Disadvantages of Partnerships in Spain

The disadvantages that partnerships offer are similar to those of autonomous workers, which include:

  • Partners have unlimited liability against the debts of third parties.  If the partnership has debts, partners may be responsible for the debts with their personal assets
  • If the partnership has substantial profits, it may face more taxes compared to companies because partnerships must pay the IRPF Tax (following the variable scale, which may reach a maximum of 56% in some Autonomous Communities) instead of the Companies Tax (fixed between 20% and 30%)
  • The partners are taxed directly and in proportion to their participation and the profits and/or losses that the partnership attains.  These incomes are added to the rest of the partner’s personal income declared in the IRPF (partners who are natural persons) or in the IS  (partners that are companies)
  • Partnerships do not offer the same status stability and durability as companies:  they do not have the same security under the law.  As a result, in practice, many businesses use this legal form only temporarily because of its simple establishment and accountability.  However, once the business is capable of generating sufficient turnover, business owners often opt to transform the partnership into a limited liability company or other type of company.

This article is not considered as legal advice

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