The civil society is an agreement in which two or more people are obliged to contribute communal money, goods, or industry, with the intention of splitting any profits. This type of association is regulated by article 1665 and following of the Civil Code.

When real estate property is submitted it is necessary to have the deed publicly notarized, but normally, this is not necessary. These societies should have a legal purpose and be established for the common interest of its members. This type of society begins the moment that the parties enter into a contract.

The losses and profits of this type of society are divided up according to the agreement. The management of the society can be carried out by:

1. A sole administrator. This person may exercise all of the administrative acts in spite of opposition from the partners, unless he/she acts in bad faith.

2. Joint administration. This means that the society’s administration is entrusted to two or more members. One administrator can not act with the consent of the other or others if they are more than two. The drawback to this type of management is, for example, that when it’s time to sign a banker’s draft, for example, all of the joint administrators should sign it.

3. Several Management. Each member can manage separately; the signature of all of the administrators is not necessary. In the previous example, a cheque can be signed by any of the administrators, the signature of all of them is not necessary. In cases where there is full confidence, this type of management is used.

The association is terminated:

When the terms by which it was established expire.
When the business doesn’t function for what it was established.
By the death or insolvency of any of the members or by the seizure of shared property due to the members’ debt.
By the wish of any of the members, as long as there is a just reason or that the duration of the society had not been set.

Society’s Obligations

This type of society, after having set up a name and then adding the abbreviation SCP, they should obtain a Tax Identification Number that they can ask for at the Treasury. After getting this identification number, the society can register with the Treasury, i.e. it may be included in the census to practice business, open bank accounts in their name, etc. etc. Also, they should register with the Canary Government’s Ministry of Economics in relation to the IGIC (Canaries’ IVA) and, in addition to this, they should register with Social Security and pay administrator and employee fees.

In terms of tax requirements, each one of the members should declare them quarterly, stating the proportion of profit or loss obtained. These are the so-called payments which will be subsequently deducted in the members’ annual tax declaration.

On the other hand, the society may pass on the tax; this is to add on the local IVA (called IGIC) and every three months it should be declared to the Canaries’ Tax Administration.

Other tax obligations exist, like, for example, the annual IGIC summary to be presented in January and the declaration of economic transactions done with clients and suppliers to take place in the month of March. Also, each member should make an annual income tax declaration. In such declaration, deposits, expenses, etc. should be included, just as the profit obtained in proportion to the share that the business has, deducting the quantities deposited in the Treasury, in this case, every three months.

This type of society requires fewer formalities than so-called limited societies and they are quickly formed (less than a week) and in addition to this, are more economical concerning the professional fees that should be paid to the professionals that have taken part in the constitution.

A big objection that they have is that if the society doesn’t do well, and it should go into debt, each one of the members is demanded to pay, this is the private wealth of each member, if the society has debts with suppliers, creditors, tax administration, etc.