What is a community of property and how can it help the self-employed?

Written by Fernando Maciá

What is a Community of Property?

A Community of Goods (CB) is considered to be the simplest and quickest legal form that exists for two or more self-employed persons to associate and create a company between them, but without losing their self-employed status at the same time. Once incorporated, the participants become community partners and the ownership of the rights and assets contributed belongs pro indiviso to the business activity that they decide to carry out jointly. It should also be added that the Community of Goods does not have legal personality, being governed by the Commercial Code in commercial matters and by the Civil Code in rights and obligations.

The constitution of a Community of Goods is a good starting solution for two or more self-employed people to create a company, when there is no initial capital or when you do not aspire to have a large income through it.

Formalities for the incorporation of a Community of Goods

The constitution of a Community of Goods does not ask for many requirements and depends on certain factors, such as if real estate or real rights are contributed, for example. In this case, it will be necessary to draw up a public deed before a notary public. Otherwise, it is sufficient for all partners to sign a private contract, where they will describe themselves:

• The contributions of each community member, in the form of goods and money.
• Who will manage the administration of the Community of Goods
• The business activity to be carried out.
• The percentage of participation of each with respect to profits and losses.

Once the incorporation contract has been drafted and signed, the following steps must be taken at the Tax Authorities for the Community of Goods to be considered effective:

• To register for the Economic Activities Tax (IAE), which can be done through the Internet if you have an electronic ID card.
• Pay the Transfer Tax.
• Request the Tax Identification Code (CIF).
• Value Added Tax (VAT) census declaration.

In order to start the business activity it is also necessary to go through another series of procedures with the Social Security, the City Council and the Ministry of Labor, these being:

• Register in the Special Regime for Self-Employed Workers (RETA), if this has not yet been done.
• In case of having hired workers or having the intention of doing so, register in the General Regime.
• Request the Guestbook for labor and Social Security inspections.
• Obtain the Opening License if you are going to start a commercial activity.

What are the advantages of incorporating a Community of Goods for a self-employed person?

In addition to a reduced amount of paperwork (as opposed to any other type of company) and the costs of these, The incorporation of a Community of Goods does not require the contribution of a mandatory minimum capital in order to be formalized.This is the ideal solution to form a small company if you do not have many financial resources. For this reason, many freelancers give preference to incorporating a company in this way, as it is clear that the bureaucratic process here is much easier.

Other advantages and points in favor of the Communities of Assets

We will list below some of the other reasons for deciding to form a Community of Goods:

• Voluntary maintenance. A partner of the Community of Goods can request the division of the common goods at any time, of course proportionally to the percentage of participation of each partner.
• Less taxes. In the fiscal aspect, a Community of Goods is subject to Personal Income Tax (IRPF), with each of the partners declaring their earnings separately. This means that you will pay less tax if you have a small size and income business to start with. You can always consider the possibility of transforming into a Limited Company if the business grows, because from a certain amount of income the Corporate Tax can be more profitable.
• Joint invoicing. Invoices are issued by the Community of Goods, and not individually by each of the community members.
• Joint and several liability. Liability is also common: the Community of Goods acts as a unit, so that all the partners are liable with their present and future assets for debts.