Limited Liability Entrepreneur

Important note: Box A9 must be completed only if the natural person is a limited liability entrepreneur ( ERL ).

In form 036, subsection A) “Natural persons” on page 2A, the entrepreneur, a natural person, can communicate (box A9) the registration or cancellation of his/her status as “Entrepreneur with Limited Liability”, as well as the date (box A10) of registration or cancellation as an entrepreneur with limited liability in the Commercial Registry.

In accordance with Law 14/2013, of September 27, BOE of the 28th, on support for entrepreneurs and their internationalization, the businessman is free to constitute himself as an entrepreneur with limited liability, but if he does so he must comply with the obligations established in the new legal framework.

The creation of this figure is accompanied by appropriate guarantees for creditors and for legal security in commercial transactions. In this sense, the operation of the limitation of liability is conditioned by registration and publicity through the Commercial Registry and the Property Registry.

According to the First Additional Provision of said Law, debts under public law are exempt from the limitation of liability. The enforcement procedures for these debts will be those established in their special regulations, with the specialities provided for in the aforementioned First Additional Provision.

Law 14/2013, cited above, establishes the definition of entrepreneur. The concept of entrepreneur is defined broadly, as those people, regardless of their status as a natural person or legal entity, who are going to develop or are developing a productive economic activity. The aim is to ensure that the measures in the Act can benefit all companies, regardless of their size and the stage of the business cycle in which they are located. This is without prejudice to the fact that certain provisions of the Law limit the scope of some measures to certain entrepreneurs, mainly depending on their size or the stage at which they are located.

Likewise, the aforementioned Law 14/2013 develops aspects that, due to their relevance to the concept of entrepreneur, are reproduced below.

Limitation of liability of the limited liability entrepreneur. (Article 7)

The entrepreneur, a natural person, regardless of his or her activity, may limit his or her liability for debts arising from the exercise of said business or professional activity by assuming the status of “Entrepreneur with Limited Liability”, once the requirements and terms established in Law 14/2013 have been met.

Effectiveness of limitation of liability. (Article 8)

1. By exception to the provisions of article 1,911 of the Civil Code and article 6 of the Commercial Code, the Entrepreneur with Limited Liability may obtain that his liability and the action of the creditor, which originates from business or professional debts, does not extend to the property not subject to the liability in accordance with section 2 of this article and provided that said non-binding nature is published in the manner established in this Law.
2. The debtor's habitual residence may benefit from the limitation of liability provided that its value does not exceed 300,000 euros, valued in accordance with the provisions of the taxable base of the Tax on Property Transfers and Documented Legal Acts at the time of registration in the Commercial Registry.

   In the case of dwellings located in towns with more than 1,000,000 inhabitants, a coefficient of 1.5 will be applied to the value of the previous paragraph.

3. In the registration of the entrepreneur in the Commercial Registry corresponding to his/her domicile, the real estate, whether his/her own or common, which is intended not to be bound by the results of the business or professional activity for complying with section 2 of this article shall be indicated.
4. A debtor who has acted with fraud or gross negligence in the fulfillment of his obligations to third parties may not benefit from the limitation of liability, provided that this is proven by a final judgment or by a bankruptcy declared culpable.

Commercial advertising for the limited liability entrepreneur. (Article 9)

1. The status of limited liability entrepreneur will be acquired through its registration in the sheet opened for it in the Commercial Registry corresponding to its domicile. In addition to ordinary circumstances, the registration shall contain an indication of the unaffected assets in accordance with sections 1 and 2 of article 8 of this Law and shall be carried out in the manner and with the requirements provided for the registration of the sole proprietor. The title to register the entrepreneur with limited liability will be the notarial act that must be submitted by the notary electronically on the same day or the next business day after his authorization in the Commercial Registry or the application signed with the recognized electronic signature of the entrepreneur and sent electronically to said Registry.
2. The registered entrepreneur must state in all his documentation, by stating the registration data, his status as a “Limited Liability Entrepreneur” or by adding the initials “ERL” to his name, surname and tax identification data.
3. Unless the creditors expressly give their consent, the debtor's universal liability for debts incurred prior to his registration in the Commercial Registry as an individual entrepreneur with limited liability shall continue to exist.
4. The College of Registrars, under the supervision of the Ministry of Justice, will maintain a freely accessible public portal where data relating to registered limited liability entrepreneurs will be disclosed free of charge to the user.

Publicity of the limitation of liability in the Property Registry. (Article 10)

1. In order to be enforceable against third parties, the fact that the habitual residence is not subject to the consequences of business or professional traffic must be registered in the Property Registry, in the page open to the property.
2. Once the entrepreneur with limited liability has registered, the Commercial Registrar will issue a certificate and send it electronically to the Property Registrar immediately, always within the same business day, for its record in the registration entry of the entrepreneur's habitual residence.
3. Once the registration referred to in the first section of this article has been carried out, the Registrar will deny the preventive annotation of the embargo placed on non-subject property unless the order shows that non-business or professional debts are secured or the debts are business or professional debts incurred prior to the registration of limitation of liability, or tax or Social Security obligations.
4. In the event of the transfer of non-taxable assets to a third party, the non-binding nature of the assets to the results of the traffic will be extinguished with respect to them and the non-affectation may be transferred to the subrogated assets by a new declaration of registration of the interested party.

Annual accounts of the individual entrepreneur. (Article 11)

1. The entrepreneur with limited liability must prepare and, where appropriate, submit to audit the annual accounts corresponding to his business or professional activity in accordance with the provisions for single-member limited liability companies.
2. The limited liability entrepreneur must file his annual accounts with the Commercial Registry.
3. After seven months have elapsed since the close of the financial year without the annual accounts having been filed with the Commercial Registry, the entrepreneur will lose the benefit of limited liability in relation to debts incurred after the end of that period. You will recover the benefit at the time of presentation.
4. Notwithstanding the foregoing, those entrepreneurs and professionals who opt for the figure of the Limited Liability Entrepreneur and who pay taxes under the objective assessment regime, may comply with the accounting and account filing obligations provided for in this article by fulfilling the formal duties established in their tax regime and by filing a standardized dual-purpose model, fiscal and commercial, in the terms that are developed by regulation.