Corporate Law

 

Company Formation

Ecuador allows mainly three types of companies: Corporations (Sociedad Anónima), Limited Liability Companies (Compañía Limitada) or wholly owned subsidiaries (Sucursal Extranjera). The decision depends on the client’s needs, number of investors, and intended allocation of risk. Our services include assistance in deciding the best business model, tax planning and all incorporation stages as well as obtaining visas for directors, registering foreign investments and hosting the company until it decides to move to its own legal domicile.

Corporation / Sociedad Anónima

A Corporation is an entity wholly based in its capital, and is not grounded on the relationship between the shareholders. Shares are freely transferable without any limitation. 

Stockholders:

Minimum number of shareholders: 2

Ecuadorian or foreign persons or legal entities may own stock. No fixed percentage of Ecuadorian ownership is required.

Capital:

Legal Minimum: US $800
Recommended Minimum: US $2,000
Minimum for obtaining Visa: US $12,500

Limited Liability Company / Compañía Limitada

A Limited Liability Company (LLC) is formed based on a personal or special bond among the shareholders. A partner’s shares cannot be transferred to third parties without the approval of all other partners.

Shareholders:

Maximum number of Shareholders: 15

Ecuadorian or foreign persons or legal entities may own stock, except for foreign corporations (“Sociedad Anónima”)

Capital:

Legal Minimum: US $400
Recommended Minimum: US $2,000
Minimum for obtaining Visa: US $12,500

Wholly Owned Subsidiary / Sucursal Extranjera

A foreign company incorporating an Ecuadorean subsidiary needs to prove that its bylaws allow it to conduct business abroad and to create subsidiaries. For incorporation, the corporate minutes approving the decision to operate in Ecuador are needed. 

The subsidiary needs to permanently hold at least one representative with ample authority to perform all legal acts and businesses to be undergone in the Ecuadorean territory; and specially, to answer suits and comply with its obligations. This officer may be an Ecuadorean national, or a foreigner with Ecuadorean residence (a visa may be obtained).

A subsidiary is usually held under the same rules and regulations as a local Corporation or LLC.

Capital:

Legal Minimum: US $2,000
Recommended Minimum: US $5,000
Minimum for obtaining Visa: US $12,500

Incorporation process requirements
  • Power of Attorney granted by each shareholder.
  • Three or four corporate names options.
  • Detailed legal purpose covering current and future needs. New regulations require limiting to one general activity (may include complementary activities)
  • Remittance of the company’s paid-in capital, and the desired ownership structure for this capital.
  • Shareholders’ names.
    • Color copy of their ID and ballot paper or Passports (if foreigners)
    • Certificate of civil status (if not shown on passport).
  • Names of the directors (at least two) and tenures.
    • We suggest that the administrator holding the company’s legal representation (usually the General Manager) is either Ecuadorean or holds an Ecuadorean residence.
    • The second administrator (usually the President) does not require an Ecuadorean residence.
    • A company sponsored, non-immigrant VISA may be obtained for directors if a minimum paid-in capital is met.
  • Decide on the creation of a board of directors (optional).
  • The company must count with an accountant and a legal domicile.
  • Compliance with foreign company shareholder requirements. (above)
Foreign Investors

Foreign investments need to be registered with the Ecuadorean Central Bank.

Foreign companies have additional requirements at the incorporation process:

  1. Capital must be represented in registered stock, shares, or participations. Bearer shares are not allowed.
  2. A representative in Ecuador must be appointed.
  3. Certificate of legal existence/good standing
  4. Provide detailed information on their shareholders, stockholders, participants etc. The IRS will require yearly information of the complete shareholder chain until no legal entities appear as shareholders in such lists.
  5. Inform if any company owning the Ecuadorean company is listed under any stock exchange.

Maintenance

Once incorporated, the NewCo is responsible for various legal and tax-related obligations, both at the national and municipal stages. Such responsibilities may be due on a yearly or monthly basis, and their administrators are joint and severally responsible for the fulfillment of these.

National taxes: the NewCo, even if without operations, is subject to declarations and payment of Income taxes (22%) and value-added taxes VAT (12%). Additionally, a 5% withholding tax has been established over all monies leaving the country.

Municipal taxes: the NewCo is subject to a 1.5/1000 tax on its total assets.

Contributions: the NewCo is responsible for yearly contributions (rather minor) to the Superintendence of Companies, calculated over the company’s capital and assets.

Finally, the NewCo shall be responsible for maintaining, at all times, an accountant’s professional services, legal domicile, and municipal operating permits which include the need to approve, at least, firefighter and environmental inspections on their premises. Further permits may be required depending on the corporate purpose.

Our Firm counts with experts handling all necessary fields related to Corporate Law. Our services cover all company obligations required to keep the company in good standing, such as accounting, book keeping, personnel management and regulation compliance.

 

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