Knowledge Base
FAQ
Popular Company Incorporations Questions
Ecuador incorporations are mostly limited to LLC’s (Compañías de Responsabilidad Limitada) and Corporations (Sociedades Anónimas & Sociedades Anónimas Simplificadas).
Main considerations when choosing a vehicle include the importance of the company’s share/stockholders and the desire to be listed in the Stock Exchanges.
Local Subsidiary incorporations are also available and are mainly subject to the same regulatory and tax requirements; benefits of this vehicle option are usually seen in the matrix’s jurisdiction.
Also available are mixed private–government entities (APP – Alianza Público Privadas)
Upon receiving all documents with their required legalizations (including translated and/or Apostilled document requirements for companies acting as share/stockholders), 7 days.
Yes, companies must yearly file complete reports to the Superintendence of Companies, and the IRS, on their ownership structure, and the administrators of any vehicles in the ownership chain, up to the ultimate beneficiary owner.
Severe penalties and tax implications derive from non-compliance.
These differ depending on the incorporated vehicle:
- LLC: USD $400
- SA: USD $800
- SAS:USD $1,000
Please note that NewCo’s Accountant has to file before the Authorities the Initial Balance reflecting the payment of the Paid-In-Capital.
Yes, NewCo’s are required to open a bank account. Regardless of the incorporation vehicle and their required/agreed paid-in-capital.
Most banks require a USD $1,000 minimum deposit for corporate accounts.
Bermeo provides bank account opening services.
We have different service levels, however, all incorporations include preparing basic Articles of incorporation (which in Ecuador, include the Bylaws), filing these before the Superintendence of Companies and/or the Mercantile Registry, and obtaining the IRS’ granted Tax ID for the NewCo.
While there is no such figure, all companies are required to have a legal representative in Ecuador. Bermeo can assist in obtaining a visa for your officers.
Also, foreign companies recorded as stock/shareholders of an Ecuadorian vehicle are required to have and file a PoA in favor of an Ecuadorian resident, with powers to file and answer suits. Bermeo provides this service as well.
Yes, for company formation purposes.
For operating companies, we require the signing of Professional Services Contracts, Issuance of Indemnity Letters, and hiring D&O Insurance, having both Bermeo and the representative as primary beneficiaries thereto.
Yes, Bermeo can provide an address for company formation purposes only, not for operating companies, as provided premises could be eventually seized upon non-compliance with certain local regulations.
Yes, we provide accounting and Payroll Services. Bookkeeping Services are provided for companies with up to 75 transactions per month.
Clients must note that upon completing the incorporation process, the accountant must file before the Authorities the initial balance, with the agreed Paid-In-Capital.
Not all companies need this; companies with certain amounts of assets and/or revenue and/or operating in some particular industries are required to hire external audit services and file their reports before local authorities.
Companies are subject to a 22% income tax on their sales globally. This is in addition to the 15% dividends that must be paid to the company’s labor force.
Yes, we have a qualified team of professionals who provide compliance, regulatory and general legal services, including contract drafting and negotiations with vendors, suppliers, clients, etc.; as well as commercial and labor litigation (including mediations and arbitration procedures).
Popular Labor Regulations Questions
Yes, professional services contracts are allowed; however, regardless of any documents or contracts signed among the parties, Ecuadorian judges will find a labor relationship exists, with all its legal implications (and automatic violations), whenever a subordination relationship is present.
Indications of such subordination, and thus, a labor relationship, include:
- Decision independence, does the person follow orders?
- Where are the services provided (in whose premises)?
- Is a schedule set (by whom) and followed?
- Who owns the tools and implements to carry out said activities?
No. Third-party hiring is strictly forbidden and penalized by Constitutional Mandate No. 8.
However, complementary services are allowed, subject to certain restrictions and formal requirements, for the following major activities:
- Security Services
- Cleaning Services
- Technology Services
Ecuador applies the indefinite contract as the predominant contract type; it can be full-time (8 hours/day), or part-time (up to 6 hours/day), 5 days a week. Two consecutive days of rest are to be granted.
Indefinite contracts can be terminated:
- By mutual agreement of the parties.
- By the employee, with a head notice of at least 15 days.
Most employer terminations will be deemed wrongful terminations in a court of law.
Yes, other contract types exist, such as an internship contract (strictly, not a labor contract), entrepreneur contracts, contracts for government-deemed strategic industries, etc.; however, a cautious review of their specific conditions is required to avoid misuse and penalties.
Yes, overtime is allowed with a 50% or 100% surcharge on the hourly rate, depending on the time and day these are carried out. There is a limit on how many hours can be requested or agreed upon.
Yes, a 90-day trial period may be agreed to in any contracts with new personnel being hired, in which either party may freely terminate the relationship without major economic consequences. If the person is shifting from one contract type to another, even if not a labor contract (such as an internship contract), trial periods can no longer be signed.
Yes, employers may fire an employee at any time. Most terminations are deemed wrongful terminations, for which the following –additional - compensation applies from day one (or 91 if a trial period was agreed to):
- One additional monthly wage for each year of work, with a minimum of three years.
Applicable January 1st 2024, Ecuador has set the minimum wage at $460/month for the general worker (different worker categories have different minimum wages).
Wages are due at least every month, but some parties agree to weekly or fortnight payments.
14 wages are provided for in the year, with an additional wage (1/12 of the yearly remuneration) paid by December 24 of each year; and a minimum wage to be paid by March 15 on the coastal region (i.e. Guayaquil) and August 1st in the Sierra (Quito), and Amazon regions.
Employees can choose, in January of each year, if they want to receive these over wages on said dates or prorated every month.
Yes. All labor relationships are subject to a Social Security contribution to be paid over any and all components of the employee’s remuneration (this includes fixed and contingent wages, bonuses, transportation, etc.). For full-time, indefinite contracts, as follows:
- Employee: 9.45%
- Employer: 11.15%
Yes, employees have the right to 15 consecutive days of paid vacations (to be enjoyed after the first year of work), with one day increasing every year (up to 30) from their 15th year of work.
Yes, Ecuadorian laws provide that employees, including complementary services personnel, are entitled to 15% of the company’s pre-tax profits, due in April of the following year.
Even if a company has no employees, some Authorities have stated that said funds need to be deposited in a government account.
No, labor relationship conflicts can only be mediated before a Government Approved Mediation Center, or tried before a labor judge.
Competent judges are:
- If against the employee, the employee’s domicile judge.
- If against the employer, or any of its representatives: wherever the company has a legal establishment.
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