Bolivia’s legal system is grounded in the civil law system, which draws its influence from the Roman Corpus Juris Civilis. Bolivia’s legal framework operates under the principles of civil law, which it inherited from Spanish and Napoleonic legal traditions. The civil law system emphasizes codified statutes, and legal decisions are often guided by applying these codes rather than judicial precedents.
Bolivia’s legal framework establishes a strong foundation for economic activity and business organization, emphasizing both individual and collective rights. The Bolivian Constitution ensures the right to engage in commerce, industry, or lawful economic activities, provided they do not harm the public good. It also guarantees freedom of business association, recognizing the legal status of such entities and supporting democratic business structures aligned with their statutes. Complementing this, the Commercial Code governs relationships arising from commercial activities, offering a broad definition that includes both the nature of activities and the individuals or entities conducting them.
Nature and Characteristics
In the United States, each state has its own laws governing the formation of LLCs. The first statute authorizing LLCs was adopted in Wyoming in 1977, and as late as 1988, only Florida had followed suit.
An LLC is a popular business structure in the United States that combines the liability protection of a corporation with the tax benefits and operational flexibility of a partnership or sole proprietorship. LLCs are hybrid business entities with a unique combination of favorable legal, business, and tax attributes that do not exist in any other single entity. In short, the LLC is an eclectic mixture of features drawn from several different traditional business forms that create an attractive package for many enterprises.
In Bolivia, the SRL is a relatively modern business entity, originating in nineteenth-century Germany with the Reich’s special law of 1892. From there, it spread to other jurisdictions, including Portugal in 1901, Austria in 1906, and England in 1907, eventually gaining global recognition.
The SRL occupies a hybrid position between capitalist and personalist corporate models. Like corporations, the SRL offers limited liability tied to members’ capital contributions but differs in not issuing freely transferable shares. Instead, it emphasizes the intuitu personae principle, prioritizing trust and personal relationships among members, as seen in the restricted transferability of quotas. This dual nature allows the SRL to combine the financial security of a corporation (Sociedad Anónima) with the personalized dynamics of a partnership (Sociedad Colectiva), making it a versatile and unique business entity.
Similarities
Limited Liability of Its Members
In the United States, one of the most appealing aspects of the LLC is the limited liability afforded to its owners and operators. For instance, in both Florida and Delaware, no member or manager is liable personally for any debt, obligation, or liability of an LLC solely by virtue of such party’s status as a member or manager. Furthermore, the individual assets of LLC members may not be used to satisfy the LLC’s debts and obligations; hence, a member’s risk of loss is limited to the amount of capital invested in the business.
In Bolivia, the SRL also provides limited liability to its members. According to Article 195 of the Commercial Code, members are liable only up to the amount of their contributions. This ensures that each partner’s personal assets remain protected, even if the company needs to cover debts or suffers losses during a given management period.
Separate Legal Entity
Under most LLC statutes, including under the DLLCA and the FRLLCA, an LLC is explicitly characterized as a separate legal entity whose identity is distinct from that of its members. As a separate “legal person,” an LLC can exercise rights and powers in its own name. Consequently, parties doing business with an LLC must look to the company, and not to the LLC’s members or managers, to satisfy any obligations owed to them.
Likewise, in Bolivia, SRLs are recognized as distinct legal entities from their members, meaning that they can enter into contracts, sue, and be sued independently from the individuals involved in ownership or management.
Flexible Management Structure
In the United States, LLCs can be member-managed or manager-managed, offering more flexibility for structuring control, especially for larger or multistate LLCs. The operating agreement typically sets the management terms. Most LLC statutes default to a member-managed structure, such as under the DLLCA and the FRLLCA, where all members have management rights, similar to a general partnership. Some statutes, however, default to a manager-managed structure, where management is centralized in a smaller group of managers, akin to a corporation. Both member-managed and manager-managed structures can be elected, regardless of the jurisdiction’s default rule.
In Bolivia, the management of an SRL may consist of one or more managers, who can be either one or more of the members, similar to a member-managed LLC, or third parties who are nonmembers, similar to a manager-managed LLC. In any case, there must be a management structure, as it is the body that constitutes the “typical representation of that company.”
Differences
Perpetual Existence
LLCs often have perpetual existence and do not dissolve with member exit unless specified in the operating agreement. For instance, the DLLCA presumes a perpetual life. Likewise, under the FRLLCA, an LLC is presumed to have perpetual duration unless otherwise stated in its articles of organization or operating agreement.
In Bolivia, SRLs do not have an indefinite duration and are never presumed to have perpetual life; rather, its articles of formation must specify a lifespan in years. In practice, SRLs generally specify a ninety-nine-year duration, which may be renewed before its lifespan terminates.
Cap on Membership
In both Florida and Delaware, there are no minimum or maximum limits on the number of members an LLC can have. In both states, LLCs can have a single member or multiple members. There is no limit on the number of members in an LLC unless the LLC opts to be taxed as an S corporation, which has a maximum of one hundred members.
Membership limits are significantly different in Bolivia, where an SRL must have at least two members and no more than twenty-five members. This stems from the conception that defines a business entity (sociedad comercial) as a contractual agreement between two or more individuals to contribute resources toward a common goal. Consequently, it is inconceivable to have a business entity with only one member; thus, under Bolivian law, the legal minimum for forming such an entity is two members. On the other hand, the cap on the number of members of an SRL responds to its closely held nature, with both capitalist and personalist elements.
Operating Agreements
The governance of an LLC is outlined in a nonpublic document known as the “operating agreement” or “limited liability company agreement,” which, like a partnership agreement or corporate bylaws, is not filed with any state official. This document specifies the rights, duties, and obligations of members and managers and serves as the framework for the LLC’s operations. LLC members have considerable flexibility to tailor the operating agreement to their unique needs, often superseding default statutory provisions. Thus, the operating agreement controls relationships between members and between members and the company.
Contrary to the LLC, an SRL only requires one solemn document (testimonio de constitución) specifying the rights, duties, and obligations of members and managers and serving as the framework for the SRL’s operations, and it is made public through the Commercial Registry. Hence, an operating agreement is not required. However, on rare occasions, members of an SRL may choose to have a parasocial agreement (acuerdo parasocial), essentially a private contract among the members that provides specific terms and conditions governing the relationships between those members. A parasocial agreement differs from an operating agreement in that the former is very specific and limited to the laws and regulations that govern SRLs.
Taxation
By default, Florida and Delaware LLCs are taxed as pass-through entities, meaning that they do not pay income taxes themselves. Instead, their owners or members pay personal income tax on the LLC’s revenue after it passes through the business to members. This is advantageous because it avoids double taxation, which occurs when both the entity and the owners are taxed.
The tax regime in Bolivia is regulated by the Tax Code and Law No. 843. The SRL, which is governed by Bolivian tax law, does not support pass-through taxation for SRLs, so they are typically taxed as separate entities.
Conclusion
In comparing LLCs in Florida and Delaware with SRLs in Bolivia, several similarities and differences emerge, shaped by the distinct legal frameworks and business environments of these regions.
One of the key similarities between LLCs and SRLs is the concept of limited liability, which protects the personal assets of members or owners from the debts and obligations of the entity. Both business structures are also recognized as separate legal entities, capable of entering into contracts and engaging in litigation independently of their members. Additionally, both LLCs and SRLs offer flexibility in management structure, allowing for member-managed or manager-managed options, depending on the specific needs of the business.
However, notable differences exist between the two. LLCs in Florida and Delaware typically enjoy perpetual existence unless otherwise stated in their operating agreements, whereas SRLs in Bolivia must specify a finite duration in their formation documents. Another major difference is the membership structure: LLCs can have a single member or an unlimited number of members, while Bolivian SRLs are limited to a minimum of two and a maximum of twenty-five members. Furthermore, LLCs benefit from pass-through taxation, which avoids double taxation, while SRLs in Bolivia are taxed as separate entities, subject to different tax rules under Bolivian law.
The contrasting legal traditions in which these structures exist—common law in the United States and civil law in Bolivia—play a significant role in shaping these differences. While LLCs have a high degree of flexibility and autonomy, particularly in their internal governance through operating agreements, SRLs rely more on codified laws and public documentation, such as the testimonio de constitución. These structural and legal contrasts reflect the broader distinctions between the decentralized, case-law-driven approach of the United States and the codified, statute-based framework of Bolivia.
Thus, while LLCs and SRLs share common features like limited liability and separate legal status, the differences in membership, governance, duration, and taxation highlight how each entity is adapted to the legal and economic systems in which it operates. These distinctions can significantly influence the decision-making process for entrepreneurs and investors when choosing between these two business structures.
