effective until formalized by public notarial deed and until the corresponding taxes are paid. Another characteristic of this kind of company is that it lacks its own legal personality and is not considered a mercantile company. For this reason, its members must pay for the income tax and not for the corporate taxes.

Limited company

Among the types of companies, it is the most common. Especially in the case of small businessmen and the most advisable to operate in the legal traffic for most of the commercial activities. Let’s look at its main features:

• Capital: It must have a social capital determined in the social statutes integrated by the contributions of the members that may not be less than €3,000. The disbursement of capital can be made by monetary or non-cash contributions (movable or immovable property, commercial, industrial establishments…).
• Division of the share capital in shareholdings: they are a part of the capital and must be numbered and registered in the Book of members register. Moreover, the disadvantage of these participations is that they cannot be freely transmitted, as the requirements for their effective transmission are higher.
• Validity: The company must be constituted in a public deed for its subsequent inscription in the Mercantile register, within a maximum period of 2 months since its creation. Once registered, the company will have its own legal personality. A company that is not yet registered in the Mercantile register will be an irregular society. The law considers the founding members and the administrators responsible for the damages that will cause the breach of this obligation.
• Responsibility: The Members do not take responsibility for the social debts, it is limited to the amount contributed as social capital.

Public limited company

• Capital: The minimum social capital to create it is €60,000. It is much higher than the other mentioned above but has other advantages, such as the easy incorporation of a large number of investor partners. The share capital must be fully subscribed and disbursed in at least 25%, or paid, so that the company can be incorporated.
• Division of the social capital: it is divided into shares, indivisible and cumulative of the social capital. In addition, they may be represented by titles or annotations in account, having the possibility of quoting in the stock market. They can be sold, as premium free transmission, this being the main advantage against the one above.
• Validity: The company can be established by two systems:

1. Simultaneous foundation or by agreement: the most used for its simplicity, the founding members are the ones that give the social writing. 

   2. In successive form or by public subscription of shares: the members and administrators have the obligation to register in the Mercantile register the public deed of incorporation within two months of their granting

• Responsibility: the members acquire a liability against creditors limited to the share capital and property in the name of the company.

It is essential to delimit what your patrimonial responsibility will be. You already have the keys to know how to create a company. For detailed legal advice, do not hesitate to contact our specialists in the field.