The concept of Sociedad Limitada Unipersonal (single person limited company) in Spain
The Sociedad Limitada Unipersonal or single person limited company is an alternative for many entrepreneurs who wish to start up their project.
It is important to know in depth the implications of an SLU and the administrative process necessary for its foundation, below, we analyse all the issues related to the Sociedad Limitada Unipersonal.
The characteristics of a limited company
A Sociedad Limitada (S.L.) limited company in Spain is a type of commercial company where the liability of the partners is limited to the capital contributed, i.e. the partners are personally liable for the debts of the company only up to the limit of the capital invested.
This type of company requires a minimum capital for its constitution, which is divided into shares, which are not freely transferable like the shares of a Sociedad Anónima (S.A.).
The Limited Company is one of the legal forms most chosen by small and medium-sized enterprises (SMEs), due to its flexibility and the protection it offers to the personal assets of the partners.
The Single person Limited Company in the context of the limited company
A Sociedad Limitada Unipersonal (S.L.U.) single person limited company in Spain is a variant of the Sociedad Limitada (S.L.) limited company in SPain characterised by having a single shareholder, either an individual or a legal entity, who holds the entire share capital.
This legal form combines the advantages of a limited liability company with the flexibility of a sole proprietorship, allowing the entrepreneur to limit his liability for debts up to the amount of the capital contributed, thus protecting his personal assets.
The incorporation of an S.L.U. is subject to conditions similar to those of any S.L.:
a minimum amount of share capital must be paid up, which is currently set at 3,000 euros, and this capital must be fully subscribed and paid up at the time of incorporation.
The incorporation process involves registration in the Mercantile Register, where the single-member nature of the company must be made clear from its creation or at the time it acquires this status.
A distinctive feature of the S.L.U. is the obligation to state in all its documentation, correspondence, order notes and invoices, as well as in any other type of documents, that it is a sole proprietorship, adding the initials “S.L.U.” to its name.
In addition, any change in the ownership of the shares and the loss of the single-member status, should it occur, must be recorded in order to guarantee transparency and correct information to third parties.
The single person limited company S.L.U. is an attractive option for entrepreneurs looking to start a self-employed project, but with financial protection that other legal forms such as the self-employed do not offer.
This legal form facilitates management and decision-making, as it does not require complex corporate bodies, with the sole shareholder directly managing the company or appointing an administrator for this task.
The difference between an SLU and the self-employed regime
The main difference between a Sociedad Limitada Unipersonal (S.L.U.) and a self-employed person in Spain lies in the legal nature and liability for debts.
While the S.L.U. is a separate legal entity, distinct from its sole shareholder, in which the shareholder’s liability for the debts of the company is limited to the capital contributed, the self-employed person is liable for the debts incurred in the exercise of his activity with all his personal assets, both present and future.
Another significant difference is the tax and social security aspect. The self-employed contribute to the Special Regime for Self-Employed Workers (RETA), basing their contributions on their profits.
Whereas in an S.L.U., profits are subject to Corporate Tax and the administrators or workers contribute to the general Social Security regime according to their salary, which can lead to differences in tax burdens and social benefits.
The incorporation and management of an S.L.U. also entails stricter formal and administrative requirements, such as:
- Registration in the Mercantile Register,
- The obligation to keep formal accounts
- Obligation to file annual accounts,
as opposed to the less bureaucratic and accounting complexity of the self-employed regime.
These differences mean that the choice between being self-employed or setting up an S.L.U. depends on the volume of activity, tax planning, business risk and the entrepreneur’s financing needs.
The articles of a Single person Limited Company
The statutes of a Sociedad Limitada Unipersonal (S.L.U.) in Spain include fundamental information on the organisation and operation of the company, similar to any Sociedad Limitada, but adapted to its single-member status.
Among the elements that must be included are:
- the identity of the sole shareholder,
- the company name followed by “Sociedad Limitada Unipersonal” or “S.L.U.”,
- the corporate purpose,
- the registered office,
- the share capital,
- the distribution of shares,
- the governing and administrative bodies of the company
- The rules for decision-making, adapted to the singularity of having a single shareholder.
In addition, procedures for the transfer of shares and, where appropriate, rules on succession of ownership of the company should be laid down.
At Asesoría Orihuela Costa we are specialists in fiscal and financial management of SMEs. If you want to protect your economic activity from the very beginning, our team is at your disposal so that you can always make the best decisions.
What happens if I become the sole partner of a company?
Single person company
A few years ago, you and your partner set up an SL.
But now he wants to focus on other matters, and you have reached an agreement whereby you will acquire his shareholding and become the sole owner of the company.
Your company will become a “Single person company” (i.e. a company with only one partner), which will entail obligations that you should not forget.
Signing of the Deed of Single person company
Companies that become sole proprietorships must notify this, together with the identity of the shareholder, to the Commercial Register.
To do this, execute a deed before a notary, presenting the register of shareholders (in which the transfer by virtue of which you acquire all the shares will be recorded).
The deadline for this registration is six months from the acquisition of the sole proprietorship.
If you allow this period to elapse and do nothing, you will be personally, jointly and severally and unlimitedly liable for the debts incurred by the company since you became a sole shareholder.
Once registration has taken place, you will no longer be liable for debts acquired after registration.
This means that any creditor of the company could demand payment of the debt from you, rather than from the company.
In practice, however, this would only be the case if the company failed to make payments when due.
What other obligations do I have if I remain a sole member company?
As there is only one member, there will no longer be a meeting for which minutes need to be taken.
However, it must still comply with certain formal requirements:
- Decisions that were previously taken by the shareholders and are now taken by you (e.g. the approval of the annual accounts, or the transfer of the registered office) must also be recorded in the company’s minute book as “decisions of the sole shareholder”.
- You must also have a legalised register book in which you record all contracts entered into between you and the company (these contracts must also be in writing and mentioned in the annual report).
Comply with these requirements if, for example, there are balances between you and the company – because you have at some point disposed of money from the company or, conversely, you have paid an invoice from the company.
If you fail to do so, a creditor could accuse you of concealing compulsory information and demand payment of the company’s debts.
Tax implications of setting up a single-member private limited company
The tax implications of setting up a sole proprietorship are often significant, but why?
A self-employed person pays between 19 and 47% tax on his profit.
A sole proprietorship is €23 (15% for the first two years).
And this is very important because the tax authorities may think that you have created the sole proprietorship just to pay less tax. If you have problems with the tax authorities about this, believe us, they will make you pay the corresponding IRPF tax bracket. You are familiar with the Messi case or the case against the tax authorities of the presenter Patricia Conde.
The key is that your company has a business activity and not a personal one. That it is the company and its staff and its assets that generate the income and not that it is generated by the intervention of a single person, such as an artist, a television presenter, an actor.
