A. SOLE OWNERSHIP

2.101 In a sole ownership business, it is just the one individual who performs and is responsible for the business activities of the firm. The owner is personally liable for any debts incurred by the firm in the course of its business. Depending on the type of business to be performed the sole proprietor must register before different government agencies.

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B. BRANCH OF A FOREIGN COMPANY

2.102 A foreign corporation must establish a branch, or any other form of permanent representation if it is to perform regularly in Argentina activities included in the object of same. As the branch is part of the foreign company, said company will be liable for any debts incurred by the branch in the course of its business.

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C. GENERAL PARTNERSHIP

2.103 A General Partnership (Sociedad Colectiva) is a company in which two or more partners undertake any type of business in which all of them are jointly and severally liable for the company's debts. The name of a General Partnership may consist either of an artificial name or of the name of one or more of the partners. If the name includes the name of one or more partners, but not of all of them, it must be followed by the words "y Compañía" or the abbreviated form "& Cía.". In both cases the company's name must end with the words "Sociedad Colectiva" or "S.C."

2.104 The bylaws may establish the administration regime of the company but if nothing is mentioned, all the partners will administer the company severally. The bylaws may establish different functions for each administrator but if not specified in same any of the administrators may be authorized to bind the partnership. Bylaws may establish also that no administrator can act alone. An administrator may be removed from office by a majority decision of the partners, unless otherwise established in the bylaws. If the bylaws require justified cause in order to remove an Administrator, if he denies the existence of the cause for his removal he will continue in office until a court decision establishes the existence of justified cause. Any partner may request the removal of the Administrator judicially. A partner that is not in agreement with the removal will be entitled to withdraw from the partnership if the appointment of the administrator in point was an express condition for incorporation of the company.

21.105 An administrator may resign at any time unless otherwise established in the bylaws, but he will be responsible for any damage he may cause if the resignation is fraudulent or effected without due notice.

2.106 Modification of the bylaws including the transfer of ownership interest to another partner requires the unanimous consent of all the partners unless otherwise agreed. Any other resolution may be adopted by majority. Majority signifies an absolute majority of the capital unless otherwise established by the bylaws.

2.107 A partner may not perform on his own account or on behalf of a third party any activity in competition with the partnership unless all the remaining partners have give their express and unanimous consent. The bylaws, as in the case of agreements for the organization of various types of business organizations referred to in this chapter, must be registered with a commercial register of the province in point. Most companies choose to incorporate in the city of Buenos Aires because the registration procedures are simple. Any subsequent alteration in the bylaws, the transformation of the firm into another type of business entity, the liquidation, merger or spin-off of the company must also be registered. Even though there are some tax advantages vis a vis other types of business entities, owing to the disadvantages of the personal liability of the partners, this type of business entity is rarely used.

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D. LIMITED PARTNERSHIP

2.108 A Limited Partnership (Sociedad en Comandita Simple) is a company in which two or more partners undertake certain business activities and in which there are two types of partners with different liabilities: (a) active (comanditado) partners who are jointly and severally liable to third parties for partnership debts and who contribute either or both capital and personal service to the firm and (b) silent (comanditario) partners who only contribute capital and whose liability is limited to the amount of their capital contribution. The name of the Limited Partnership may consist either of an artificial name or of the name of one or more of the active partners. The name of the silent partners cannot be included in the name of the Limited Partnership. The Company's name must end with the words "Sociedad en Comandita Simple" or "S.C.S.".

2.109 The administration and representation of a Limited Partnership may be vested in the active parties or in third parties. The same principles regarding administration established for General Partnerships will apply. If the silent partner disregards this restriction, he will be held jointly and severally liable for all the partnerships debts if he normally administers the Limited Partnership. If he has acted only in a few matters he will be held jointly and severally liable solely regarding the matters in which he was involved. A silent partner is not allowed to act under mandate. If he infringes this provision he will also be held jointly and severally liable.

2.110 A silent partner may examine, inspect, verify and watch over the operation of the Limited Partnership and issue opinions or advice since he is a partner and not a mere furnisher of financing. However, these activities must not interfere with the administration of the company.

2.111 The same provisions mentioned in point 2.107 are applicable to the adoption of resolutions by the partners. The silent partner may undertake all urgent acts that are required for the administration of the company's business if all the active partners have become bankrupt, die or become incompetent or disqualified. In this case the silent partners will not be hold jointly and severally liable. The Limited Partnership will be dissolved within three months if new active partners are not incorporated or named or if it is not transformed into another type of business organization. The silent partners will be held jointly and severally liable if they are unable to preserve the company. This is a form of business organization that has been used mainly in the past but has not been used much lately because of the unlimited liability of the active partners.

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E. CAPITAL AND INDUSTRY PARTNERSHIP

2.112 The Capital and Industry Partnership (Sociedad de Capital e Industria) is a company in which two or more partners undertake any type of business. There are two types of partners: (a) the capitalist who has joint and unlimited liability and contributes the capital of the company; and (b) the industrial partners who contribute their personal effort (work) and whose liability is limited to the undistributed profits. The name of the Capital and Industry Partnership may consist either of an artificial name or of the name of one or more of the capitalist partners. The name of the industrial partners must not be included in the name of this partnership. If it is, the industrial partner will be held jointly and severally liable for the obligations of the partnership. The company's name must end with the words "Sociedad de Capital e Industria" or "S.C.I.".

2.113 The administration and representation of the Capital and Industry Partnership may be vested in any of the partners, including the industrial partners. The same provisions mentioned in point 2.107 are applicable to the adoption of resolutions by the partners. For voting purposes it will be considered that the industrial partners have the same capital as the capitalist partner with the lowest contribution.

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F. LIMITED LIABILITY COMPANY

2.114 This type of company is an intermediary step between the companies constituted by persons that have been mentioned above and share companies. As from the last tax amendment there are no major differences between a Limited Liability Company and a corporation except that the latter is a more complex type of business organization.

2.115 A Limited Liability Company (Sociedad de Responsabilidad Limitada) is a company in which two or more partners undertake any type of business in which each partner is individually liable for the entire contribution of the company's subscribed capital and for the valuation given to contributions in kind. Once all the quotas are paid up, the quotaholders are released from all further liability and, except for extraordinary situations, have no obligations either to the company, to its creditors or to its partners. The name of the Limited Liability Company may consist either of an artificial name or of the name of one or more quotaholders. In either case the company's name must include the words "Sociedad de Responsabilidad Limitada" or "S.R.L.".

2.116 The capital is divided in quotas, each quota having the same value. If the capital is subscribed in cash, 25% must be paid in when the company is incorporated or the capital is increased. The remaining 75% has to be paid in within two years. If the capital is subscribed in kind it must be fully paid up at the time of subscription. The bylaws may authorize supplementary capital quotas payable in whole or in part only upon demand by the company by means of a resolution by partners representing over half the corporate capital, followed by publication and registration in the Register of Commerce. Contribution will be pro rata to the number of quotas each partner holds at the time of contribution.

2.117 The quotas are freely transmissible unless otherwise stipulated in the bylaws. The transfer of quotas is binding on the company as from notification. Vis a vis third parties only as from registration with the commercial register. The company or its quotaholders may reject the incorporation of a new partner resulting from a transfer of quotas only upon justified cause. The bylaws may limit the transfer of quotas but cannot prohibit same. It is legal to stipulate that a majority or unanimous decision of the partners is required to be able to transfer any amount of quotas. It is also legal to establish a preemptive right to acquire the quotas on the part of the rest of the partners or of the company if they are acquired with profits, disposable reserves or if the company reduces its capital. The bylaws must establish the procedures to be followed in each case. But the term for notifying a partner willing to sell his quotas cannot exceed 30 days. Unless otherwise established in the bylaws, the heirs of a partner will be incorporated to the company. The creation or cancellation of legal usufruct, pledge, attachment or other preventive measures over the quotas must be registered before the commercial register.

2.118 The administration and representation of a Limited Liability Company is vested in one or more managers who may or not be partners. They may be designated for a limited or unlimited period of time. Alternate managers may be appointed. If there is more than one manager the bylaws may establish the functions of each one or establish that all of them may act jointly and severally. If the bylaws do not establish how they are to operate, it is understood that any of them is authorized to handle any administration matter. The managers cannot participate, whether for their own account or for third parties, in acts that compete with the company, unless unanimously authorized by the quotaholders. The managers are personally liable for their administration if there is a decentralized administration. Otherwise all managers are jointly and severally liable. The courts may decide each manager's share in the damage caused. The managers may be removed from office except if they were a condition for incorporation of the company. In this later case the quotaholders that voted against the removal will have the right to withdraw from the Limited Liability Company.

2.119 The company may have an internal control body, syndic or surveillance committee. If the nominal capital of the Limited Liability Company exceeds $ 2.100.000 then it must have a syndic or surveillance committee.

2.120 The quotaholders may adopt any kind of resolution by notifying their vote to the Limited Liability Company within ten days as from consultation by the managers; or by written resolution signed by all the quotaholders. If the capital of a Limited Liability Company exceeds $ 2.100.000.- the managers must call a quotaholders meeting within four months from the end of the fiscal year in order for the quotaholders to approve the financial statements. The quotaholders must be personally notified that a meeting is scheduled. Each quota entitles to one vote. Any resolution that is not related to the amendment of the bylaws, or the appointment or removal of the managers or syndics will be adopted by majority of the quotaholders present, unless the bylaws establish a higher number. In case of amendment of the bylaws the resolution must be adopted by a majority representing at least more than half the capital. If the bylaws do not establish the majority needed then it will be at least 75% of the capital. If one quotaholders represents the majority then the vote of another one is needed. The transformation, merger, spin-off, extension of duration, reconduction, removal of the domicile to a foreign country, the substantial modification of the object of the company that increases the obligations or the liability of the quota holders that voted against the motion entitles the said quota holders to withdraw.

2.121 Due to the limitation of liabilities, the simple structure involved and a favorable tax situation that no longer exists, this form of business was adopted mainly by small and medium family companies. Nowadays due to the recent "check in the box" regulations in the United States some big US companies are adopting or transforming this type of company for their subsidiaries. All provisions regarding corporations are subsidiarily applicable to Limited Liability Companies.

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