Many of our self-employed individuals have shown interest in the Limited Liability Entrepreneur figure as the new year approaches. In this post, we will discuss the advantages of this business structure and whether it’s worth considering.
It is known as (ERL), and since 2013, it has been one of the newly created business forms aimed at limiting one’s liability.
The main feature that distinguishes ERL from a typical self-employed individual is the protection of their primary residence in case of debts. However, adopting this business form is subject to several specific requirements that are important to examine.
The requirements that a self-employed person must meet to become an ERL are as follows:
- The primary residence cannot be related to the business activity conducted or serve as collateral for the activity.
- The value of the primary residence cannot exceed €300,000 under any circumstances.
- Debts incurred prior to acquiring ERL status are excluded from this measure.
- In the case of a married ERL, it is necessary to review the marital property regime to avoid the spouse’s liability. In other words, a separation of property is essential.
If you meet these criteria, you can consider the advantages of registering in the Commercial Register as an ERL:
- Debts arising from your business activities can be limited.
- For small businesses, it is an agile form of operation.
- No legal personality acquisition procedures are required.
- It is a cost-effective legal form because it does not require creating a legal entity separate from the business owner.
It’s important to note that, despite the advantages it offers, we must consider some disadvantages associated with this figure:
- The primary residence is not always exempt from liability. If the debts are owed to public authorities, they can act against the property.
- In the case of a married ERL, these debts can affect the spouse.
- The higher the income volume, the higher the tax liability.
- Additionally, it is mandatory to submit annual financial statements to the Commercial Register every year.
With this article, we hope to address all your questions about this figure. Our team is at your disposal and will be happy to answer any of your inquiries.
