What is the legal form of your company?

A company can be structured in different ways which is defined as the legal form. The VSME framework asks company to classify your business according to national legislation. The legal form defines the structure of your company, its liabilities, and regulatory requirements. Below are the standard undertaking structures you can choose from:

1. Private limited liability undertaking

A private limited liability company (LLC) is a common legal form where the business is a separate legal entity from its owners. Shareholders have limited liability, meaning their personal assets are protected from company debts. This structure is widely used for small and medium-sized enterprises due to its flexibility and legal protection.

2. Sole proprietorship

A sole proprietorship is the simplest business structure, where a single individual owns and operates the business. The owner is personally responsible for all debts and liabilities, making this structure suitable for freelancers, small business owners, and independent professionals.

3. Partnership

A partnership consists of two or more individuals who share ownership, responsibilities, and profits. Partnerships can be general (where all partners share liability) or limited (where some partners have limited liability). This structure is commonly used for professional services such as law firms and consultancies.

4. Cooperative

A cooperative is a business owned and operated by a group of individuals for their mutual benefit. Profits and decision-making are typically shared among members. Cooperatives are popular in sectors such as agriculture, retail, and financial services.

5. Other

Some countries have unique legal forms that do not fall into the above categories. If your company operates under a different legal form, specify its classification according to your national legislation.

Why is this important?

Identifying and reporting your company’s legal form ensures compliance with regulatory requirements and provides stakeholders with a clear understanding of your business structure. Proper classification can also impact taxation, liability, and governance responsibilities.

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