A community of property is a legal form that a company can hold. It is characterized by the union of various self-employed workers, known as community members, who have shared ownership of the same property. You want to obtain a future return by exploiting said asset through specific business activity.
Strictly speaking, the community of property is nothing more than a private agreement between two or more people (generally self-employed). They agree to share a patrimonial element (capital or rights).
Characteristics Of A Community Property
As a summary, and to strengthen the concept and be able to go deeper, let’s see the main characteristics of the community of goods:
- It is legal, such as a public limited company (SA) or limited company (SL).
- There is the shared possession of a common good, from which it expects to obtain a future return derived from economic activity.
- The owners of the property in question, and founders of the community of property, are called “commoners.”
- Although they have a company, these community members have unlimited liability and, therefore, must respond with their assets.
- The tax treatment is the same as that of a self-employed person.
- It is the easiest way to create a company.
- It does not require minimum capital or complex bureaucratic procedures.
Types Of Community Property
The most common classification is based on the origin of the community property. Thus, two types can be distinguish:
- On the one hand, voluntary communities arise by the interest parties’ will. It is the case of several people associate with a community of goods.
- And on the other hand, the incidental community is the one that is impose (the will of the parties does not constitute it). For example, it occurs between co-heirs in the case of a succession.
- Constitution of a community property
- It is enough to sign a private contract
- The goal of the community. As in the case of companies, it is a question of determining the activity to which the professionals will dedicate themselves jointly.
- The identity of the commoners. The commoners are the members of the community of goods. As such, they have the rights and obligations derived from their management.
- Participation in profits and losses. Therefore, it is a matter of determining to what extent they will contribute to the community and benefit from its results.
Requirements To Create A Community Property
- Among the requirements presented by the Spanish regulation, for example, to create a community of property, there are the following:
- You must have a minimum of two partners.
- It does not have a minimum required capital, but it does require the contribution of a minimum, such as the common good.
- The community members, being the partners that constitute the community of property, must sign a contract under which the operation of the said community will be govern.
- The community members must register the community property in the corresponding regional administration body.
- In addition, if real estate or fundamental rights are contribute, a public deed will be necessary.
- The responsibility of the community members is unlimited and joint and several, so the community members have to respond with their assets.
So that we understand each other, the community of goods is the easiest way to create a company. It does not require a minimum capital contribution, and this common good may contribute to starting up the economic activity. This is because, ultimately, the responsibility falls on the self-employed who formed it.
When they create a community of property, these self-employ are known as “commoners.” These community members continue to self-employ, so their tax treatment is the same as any self-employ person.
Advantages and Disadvantages
- As you can see, community property is a very flexible figure. It allows broad discretion in its design and does not have a maximum number of community members. In addition, it does not require an initial contribution.
- The community members will freely agree on the minimum capital, being able to contribute goods or work. The only limitation is that superior work cannot be provided but must be accompanied by a contribution of assets
- On the other hand, the constitution and administration of community property are very simple. This facilitates operations and explains why many professional associations or family businesses use it.
The main disadvantage of community property is that it does not limit the liability of its partners. Although this pitfall is overcome with good insurance, the scant formalism of these communities and the lack of a minimum social capital mean that the community members are left unprotect in the event of civil liability.
The composition of the commons and its use, the commons are the set of goods and rights put in common. Thus, it is made up of a sum of money (capital), real estate (business premises), intangible rights (patents or software licenses, for example), etc.