On 28 September 2013, the BOE published Law 14/2013 of 27 September 2013, on supporting entrepreneurs and their internationalization (better known as the Entrepreneurs Law). With some delay, this law was one of the most anticipated by the self-employed and small business owners, since its objective is to support entrepreneurs and businesses by supporting their development, growth, and internationalization. In addition, it promotes entrepreneurship and an environment favouring economic activities, both in the initial stages of establishing a business and in its subsequent development, growth and internationalization. To this end, the Law introduces reforms affecting various sectors of our legal system (fiscal, labour, commercial, bankruptcy and administrative).
Hereinafter is a brief summary of the measures regarding commercial and company law provisions, which includes the creation of entrepreneurial limited liability.
Scope and Concept of Entrepreneurship
- Law 14/2013 applies to all economic activities and promotion of internationalization of entrepreneurs in the Spanish territory.
- Entrepreneurs are considered to be people, regardless of their physical or legal status, who develop a business or entrepreneurial economic activity within the terms of the Law
Entrepreneurial Limited Liability (E.L.L.)
- The concept of Entrepreneurial Limited Liability (E.L.L.) allows individuals to avoid liability for the debts of their businesses from affecting their primary residence, which must be registered with the corresponding Property Registry (provided that the residence does not exceed the value of € 300,000 or € 450,000 when it is located in a town with more than 1,000,000 inhabitants). It is predicted that this will ensure that a person who decides to start an independent sole proprietorship has the adequate means to do so in order to avoid, to some extent, one of the common risks suffered by individual entrepreneurs: the universal asset liability established in the Spanish Civil Code and the Spanish Commercial Code.
- The status of E.L.L. is acquired by proof through the information/data sheet with the Commercial Registry where the business is domiciled (the registration fees for the registration of an E.L.L. is 40 euros at the Commercial Registry, and 24 euros at the Land Registry). In addition to the ordinary circumstances, the registration will identify the property, whether it is a sole proprietorship or a commonly owned property, and indicate that it is not affected by liabilities derived from business or professional activity.
- Once registered, the entrepreneur must state his or her acquired status of Limited Liability Entrepreneur on all his or her documentation, quoting registry information; or by adding the initials E.L.L. to his or her name, surnames, and tax identification number. Additionally, the Association of Registrars will maintain a public portal with free access to the data which can be released at no cost to the registered entrepreneur.
- The E.L.L. must prepare, audit (if necessary) and deposit with the Commercial Registry the annual accounts of their business or professional activities in accordance with statutory provisions for sole-proprietor limited liability companies. Entrepreneurs and professionals who choose this option will be taxed under the objective assessment scheme. Furthermore, the E.L.L. will have to comply with accounting and deposit obligations by completing the formal duties established in the tax system, and by depositing a standardized model in accordance to law.
- If seven months elapse from the close of the financial year without the entrepreneur depositing the annual accounts with the Commercial Registry, the entrepreneur will lose the benefit of the limitation of liability in relation to debts incurred after the end of that term. The Entrepreneur can recover these benefits at the time of submitting the accounts.
- Finally, the exemption from liability will not apply for Public Law debts.
This article is not considered as legal advice