1. UNIT 3: Equity and Business Set up

2. 2 different kinds of funds to set up a business: -Own generated funds (money given by shareholders, gains generated by the company and left there “Reserves”, etc.) -External funds (bank loans, etc.) 2 groups of financial accounts: -Group 1: “BASIC FINANCING” – Long Term (with both “own generated” and “external funds”) -Group 5: “FINANCIAL ACCOUNTS” – Short Term (with both “own generated” and “external funds”) 1. FUNDS

3. 2. BUSINESS LEGAL STATUS 3 different legal status for businesses: Natural Person2.1. Sole Trader Legal Person 2.2. LLC (Limited Liability Company) 2.3. Corporation Natural Person – Legal Person -Natural person (Sole Traders) – UNLIMITED LIABILITY Sole traders compromise their own equity before the business payable debts. They are personally liable for the debts of the company. -Legal Person (LLC and Corporations) – LIMITED LIABILITY The partners of a LLC or a Corporation don’t compromise their own equity.

4. 2.1. Sole Traders – Set up requirements 1.No need of issuing any minimum capital 2.Unlimited liability 3.Personal Income Tax 2.2. LLC Limited Liability Companies – Set up requirements 1.Minimum issued capital: 3.005’07 € 2.Minimum disbursed capital at set up: 100% of issued capital 3.Limited liability 4.Corporate Income Tax 2.2. Corporations – Set up requirements 1.Minimum issued capital: 60.101’22 € 2.Minimum disbursed capital at set up: 25% of issued capital 3.Limited liability 4.Corporate Income Tax

5. 3. LIMITED LIABILITY COMPANY (LLC) SET UP - JOURNALS 3.1. Issue, Subscription and Disbursement A LLC has been set up with 200 equity holdings 20€ face value. Expenses (VAT not included): 300€ XXX 194 Disbursed Goods (Banks, Buildings, Machinery, etc) Issued Capital pending registration 4.000 194. Issued capital pending registration – LIABILITY (It’s not Equity yet: not until the public deed is filed)

6. 3.3. Public deed filed at the Business Registry 3.2. Expenses (notary public, consultants, Business Registry, etc) 623 472 4751 41_ Independent professional services Input VAT (21% x 300) Taxation authorities withholding tax Other payables 300 63 300 194 100 Issued capital pending registration Share Capital 4000 100. Share Capital – EQUITY

7. 4. CORPORATIONS SET UP - JOURNALS 4.1. Issue - Paper A Corporation has been set up by issuing 1.000 shares of 100 € face value. The shares have been totally subscribed (50.000 € monetary, 50.000 € non-monetary contributions) and disbursement has been made by the minimum required (½ by cash, ½ by land and natural resources). Expenses (VAT not included): 300 € 194. Issued capital pending registration – LIABILITY (it’s not Equity yet: not until the public deed is filed) 190. Shares Issued – MINUS LIABILITY 190 194 Shares issued Issued Capital pending registration 100.000

8. 1034 1044 190 Uncalled capital pending registration Uncalled non-monetary contributions, capital pending registration Shares issued 50.000 100.000 4.2. Subscription (100%) – Not called up People 1034 and 1044 – MINUS LIABILITY (just as 190) (Reclassified) 570 210 1034 1044 Cash, euros (1/2 25% 100.000) Land and resources (1/2 25% 100.000) Uncalled capital pending registration Uncalled non-monetary contributions, capital pending registration 12.500 4.3. Minimum required Disbursement (25%) - Goods 570 and 210 – ASSETS

9. 4.5. Public deed filed at the Business Registry 4.4. Expenses (notary public, consultants, Business Registry, etc) 623 472 4751 41_ Independent professional services Input VAT (21% x 300) Taxation authorities withholding tax Other payables 300 63 300 194 100 Issued capital pending registration Share Capital 100.000 100. Share Capital – EQUITY 1030. Uncalled capital – MINUS EQUITY 1040. Uncalled non-monetary contributions, cap – MINUS EQUITY 1030 1040 1034 1044 Uncalled cap. Uncalled non-monetary contributions, cap. Uncalled capital pending registration Uncalled non-monetary contributions, capital pending registration 37.500 37.500

10. 558 1030 1040 Receivable on called-up capital Uncalled cap. Uncalled non-monetary contributions, cap. 75.000 37.500 4.6. Called-up capital of what is left (75%) – Called up People 572 218 558 Banks, current accounts Motor vehicles Receivable on called-up capital 37.500 75.000 4.7. Disbursement of what is left (75%) - Goods The Corporation calls up and requires the capital that is left. It is disbursed through Banks and Motor vehicles 558. Receivable on called-up capital - ASSET 572 and 218 – ASSETS

11. 5. SHARE PREMIUM SET UP - JOURNALS A Corporation has been set up through 10.000 shares of 10 € face value issued at 115%. Shares have been totally subscribed (100%) and disbursement has been made by the minimum required (25% share capital + 100% share premium). Expenses = 0 (to simplify). The corporation calls-up and requires 75% of share capital. It is disbursed the day after through banks. Previous calculations: 10 x 1,15 = 11,5 Issue Valuex 10.000 shares = 115.000 10 Face Valuex 10.000 shares = 100.000 Share Capital 11,5 – 10 = 1,5 Premium Valuex 10.000 shares = 15.000 Share Premium

12. 4.1. Issue - Paper 190 194 Shares issued (10.000 x 11,5 Issued Val.) Issued Capital pending registration 115.000 1034 190 Uncalled capital pending registration Shares issued 115.000 4.2. Subscription (100%) – Not called up People 570 1034 Cash, euros (25% 100.000 + 100% 15.000) Uncalled capital pending registration 40.000 4.3. Minimum required Disbursement (25% Share Capital + 100% Share Premium)

13. 4.5. Public deed filed at the Business Registry 194 100 110 Issued capital pending registration Share Capital Share Premium 115.000 100.000 15.000 1030 1034 Uncalled capital (75% 100.000) Uncalled capital pending registration 75.000 4.4. Expenses = 0 ------ 558 1030 Receivable on called-up capital Uncalled cap. 75.000 4.6. Called-up capital of 75% – Called up People 572 558 Banks, current accounts Receivable on called-up capital 75.000 4.7. Disbursement of what is left (75%) - Goods