Practical tips to register a company in Ecuador
Ecuador's economy has been on a steady ascent over the past decades, and experts believe that the growth will go on for decades to come. Good oil prices, the growth of the middle-class economy and access to international markets are of the factors spurring the growth of the country’s economy. Consequently, the country is now getting a lot of attention from foreign investors who are keen on coming in and setting up bases in Ecuador. If you are one of them, or you think now would be a prime time to consider Ecuador company registration.
How to register a company in Ecuador?
Unlike most countries which don’t allow for 100% ownership, it is possible to form a company in Ecuador that will be 100% owned by foreigners. This is appealing to many investors around the world.
The process of Ecuador company registration is not complicated in any way. One director and two shareholders are the basic requirements to register a company in Ecuador. Both the director and the shareholders can be from any nationality. For the minimum share capital, US400 is necessary for company incorporation.
Foreign investors starting a business in Ecuador usually establish local corporations, or local branches of offshore entities. All entities are registered with and controlled by the Superintendency of Companies and governed by the Companies Law. Starting a business in Ecuador includes: first, to apply for a patent, an online process which takes up to 24 hours; second, to obtain the licence for functionality, which involves a firefighters’ inspection that is usually made within 15 days following application.
On March 2020, a new type of company was approved in Ecuador. This is the Simplified Joint Stock Company (SAS), easier to register and also easier to authorize since it doesn't require a notary.
1. Simplified Joint Stock Company (SAS)
The main advantage of the Simplified Joint-Stock Company is its flexibility to adapt to the particularities of each business. Its formation process is very agile and its shareholders have ample freedom to establish the rules of its operation in the bylaws. Therefore, entrepreneurs can count on a legal figure that allows them to develop formal businesses that are entirely adapted to the will of the partners and the peculiarities of the businesses. Below comment on this comments details:
This company is not allowed to issue public shares.
It can be registered with one or more shareholders. With no limitations on nationality.
There is not minimum capital requirement.
The registration process is done through email.
Shareholder and administrator must have an electronic signature, issued by civil registry or private entities.
2. Corporations (SA)
Corporations are the most formal type of company in Ecuador. Its capital is divided by negotiable amounts of shares. It is formed by a contribution from the shareholders who have influence according to the size of their shares. We can denote the following details: a) It must have a minimum of two shareholders with no maximum limit; b) The minimum capital is USD $ 800; c) The legal representation of the company correspond to a General Manager assigned by the General Assembly of Shareholders.
3. Limited Liability Companies (LLC)
Compared to Corporations, limited liability companies are not allowed to operate in the finance system of Ecuador (banks, insurance companies, etc). Also the modifications to their social structure are less burocratic than Corporations, this way they are easier to manage, making them one of the best options for a formal company in Ecuador.
The details of this type of company are the following: a) It's ruled to have a minimum of 2 shareholders with a maximum of 15; b) The minimum capital is USD $ 400; c) Same as Corporations, the legal representation of the company correspond to a General Manager assigned by the General Assembly of Shareholders.
Ecuador promotes foreign investment
Ecuador is working towards opening up to the world and further attract foreign investment. In order to reach its goals, the country passed the Productive Promotion and Attraction of Foreign Investment Law in 2018. The law includes big tax benefits to new investments in Ecuador and applies to both new companies and previously existing ones. In total we can summarize these benefits:
The country has the lowest Income Tax in the region.
Reduction of 10 points from the rate of the Income Rent for reinvestment in productive actives.
Dismissal of payment of the Minimum Advance of the Income Rate for 5 years for the new companies that are constituted in the country.
Dismissal of payment of the Exit of Currency Tax (ISD) for foreign payments for external credits, with a window bigger than one year and a rate no higher than that authorized by the Central Bank of Ecuador, except for tax havens.
Additional benefits for medium companies, such as training and technical assistance.
Deduction of an additional 100% for the calculation of the Income Rent Rate and the expenses in salaries for the generation of new employment in determined areas, for 5 years.
Deduction of an additional 100% for the calculation of the income rent rate for the use of machinery for cleaner production and for the implementation of systems of renewable energies (solar, eolic or similar) or the mitigation of environmental impact.
Ecuador also has public agencies that are responsible for the promotion and facilitation of trade, commerce and investment in the region, including the Ministry of Foreign Trade and Investment and Pro Ecuador, an agency that promotes and provides assistance to foreign investors looking to establish a commercial presence in they country. Recently, China has become the largest investing country in Ecuador.
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