By: Belen Rivera
The pandemic has highlighted the great entrepreneurial potential that Ecuadorians have. In fact, Ecuador fights for the first places in entrepreneurship in the region. In this article we offer you several tools that will allow you to protect your time and investment, making your business prosper avoiding inconveniences.
Your brand defines you. Protect it! It is the way your customer will identify your products and services. Get trained and identify the discounts you can access. Use your website and social networks responsibly and intelligently. Promote your products in an assertive way. Formalize! Your income generates taxes, establish a tax strategy to help you optimize profits. Define the scope of your business. Identify if you are going to have partners or employees. Research about the sanitary permits that your product will require. Consult your trusted lawyer. Make him/her your ally to protect your business.
SELECT YOUR COMPANY NAME AND PRODUCT BRANDS
The most important thing in your business will be your brand. It is the way in which your customer will identify your product or service, so it is essential that you protect it.
When you build it, try not to use generic or commonly used terms. “Chocodulce” for chocolates or “Comida Rica” for food, are weak marks that will be repeated in other signs.
Try to use fancy signs that come from your imagination, that do not relate to your product at all, or suggestive marks that evoke some of the unique qualities of your product. These types of words are the ones that best identify your venture and will acquire a unique meaning over the years. In addition, adding a graphic can make your product or service even more identifiable.
When you have several proposals, we can help you perform a search to identify if your options have not been previously registered or that your product does not violate third party rights.
SENADI is the agency in charge of protecting trademarks in Ecuador. This agency offers benefits for entrepreneurs, for example, a 50% discount on the payment of fees, if you are MSMEs, independent researcher, small and medium farmer, peasant business organization of agricultural production, popular and solidarity economy company or artisan. The official fee for the registration of a trademark drops from US $208 to $104.
INTERNET AND SOCIAL NETWORKS
Just like your brand, make sure that your user or profile name is available on all social networks. Creating accounts in social networks is free, even if there are some networks that you are not going to use yet, reserve the same name in all of them. Also make sure your brand name is available as a domain name (web page), this will allow your followers to locate you more easily. Also search the internet and social networks to see if anyone is already using the name you intend to use or similar names. It is important to be unique.
ADVERTISING
Identify your consumers, design advertising and elaborate promotions. Avoid speculation, misleading advertising, conditional sales and the sale of counterfeit or unlicensed products.
Specify the price, weight and measurements of the product, as well as surcharges and taxes to be charged. In addition, mention if it is a processed food product, primary product for human or livestock consumption, medicine, instructions on proper handling and warnings, and the warranty offered by the product. Don’t forget to put your contact information in your ads!
Share your products and publications in social media groups, with your friends, family and on your accounts. Keep your customers constantly informed about your proposals and news; this way you will increase your number of followers. There are free platforms that help you share content in all your networks, use these media to boost your reach.
FORMALIZE YOUR TAXES
Don’t forget that your new income will be taxed. It is possible to deduct the expenses you incurred to generate that income. If you are going to start a business, you have 2 ways to regularize your income and expenses:
RISE
If you are an individual and your annual gross income projection does not exceed $60,000; you sell only to final consumers and you are not going to hire more than 10 employees. The RISE may be your best option.
The Ecuadorian Simplified Tax System (RISE) replaces the payment of VAT and Income Tax through monthly installments, depending on your average annual income. You are not obliged to declare, you do not deliver invoices but sales notes authorized by the SRI, you do not withhold VAT or Income, you are not obliged to keep accounts and for each new employee that you incorporate to your payroll and that is affiliated to the IESS, 5% of your monthly fee is discounted up to a maximum of 50% discount. For more information: https://www.sri.gob.ec/web/guest/regimen-impositivo-simplificado-rise
RUC
The Registro Único de Contribuyentes (RUC) is the number that identifies the taxpayer for tax purposes and allows commercial activities. The requirements to obtain the RUC will depend on whether you are a natural or legal person. For more information: htttps://www.sri.gob.ec/web/guest/requisitos-para-tramites
MUNICIPAL PATENT
Additionally, the Municipality requires the payment of the annual Municipal Patent to carry out an economic activity in the Metropolitan District of Quito. More information and requirements at https://www.quito.gob.ec/index.php/municipio/270-preguntas-frecuentes-patente
Corporate
Likewise, it is important to set up a corporate strategy for your venture. If you obtain a RUC or RISE as a natural person, debts and profits will be mixed with your personal assets. Therefore, in case of losses, creditors could pursue your personal assets.
If you do not want to expose your personal assets, you can incorporate a company, which will allow you to separate your personal and business assets. You will also be able to divide the percentage that corresponds to each partner, in case you have them.
The Entrepreneurship Law approved a new company model that encourages new businesses. The Simplified Joint Stock Company (SAS) can be constituted by one or several persons, without minimum capital stock, through a private instrument without notary formalities, directly before the Superintendence of Companies.
Also available are the Sociedad Anónima S.A. with minimum capital of $800, shares are easily transferable, a minimum of two shareholders, gives priority to capital and is constituted by public deed through a notary; and the Compañía Limitada Cia. Ltda., with a minimum capital of $400, shares are not easily transferable, a minimum of two partners, gives priority to individuals and is constituted by public deed through a notary.
Remember that all these types of companies are under the control of the Superintendence of Companies, they are obliged to keep accounting records and to present balance sheets and reports every year.
Sanitary Permits
Don’t forget that when your products become more popular, they will need a sanitary registration or notification to be marketed. There are different categories and requirements for food, cosmetics, hygiene, pharmaceuticals, etc. To obtain these permits, your products must meet production and quality standards, and your company must comply with more formalities such as operating permits.
CONSULT WITH YOUR LAWYER
No matter how small or artisanal your business is, a solid foundation will allow it to grow in an orderly fashion. In addition, good advice ensures that the time, money and work spent on growing your business will be to your benefit. We are ready to advise you in every step to protect your business!
Belen Rivera
Belen Rivera is an associate attorney in Bermeo & Bermeo,
specialist in intellectual property and data protection.
