Business Structures

Business Structures Notes

Learning Goals

  • Understand the main business structures in France and Common Law countries.

  • Learn how to protect business and personal assets.

  • Distinguish between members and directors.

Chapter 1: Introduction to Business Structures

§1. Persons

  • Legal Personality

  • Definition: Ability to have rights and duties under law.

  • Legal subjects can be:

    • Natural Persons: Individual human beings.

    • Legal Persons: Entities like companies, corporations, associations, charities, public entities etc.

  • Legal consequences include:

    • Name.

    • Capacity.

    • Civil liability.

    • Criminal responsibility.

    • Estate (legal wealth).

  • Individuals (Natural Persons)

  • Defined as entities acquiring legal personality on birth and ending with death.

  • Legal Persons

  • Definition: Groups of persons/assets recognized as a single entity legally.

  • Distinction between private entities (Private Law) and public bodies (Public Law) in France.

  • Acquisition of legal personality occurs when the entity is incorporated (e.g., registered at Companies House).

  • Ends with winding-up and liquidation of the company.

§2. Estate’s Protection

  • Definition of Estate (Legal Wealth)

  • A system including all of a person's assets and liabilities, termed as "legal wealth".

  • Features

  • In France, sole traders have two estates (introduced in 2022).

  • In Germany: multiple estates allowed for all persons.

  • In Common Law, typically one estate, but trusts are also utilized.

  • All persons possess a legal estate, which may have no financial value.

  • Consequences:

  • Unlimited liability principle towards creditors.

  • Limitations may depend on domestic laws.

§3. Other Definitions

  • Difference between Companies and Sole Traders

  • Sole Traders:

    • Defined as a natural person engaging in business alone, without partners.

    • Do not possess legal personality; no share capital, incorporation, or articles of association.

    • Business assets belong to the individual.

  • Companies:

    • Recognized as legal persons conducting business.

    • Must develop Articles of Association and register to incorporate.

    • Corporate assets belong to the company, separate from shareholders.

  • Members/Shareholders of Companies

  • Ownership and governance structure, contributing to finance.

  • Responsibilities include investing, approving major decisions, and owning shares.

  • Rights include information access, participation in meetings, and voting.

  • Liability varies (limited or unlimited).

  • Financial returns through dividends and capital gains/losses.

  • Board of Directors

  • Non-executive directors appoint the CEO and set general strategy.

  • Members appoint and remove directors; remuneration based on service contracts.

  • C-suites Executives

  • Include management roles such as CEO.

  • Responsible for the company's day-to-day operations and legal representation.

  • Employees (Officers)

  • Work under an employment contract with a salary as compensation.

generally, 1 estate per persone but if a persone creates a business, this person could have another estate. 1 personal estate and 1 business estate

animals don’t and cannot have an estate

we all have at least on estate

contribution

object of company (occupation or what they do)

head of office (where the company is register

an entrepreneur’s income personnal income tax will be linked to his business tax and could be subjet to corperate tax