Understanding company formation in Latin America is essential for foreign investors to thrive in this booming market. Many of the traditionally quite conservative states that have preferred closed economies are now opening up.
Key takeaways
| Five general steps that apply across the region | These will vary depending on the country, but in general you will have to register the company, draft bylaws, open a bank account, receive a tax number and make an official declaration |
| There are three general company types to consider | These are the SRL, SA and opening a local branch of an overseas company. These vary depending on the country, and some places also have a simplified S.A, known as an S.A.S |
| Company formation in Latin America involves bureaucracy | You will need to register with the tax office, the chamber of commerce or equivalent and possibly declare your Ultimate Beneficiary Owners. |
| You will need a legal representative | This person will usually be based in the country, and do not normally need to be a local citizen. However, they almost always need residency at minimum |
| Opening a bank account is necessary | This is a relatively involved procedure that will involve designating access and responsibility. |
| Different countries have different rules | This is a general guide and for specific and detailed advice you will need to contact one of our representatives |
General steps for company formation in Latin America
You must understand each step of the company formation process before you begin. Below is a detailed step-by-step guide to help familiarize yourself with the system in Latin America.
It takes approximately two to 16 weeks to complete the process of company formation in Latin America once you have all of the required documents. Here are the common steps you will need to follow:
- Register the company.
- Draft the company constitution or bylaws
- Obtain a local tax number.
- Make an official declaration with the local gazette in some countries
- Set up a company bank account
Important Note: If the company has foreign shareholders, then a Power of Attorney (POA), apostille process, and translation of documents may be required.
Registering the company is usually done with the local chamber of commerce or with the ministry of work or equivalent. This is how you will be visible in the eyes of the law – so that people know you are legitimate operator in good standing. It also commits you to follow all relevant local laws.
Drafting the company constitution will be highly dependent on both the type of company you have decided to open and the country in which you are working. There will be some restrictions in terms of how many shareholders are needed, what the maximum number of shareholders might be and whether a board is necessary, for example.
Obtaining a local tax number is always of critical importance. It is often known as a NIT (Número de Identificación Tributaria) or RUT (Registro Único Tributario), and some countries draw a distinction between the two. These identify you for all offical tax purposes.
An official declaration of your company formation in Latin America is not always necessary. Where it is a legal requirement, it will generally be a clearly designated manner and publication. In some places, you will have to make an official declaration and also a public declaration in a newspaper of record or equivalent.
The final step is usually to set up a corporate bank account. This varies a little depending on the type of company and country. Opening a corporate bank account is a more complex affair than a regualr current account. You will need to provide your tax number and decide who has authorization to make payments and withdrawals, among other things.
What entity types are there in Latin America?
Company formation in Latin America is a multi-step process, and one of the initial and most crucial decisions you’ll make is selecting the right type of company structure. The type of company you choose will have significant implications on aspects such as liability, taxation, and administrative requirements.
In Latin America, there are several types of companies to choose from, each with its own set of characteristics and requirements. Below, we will provide an overview of the most common types of company formation in Latin America to help you understand the options available and make an informed decision for your business.
These are the entity types most commonly found in the region, but be aware that company formation in Latin America also includes a number of entity types that are generally aimed at smaller operators such as sole traders and the like.
1. Sociedad de Responsabilidad Limitada (S.R.L)
This is similar to an LLC in other jurisdictions, usually with anything between 1 to 50 shareholders. The company name must illustrate the goods or services it provides or include the name of one or more partners. Personal liability is tied either to the value of shares held or to capital investment.
2. Sociedad Anónima (SA)
A public limited company (Sociedad Anónima or SA) is another option for company formation in Latin America. Each shareholder is liable to the extent of their capital contribution. They are often able to be traded publically, but not always.
3. Sociedad de Acciones Simplificada (S.A.S)
This type of company facilitates the incorporation of a company by simplifying procedures, costs and allowing for a flexible corporate structure. It is designed to help smaller businesses enter the market quickly and bypass heavy bureaucracy.
The S.A.S are companies where the ownership can be by a sole person. It requires a legal representative to be appointed within the company bylaws, a fiscal address, and no minimum capital.
4. Branch of a foreign company (Sucursal)
It is possible to incorporate a branch of an existing country. A branch of a foreign company in Latin America does not possess an independent legal status separate from the parent company. This process suits large conglomerates that will benefit from retaining links to existing brand strength and/or well-developed internal processes.
What are the minimum requirements for company formation in Latin America?
The minimum requirements to incorporate a business in Latin America usually include all or some of the following:
- A name for your legal entity.
- At least one named shareholder, which can usually be either a natural person (individual) or legal person (entity).
- Appoint a legal representative within the bylaws of the company.
- Register a fiscal address which must be within the country and is used for official correspondence.
- The business activities, corporate purpose, and primary operations.
- Minimum initial capital to be registered.
These are the minimum general requirements for company formation in Latin America. It’s important to note that the process can involve other steps and documents, depending on the specific circumstances of your business and the type of company you’re setting up.
It’s highly recommended to seek professional legal and business advice when starting a company in Latin America to ensure compliance with all regulations and to make the process as smooth as possible.
Important Tip: We always recommend having a preferred legal name and two alternatives in case the primary legal name is unavailable.
FAQs on company formation in Latin America
Answers to some of the most common questions we get asked by our clients.
Yes, in all jurisdictions we operate in a business can be 100% foreign-owned by either legal persons (legal entities) or natural persons (individuals).
Latin American company tax ID are often known as a RUT (Registro Único Tributario), which translates in English to Single Tax Registration, a unique identification number for tax purposes across Latin America.
It takes two to 16 weeks to register and set up an operating company in Latin America, contingent upon the timely submission of all necessary documents and the sector/country you are in.
A public limited company (Sociedad Anónima or SA) is another option for company formation in Latin America. Each shareholder is liable to the extent of their capital contribution.
This is similar to an LLC in other jurisdictions, usually with anything between 1 to 50 shareholders. The company name must illustrate the goods or services it provides or include the name of one or more partners. Personal liability is tied either to the value of shares held or to capital investment.
The Sociedad por Acciones (S.A) and Sociedad de Responsabilidad Limitada (S.R.L) both provide limited liability protections to their owners in Latin America.
We usually recommend Simplified Share Companies where they exist, but this does vary slightly depending on a variety of factors, such as the country, industry and size of company.
How can Biz Latin Hub help with company formation in Latin America?
At Biz Latin Hub, our multilingual team of company formation specialists has extensive experience in supporting foreign executives when starting a business in Latin America. We offer a complete set of services for your business needs, such as legal, accounting, and recruitment support.
You can rely on us as your main contact for entering and doing business in any of the 18 markets in Latin America and the Caribbean where we operate.
Contact us now for personalized assistance or a free quote on company formation in Latin America.
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