Exercises: The entrepreneur: profiles and legal framework

Explain in your own words what traits an entrepreneurial person usually has (initiative, risk tolerance, ability to organise and to learn from mistakes) and give a specific example of each trait applied to someone opening a local coffee shop.

Order these legal structures from lowest to highest minimum required share capital for their incorporation: public limited company, sole trader, and private limited company. Furthermore, indicate in which of them the owner is personally liable for the business debts with their personal assets.

The diagram summarizes three very common legal structures in Mexico and the minimum capital required for each. State which legal structure corresponds to the box marked with "?" and explain two differences between it and a private limited company.

Two friends want to open an online handmade cosmetics shop. They have hardly any savings, but they are worried about having to be personally liable with their personal assets if the business accumulates debts. Which legal structure would you recommend to them? Justify your answer considering the liability they would assume and the capital required.

Explain two differences between paying tax as a sole trader (under Income Tax / IRPF) and doing so as a private limited company (under Corporation Tax), and explain why an independent professional with modest earnings might be interested in starting as a sole trader.

Mei wants to register as a self-employed sole trader to sell her illustrations online. List and briefly explain three procedures or obligations she will assume from a legal perspective (tax registration with the tax authority, Social Security registration, tax and invoicing obligations).

Marta invoices 60 pesos 000 annually as a sole trader doing web design (with net earnings of 38 pesos 000). To expand, she needs to hire two developers. An investor offers her 20 pesos 000 in exchange for 40% of the equity, but demands to be able to freely sell their stake to a competitor if they do not receive dividends within two years. In addition, Marta has just purchased a home of her own that she fears losing if the project fails.

1. a) Evaluate the legal viability of maintaining the legal form of sole proprietorship versus incorporating an SL (limited liability company) to satisfy Marta's objectives and the investor's demands.
2. b) Analyze the corporate governance conflict that would arise from the investor's intention to freely sell their stake in an SL, and propose a statutory clause or shareholder agreement that protects Marta's control without losing the investment.
3. c) Compare the impact of both legal forms on the capacity for self-financing if Marta plans to reinvest most of the profits into the business.

A technology-based startup plans to raise funds in three phases: an initial phase of 10 pesos 000 contributed by two founders, a second round of 150 pesos 000 with private investors («business angels»), and a third phase with hundreds of small investors through a crowdfunding platform who will demand to trade and sell their shares agilely without entry restrictions.

1. a) Justify why the Sociedad Limitada (SL) is ideal for the first two phases but dysfunctional for the third, contrasting the regime for transferring ownership shares (participaciones) versus shares of stock (acciones) in an SA.
2. b) An advisor suggests directly incorporating a Sociedad Anónima (SA) with 60 pesos 000 from day one, paying up only the legal minimum required. Explain how this initial paid-up capital and uncalled capital (dividendos pasivos) would work, evaluating whether it is worthwhile for the founders compared to starting as an SL and transforming later.
3. c) Evaluate the legality and advisability of including a statutory clause in an SL that declares «the transfer of shares to any third party completely free and without preemptive acquisition rights».

Lucas runs a restaurant as a sole trader, having invested 15 pesos 000 of his savings. After accumulating operating debts of 90 pesos 000 (with suppliers and financial institutions), the business ceases its activity. The liquidation value of the premises' assets is only 20 pesos 000. Lucas personally owns a primary residence valued at 130 pesos 000 and has 10 pesos 000 in his checking account.

1. a) Determine which assets creditors can claim if Lucas operated as a standard sole trader versus if he had previously registered as a Limited Liability Entrepreneur (ERL), specifying the requirements this status demands to protect the primary residence.
2. b) His brother-in-law argues: «If you had created an SL contributing 3,000, pesos you would never risk your personal assets, no matter what happened with the debts». Technically refute this statement by analyzing two cases in which the courts or the law require the administrator or shareholder of an SL to respond with their personal assets (liability for corporate debts and piercing the corporate veil).