Limited Liability Individual Enterprise
- Chile
- 01/01/2003
- Prieto y Cía
On February 11th, 2003 Law N°19.857 was published in the Chilean Official Gazette. This law authorizes the incorporation of limited liability individual enterprises. These enterprises have most of the characteristics of a limited liability partnership, but require only one individual to be incorporated.
This innovative structure comes to solve the problem of many individual entrepreneurs who were assuming their business risks with all their patrimony. Indeed, individual entrepreneurs would usually be personally liable for the debts they incurred in their business, instead of only being liable for the contribution they make to it. This new structure give them the chance to isolate part of their money and to use it in their commercial activity.
A regular limited liability partnership would need at least two partners. This requirement was some times an obstacle for people whose activity was not as profitable to share its dividends with someone else. This problem was usually solved by giving this partner a small participation in the limited. From now on, an entrepreneur may start a business through a limited liability individual enterprise, without needing to find a third party.
Another important issue regarding this matter is the possibility of this enterprises to amend their bylaws in order to turn into any other sort of partnership or company. Also when the total ownership interest in any kind of partnership or company becomes property of a single partner or shareholder, the bylaws of that company or partnership may be amended as to turn it into a limited liability individual enterprise.
Finally, Law N°19.857 states certain causes by which the separation of patrimonies between the entrepreneur as an individual and his business ends, like fraudulent or guilty bankruptcy of the entrepreneur.
