Types of business and legal forms

By size, businesses are broadly classified into micro-enterprises (fewer than $10$ workers), small businesses ($10$ to $49$), medium-sized businesses ($50$ to $249$), and large enterprises ($250$ or more). Classify: (a) the local greengrocer's, with $2$ employees; (b) the furniture factory in the industrial estate, with $120$; (c) a consultancy firm with $35$; (d) a supermarket chain with thousands of employees. Explain why size matters (grants, paperwork, bargaining power with banks).

Ana is a self-employed plumber (sole trader) and her business owes $20.000\ \text{€}$ to a supplier. If she cannot pay, she is liable with everything she owns, including her savings and, in the worst case, her home: that is unlimited liability. If the business were a private limited company, she would only lose the money invested in the company. Explain the difference between limited and unlimited liability and why a private limited company is said to "protect" personal assets.

The company 'BikeSur' has accumulated debts of $40.000\ \text{€}$ and is closing down.

1. a) If it was a sole-trader business, explain how much the owner can end up losing.
2. b) If it was a private limited company whose partners had contributed $5.000\ \text{€}$, explain how much they lose at most and what happens to the rest of the debt.
3. c) Argue why the law allows limited liability despite that risk for suppliers (it wants to encourage people to start businesses).

Marcos works as a self-employed plumber. He is offered a comprehensive renovation project budgeted at $45.000\ \text{€}$. To take it on, he needs to take out a bank loan of $30.000\ \text{€}$ to acquire machinery and a van, as well as hire two labourers. His personal assets include a primary residence valued at $140.000\ \text{€}$ and $12.000\ \text{€}$ in savings.

1. a) Design an asset-risk comparison evaluating what would happen if the client goes bankrupt and leaves the project unpaid: contrast the outcome if Marcos remains an individual sole proprietor (autónomo) versus if he previously incorporates a Limited Liability Company (SL).
2. b) Advise Marcos with a reasoned recommendation: weigh the protection of his home against the greater management obligations, incorporation costs, and accounting formalities of an SL for this specific case.

The figure summarizes the four most common legal structures when setting up a business and their main characteristics. Below is a card with an unsolved practical case.

1. a) Choose the legal structure that fits Marta and explain why (she works alone, takes on low risk, and needs neither partners nor capital).
2. b) Now choose for three friends launching an app, contributing $6.000\ \text{€}$ between the three of them, who want to risk only that money, not their savings or homes.

When Ana, the self-employed plumber, forms a private limited company, a new 'person' is born: the company has its own assets, signs contracts and can owe money separately from Ana.

1. a) Explain what it means that a company has its own legal personality.
2. b) Argue why that separates the debts of the business from the personal debts of the partner.

Choose the most appropriate legal form for each case and justify it: (a) Lucía, a graphic designer working alone for several clients; (b) three friends with an app who want to risk only the $6.000\ \text{€}$ they contribute; (c) five workers at a closing workshop who want to buy it together and make decisions in an assembly; (d) a bicycle factory seeking investors who will contribute $200.000\ \text{€}$ and can sell their shares whenever they want.

Large companies divide their capital into shares: small pieces of ownership that can be bought and sold.

1. a) Explain what being a shareholder is (owner of a part, entitled to their slice of the profits) and what the difference is between being a shareholder and being the boss.
2. b) Argue why a factory that needs a lot of money may want to sell shares to many people.

Two friends set up a private limited company (SL) fifty-fifty: each contributes $1.500\ \text{€}$. In the first year they earn $4.000\ \text{€}$ and decide to share out half and leave the other half in the company to grow.

1. a) Calculate how much each one receives.
2. b) Explain what advantage leaving profits inside the company has (reserves to buy a machine without taking out a loan).
3. c) Argue how the split would change if one had contributed $70\ \%$ and the other $30\ \%$ (the usual practice is to share according to the capital contributed, unless agreed otherwise).

Three business partners found a video game company as an SL (limited liability company) with a capital of $18.000\ \text{€}$: Mara contributes $10.000\ \text{€}$, Íker $5.000\ \text{€}$, and Zoe $3.000\ \text{€}$. Mara and Íker have other jobs and do not contribute time, while Zoe works full-time developing the video games. At the end of the year, the company obtains a net profit of $24.000\ \text{€}$.

1. a) Analyze the distribution of votes and the distribution of dividends that would strictly correspond according to capital shares. Justify why this standard distribution turns out to be unfair to Zoe.
2. b) Design a legal and compensation solution that fairly compensates Zoe's work without infringing upon the ownership rights of Mara and Íker, differentiating labor compensation from return on capital.
3. c) Suppose that Mara intends to unilaterally approve the full reinvestment of profits into a risky project that Zoe rejects. Determine whether Mara has the necessary majority and formulate a clause or shareholders' agreement that prevents majority abuses.