Advantages and disadvantages of Limited Partnership

A Sociedad Limitada is a type of commercial company frequently used in Spain by small and medium-sized entrepreneurs. As its name indicates, it limits our liability to what we have contributed to the company and thus avoids affecting personal assets. Despite what you may think a priori, a Limited Company can have only one partner, either as an individual or a legal entity, and there is no limitation on the number of partners.

Advantages and disadvantages of a Limited Partnership

To understand, for example, the difference with a Sociedad Anónima we must take into account that the Sociedad Anónima is an open company, that is, the partners can freely sell their shares while in the Sociedad Limitada it is only free when the buyer is another partner or a direct relative such as the spouse or children of the seller.

Advantages of a limited partnership

• The expense of the land previously fixed will be deductible as an expense for the partnership.
• The procedures for setting up a Limited Company are not high, so it can be incorporated in a relatively simple way.
• The Limited Company can be set up in a relatively simple way.
• It is easy to access credit due to the type of company it is.
• From 40.000€, at taxation level it will always be much more profitable to have a company paying the corporate tax than a self-employed paying the IRPF.

Disadvantages of a limited company

• The procedure to incorporate the company takes an estimated time of 2 to 3 weeks, so it does not allow great flexibility or speed.
• The shares within the company are not easy to transfer since the other partners will always have priority over any possible external investor.
• If at any time you need external financing to be able to maintain the business, banks will require personal guarantees in order to obtain that credit.