An individual that carries out a commercial, industrial or professional activity in their own name or on behalf on a company.

Characteristics

• There is no specific legal regulation for sole proprietorships and business activity is subject to the general stipulations in the Code of Commercial Law in matters of trade and the stipulations in the Civil Code as regards rights and obligations.
• The company is completely controlled by the proprietor, who is in charge of its management.
• The legal personality of the company is the same as that of its proprietor (the owner), who is personally liable for all the debts the company incurs.
• No distinction is made between the proprietor's personal assets and the company assets.
• It is not necessary to follow any specific process prior to setting up the company. Procedures begin when the business activity gets underway.
• Both the quality and the quantity of the capital contributions made to the company shall depend entirely on the proprietor.

Advantages

This type of company is ideal for small businesses.

There are fewer procedures and formalities involved in carrying out the activity, as no specific process must be followed to obtain a legal personality.

It can work out cheaper, as the company's legal personality is the same as that of the proprietor.

Disadvantages

The proprietor's personal assets are liable for any debts incurred by the business activity.

If the proprietor is married, these business activities may possibly affect his/her spouse, depending on the assets in question:

• The personal assets of the proprietor are liable for the company's debt.
• Joint property may be liable by express consent or by presence and consent.

The premarital assets of the proprietor's spouse can be held liable if expressly consented in a deed of public record.

High profits may be subject to substantial tax rates (companies pay a fixed rate of 35% of their profits, however in the cases of individuals, the tax rate rises in proportion to their income).

Ledgers

This will depend on the Tax Scheme to which the proprietor is subject.

• In the event this scheme is the "direct estimate method" and the proprietor carries out an industrial, commercial or service activity, the official ledgers of the Code of Commercial Law shall be kept and legalized at the Register of Companies:
  • Daily Ledger
  • Ledger for Inventories and Annual Accounts
• In the event this scheme is the "simplified direct estimate method", the following tax ledgers must also be kept: Sales and Income Ledger.
  • Purchases and Expenses Ledger.
  • Capital assets registration ledger.