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Legal Forms of Business
Legal Forms of Business
Every country has its own procedures for and definition of the legal forms of business, and this vast subject is not capable of being defined within the scope of a single article on our website.
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However, inside the European Economic Area (EEA), which includes the European Union, there are now universal laws that apply across all borders setting out several new legal forms of business, and to date more than 3000 corporations have been established under these laws.
It is important to note that as of January 2021, all of the information presented in this document is no longer relevant to companies registered in the United Kingdom.
In defining business, two terms are used – partnerships and companies, and companies are then subdivided further, as we explain below.
Partnerships are defined in terms of laws governing the European Economic Interest Grouping (EEIG). They are registered as a legal entity having unlimited liability and not being liable for corporate tax. Each member of the EEIG has unlimited joint-and-several liability for its debts, which means in the event of a failure such as bankruptcy, each individual can be sued for the total amount of any outstanding debt.
A company can be set up within the EU in the form of a European public limited-liability company (Societas Europaea or SE), in one of these forms:
- (SE) European company
- (SCE) a European private limited company, a term that is similar to a German GmbH, Dutch BV, Belgian BVBA or French SARL.
- An SE or SCE can be registered in any EEA member state. An SE cannot simply be formed as a new business, but is reserved for existing companies. SE companies must be set up by the merger of multiple national companies from different countries or by the conversion of an existing company into an SE.
Globalization and the internet have extended business activities beyond national borders and the main purpose of SE is to make European business easier. The regulations came into force at the end of 2004 and some well-known examples such as Puma, SAP, and Zalando are operating under this form.
This business structure offers the advantage of being able to operate throughout the European Union without any bureaucratic blocks, which makes it much easier for a CE to open new branches in, or relocate to, other EU countries.
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