What are the Types of Companies Guatemala?

Understanding the types of companies in Guatemala is essentail for choosing the right corporate structure when looking to incorporate a company in Guatemala. Understanding and adhering to all legal and accounting requirements specific to the types of companies is paramount for smooth operations and compliance. Collaborating with local experts allows you to navigate the regulatory framework with confidence and clarity. Whether opting for flexibility or liability protection, at Biz Latin Hub, we provide the knowledge and support you need to ensure seamless integration into Guatemala’s entrepreneurial ecosystem.

Key Takeaways

3 Types of Legal Entities in Guatemala

There are several different types of companies in Guatemala to incorporate your company. Each legal entity offers different conditions and governance structures to suit varying business needs.

The legal entity you choose will influence the amount of capital to invest, economic activities to be carried out, how many shareholders you will have, and other factors.

The most common types of legal entities that are usually used to establish a company are included below.

1. Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L.)
2. Corporation (Sociedad Anónima – S.A.)
3. Foreign Company Branch

1. Limited Liability Company (Sociedad de Responsabilidad Limitada S.R.L.)

The Limited Liability Company (LLC) is one of the types of companies in Guatemala, also called Sociedad de Responsabilidad Limitada (S.R.L.) in Spanish. It can be made up of several partners who are only required to pay their capital contributions, and whose personal assets are not liable for company debt. Only the company assets are liable for the social obligations, and where appropriate, sums that total more than the contributions agreed on the social deed.

The Limited Liability Company in Guatemala possesses additional characteristics, including:

• It is a mercantile society: a legal entity created for commerce and having commercial activities as its objective
• Participation is not represented in shares, but in contributions from each partner
• Only a maximum of 20 partners are allowed
• The company will operate under a denomination or company name. The name will be freely formed but will always refer to the main social activity. The company name will be formed with the full name of one of the partners or the last name of two or more of them. In both cases, it is mandatory to add the following words ‘Limited Company,’ which may be abbreviated: Ltda. or/and Cía. Ltda, respectively.

2. Corporation (Sociedad Anónima S.A.)

Among the types of companies in Guatemala, we have the Corporation (Sociedad Anónima) is a legal entity with capital divided and represented by shareholders. The responsibility of each shareholder is limited to the payment of the shares that they have subscribed to.

The Corporation’s legal entity has elements similar to those of the Limited Liability Company. Both are mercantile companies created for commerce and their objectives are aimed at such. However, there are some differences in the characteristics of these legal entities in Guatemala which businesses must take into account. The following factors highlight the differences in these characteristics :

• Capital is represented by registered shares
• The shares have freedom of transmission, although the form of transmission of the shares will depend on how the form is regulated in the articles of incorporation
• The contributions for capital formation can be in cash
• The name of the company can be freely formed, but it must carry the word Corporation, which can also be abbreviated S.A.

3. Foreign Company Branch

A Foreign Company Branch is the third type of company in Guatemala and is for companies legally constituted abroad who wish to operate in the country by establishing one or more branches or agencies. They are subject to the provisions of the Commercial Code and other laws of the Republic of Guatemala.

The form of constitution and requirements for this legal entity in Guatemala are very similar to those in other Central American countries. The essential elements of a Foreign Company Branch in Guatemala include:

• The company must permanently have a legal representative in the country who will have broad powers to carry out all the legal acts and businesses of their business.
• Contract a bond in favor of third parties for an amount no less than the equivalent in Quetzales of approximately US$50,000. The amount of the deposit is set by the Mercantile Registry (Registro Mercantíl)
• The approximate time to set up a branch is 30-45 days after receiving the corresponding legal documentation.

Key Considerations When Choosing Types of Companies in Guatemala

Ownership Structure

Evaluate whether the chosen business entity allows full foreign ownership. Guatemala generally permits 100% foreign ownership across most industries, creating an investor-friendly environment. However, certain sectors like telecommunications, mining, and energy may have additional regulatory oversight or licensing requirements. Understanding these regulations ensures compliance and supports seamless operations in the local market.

Tax Efficiency

Analyze the effects of Guatemala’s tax framework on your business. Corporate income tax operates under two regimes:

• Simplified Optional Regime (10%): Tax applied on gross income.
• General Regime (25%): Tax applied on net taxable income.

Additionally, a value-added tax (VAT) of 12% applies to most goods and services. Companies operating in strategic sectors, such as renewable energy or tourism, or within special economic zones (ZOLIC), can benefit from tax incentives, including reduced rates or exemptions. Proper tax planning and selection of the appropriate tax regime are crucial for optimizing costs while maintaining compliance with local laws.

Profit Distribution

Consider the taxation of profit distribution in Guatemala. Dividends paid to non-residents are subject to a 5% withholding tax, in addition to corporate taxes. Guatemala has limited double taxation treaties, so it is critical to structure repatriation strategies carefully to optimize shareholder returns. Understanding the local framework will ensure efficient and compliant fund transfers.

Transfer Pricing

Comply with Guatemala’s transfer pricing regulations for cross-border transactions between related parties. These rules follow OECD guidelines, requiring businesses to justify that intercompany transactions reflect arm’s-length market values. Companies must submit annual transfer pricing documentation and provide reports during audits. This is particularly important for businesses involved in international trade, intellectual property, or intercompany financing.

Compliance

Prepare to meet Guatemala’s regulatory compliance requirements. Companies must register with the Mercantile Registry (Registro Mercantil) and the Tax Administration Superintendency (SAT). Monthly tax filings for VAT and payroll taxes are mandatory, along with annual income tax declarations. Financial statements must align with Guatemalan accounting standards (based on IFRS for certain entities). Labor compliance is also key, including social security contributions to the Guatemalan Social Security Institute (IGSS) and adherence to local labor laws. Staying up to date with these obligations is essential to maintain legal standing and avoid penalties.

Flexibility

Choose a business structure that offers the right balance of simplicity and adaptability. Common legal structures in Guatemala include:

• Sociedad Anónima (S.A.): The most common structure for businesses, offering limited liability and the ability to issue shares. It requires at least two shareholders and is suitable for businesses of all sizes.
• Sociedad de Responsabilidad Limitada (S.R.L.): Ideal for small to medium-sized businesses, with limited liability and fewer corporate governance requirements. It has a limit of 20 shareholders.
• Empresa Individual de Responsabilidad Limitada (E.I.R.L.): A structure for sole proprietors that offers limited liability protection and simplicity in operations.
  Choosing a flexible structure ensures that your business can adapt to changing regulations and opportunities in Guatemala.

Our recommendation: From experience we recommend clients the S.A. company strucutre, as it offers limited liability protection to shareholders, flexibility in shareholding structure, management and capital contributions.

FAQs on Types of Legal Structures in Guatemala

Why Choose to Invest in Guatemala?

With Central America emerging as a focal point for foreign multinationals interested in taking advantage of opportunities spanning North and South America, discerning the optimal corporate structure is imperative. Whether considering the formation of a Sociedad Anonima (S.A.), a Sociedad de Responsabilidad Limitada (S.R.L.), or other entity models, our experience in Guatemalan company formation facilitates informed decision-making, ensuring a smooth entry into Guatemala’s dynamic business landscape.

Central American countries have a lot to offer to foreign and local companies, such as tax benefits, special economic zones, and access to the Atlantic and Pacific Oceans. Guatemala maintains several free trade agreements for businesses to obtain certain benefits for the sale of products within the region.

Which types of companies Guatemala to choose with the help of trusted experts

The Guatemalan government authorities are open to national and foreign businesses looking to expand to Guatemala since it will stimulate the growth of their economy. For this reason, the facilities for establishing a company and various commercial, tax incentives are offered for people interested in establishing a legal entity for commercial purposes. As explained in the article, you have 3 types of companies in Guatemala to choose from.

Choosing the right type of legal entity to enter the Guatemalan market is of utmost importance as it lays the foundation for your future expansion around the Central American region. For this reason, we recommend working with a local partner who knows the legal and accounting regulations of Guatemala. Contact Biz Latin Hub and our team of local experts will provide tailor-made services to help you establish your business in Guatemala.

If you are interested in obtaining more information about the types of legal entities in Guatemala, do not hesitate to contact us at contact@bizlatinhub.com.

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