Joint ventures

Temporary Business Association (Unión Temporal de Empresas).

A Unión Temporal de Empresas (UTE) is an business association between two or more companies created with the purpose of carrying out a specific project or service. A UTE has no legal entity of its own, hence the associated companies will be severally held responsible of the liabilities of the UTE. Notwithstanding this, the UTE must keep its own and independente accounting records, and will enter into contracts and agreements in its name and on its behalf

A UTE must be created through a notarial deed and must be registered in a specific Register the Ministry of Economy.

UTEs are a very common co-operation vehicle in Spain used in construction and engineering projects, services provision, public projects, etc.

Economic Interest Grouping (Agrupación de Interés Económico).

A Agrupación de Interés Económico (AIE) is a non-profit legal entity created for the purpose of helping its members to achieve certain objectives, most commonly the supply of common or centralised services such as purchasing, sales, data processing or administrative services.

The AIE must be incorporated through a notarial deed and registered in the Trade Register. The deed shall establish the identity of the members, the capital of the grouping (if any) and the contributions of the members, the purpose of the grouping, its name, its duration, its registered address, and its directors, as well as any agreed rules on votings or any other legitimate pact agreed upon by the members.

The members of an AIE may be wholly and severally held liable for the debts of the grouping in the event of non-payment or default of the grouping.

European Economic Interest Groupings (Agrupaciones Europeas de Interés Económico) registered in Spain may be created between a Spanish company and one or more European companies. The regulation of the European Groupings is practically identical to that of the Spanish Groupings.

Partnership Agreements (Contrato de cuentas en participación).

A partnership contract by virtue of which a company or entrepeneur enters into a project or business with the help of the contributions (in money or in kind) of one or more companies or entrepeneurs. The principal partner manages the project or business in its own name and distributes the benefits among the contributing (non-managing) partners. In case the project or business suffered losses, those must be sustained by all partners in the previously agreed upon proportion.

This type of agreement does not create any type of legal entity and it does not legally require any legal formality, although it is usually documented in a notarial deed for proof purposes (which is specially important for taxation purposes).

Income paid to the non-managing partner is a tax-deductible expense for the managing participant and a regular taxable income for the non-managing recipient.