How is the ERL law (limited liability entrepreneur)

The limited liability entrepreneur (ERL), in the terms provided for in the Law, is that natural person, whatever his / her business or professional activity, which may limit his / her liability for the debts incurred due to the exercise of said activity, in such a way that this does not affect your habitual residence, under the conditions that we mention below.

Effects of the ERL

  • Limit the responsibility partially. The habitual residence of the ERL is free of responsibility, provided that its value does not exceed 300, 000 euros. If the dwelling is located in a population of more than 1 million inhabitants, a reduction coefficient of 1.5 will be applied to the aforementioned value1.
  • The ERL that acts with fraud or gross negligence in fulfilling its obligations can not benefit from this limitation of liability. Such gross negligence or fraud must be declared in a final judgment or in a bankruptcy conviction.
  • Neither will the ERL benefit from this limitation to the liability exemption, if it is tax or social security debts.
  • The Property Registrar, as a consequence of the limitation of liability, will deny the liens on the non-subject property, unless they are non-business or professional debts or prior to the registration of the limitation of liability.
  • The ERL must formulate and, if applicable, audit the annual accounts corresponding to its professional or business activity. After seven months from the end of the year, if the annual accounts of the ERL have not been deposited with the Mercantile Registry, the limitation of liability would not come into play, with respect to the debts contracted after said term.
  • Valuation in accordance with the provisions of the tax base of the Property Transfer Tax and Documented Legal Acts at the time of registration in the Commercial Registry.
  • For third-party effectiveness, the non-subjection of the habitual residence to the results of the business traffic, must be registered in the Property Registry and in the Mercantile Registry in the open sheet for the good and the entrepreneur, respectively.
  • Regarding the limitation of liability with respect to public law debts, the new Statutes of the Autonomous Worker, establish the subsidiary nature of the habitual residence with respect to these debts, so that the embargo can only be enforced when there are no others enough assets to cover the debt, giving a term of two years between the 1st stage of seizure and the completion of the same, to be able to assume the debts