Professional Documents
Culture Documents
A- DEFINITION OF A CORPORATION
A corporation is a large company authorized to act as a single entity and recognized as such
in law.
There are 2 essentials characteristics:
- It has a legal personality
- It exists within a legal framework
In law the main point is to be recognized by law, to exist in law, to be able to go to court and
defend your rights.
(SA) PLC - Public Company (everybody could be a shareholder; the company has to reveal all
the financial information)
(SARL) LTD/ LLC – Limited Liability Company
(SA) (Société par actions simplifiées) - joint-stock company
Individual joint-stock corporation (only one shareholder)
DEFINITION OF A COMPANY
A company shall be formed by two or more persons who agree by contract to appropriate
their assets or industry to a common undertaking with a view to sharing the profits or
benefiting from any savings that may arise. It may be instituted, in the cases provided for by
law, by the act of will of one person. The partners undertake to contribute the losses.
B- Business VS corporation
a) DEFINITION OF BUSINESS
The business is a structure under which an economic activity is carried out using appropriate
people, premises and equipment. It is the sum of material and human resources tending to
create an autonomous economic activity.
Sole proprietorship for entrepreneurs developing their own business without creating a cie.
MICRO-ENTREPRENEUR SOLE-PROPRIETORSHIP
-Any activity -Any activity (civil or commercial)
-advantages:
->no VAT is required on bills/ invoices (higher -advantages:
VAT Hungary, lower Luxembourg (under 37000) ->basic accounting obligation
-disadvantages
->no deductions are possible at all, (micro
entrepreneur I have no expense, if you buy -disadvantages
desk, car, you travel to see consumer, do ->additional taxes (pension almost 10% on net
advertising, nothing is deductible, taxes on profit)
turnover) Tax office offers 34% automatic
deduction of income
c) Civil partnerships
Partnerships are also business entity:
-the general partnership, in which all partners share the profits and liabilities of the
partnership
- the limited partnership, in which some partners have lessened management responsibility
and lessened liabilities
-limited liability partnership (LLP), in which all the partners have some form of limited
liability
a) Financial motivat°
- The equity amount reassures, easiness to obtain loans
- More people contribute to the business
- Less dangerous partners for banks
b) Tax motivat°
- The professional activity is called to generate profits that rise a tax issue
Obj: tax optimisat°
- Income tax- up to 45%
- Corporate tax- up to 33%
c) Social motivat°
- Managers associates to employees, social coverage
- Self-employed, personal contribut°
Less generous social security and pension coverage
d) Patrimonial motivat°
- Protect the entrepreneur’s personal assets
- Protect the family patrimony
(ex: marriage contracts
o Universal community marriage contract (share everything before and during the
marriage)
o Community reduced to aquest (reduced to what you acquired during the marriage,
everything received before and after the marriage don’t share) AUTOMATIC
CONTRACT
o Separation of goods marriage contract (don’t share before/during or after the
marriage) – recommended if you have a business to protect the family)
DEFINITION OF INCORPORATION
The incorporation is its registration within a commercial court in order to exist.
Only after its incorporation, the company becomes a legal person having a distinct entity
from its members.
Investment in a company
o In cash (money)
o In kind (equipment, machines, property…)
o In industry (work)
o Innovative idea- INTELLECTUAL PROPERTY (90% OF THE PROFIT IN THE WORLD)
IP:
1. Patents- technology right for 20 years and becomes public
2. Trademark (name, logo, slogan, sounds, colors, smell…) protected for 10 years and
renewable forever
3. Copyright- books, movies, music, art, website, software, protected for 50 years after
the death
4. Design patent- shape protected for 5 to 25 years renewable up to 25y
5. Trade secret- recipes protected forever
Administrative constraints:
o Verify if the chosen name is available
o Draft the articles of association
o Choose a headquarters address (siege social)
o Raise the share capital and open a bank account
o Publish a notice of incorporation
o Enroll at the tax office
o Enroll at the commercial court
A- The modern corporation
a) Legal characteristics
o It is a legal entity, with a legal personality separate from that of its members.
It can therefore:
- Make arrangement to govern its own activities
- Sue and be sued
- Purchase, hold and dispose of assets in its own name
- Hire staff, agents and contractors
Sole-proprietorship Micro-entrepreneur
NO POSSIBLE DEDUCTIONS
Business Business
No legal personality No legal personality
The shareholder is liable The shareholder is liable
Same as micro entrepreneur, same status, but it Same as sole- proprietorship, same status, but it
is a business + Limited liability is a business:
deduction of expense
But no limit on turnover 30% social contributions (on profit)
10% on pension and additional taxes
No deduction possible (professional tax for example)
Social contributions 22.5% on turnover No limit on turnover
PARTNERSHIP
Partnership is a contract between two or more people to share profit and loss, no creation
of a corporation.
Very flexible and easy to create, advantageous (because share profit and loss) , risky (trust
the partner, each one of the parties can pay the entire amount of the debt)
- General partnership
- Limited liability partnership (preferred)
If there are more than two parties, you have to share equally
CORPORATIONS