9 Basic Steps to Follow and Keep in Mind to Create a Corporation in Ecuador
Foreign investors are starting a corporation in Ecuador as the government has attracted them through various government schemes which allows these corporation to exempt from taxes from 3 to 15 years. The increasing figure of foreign investments will definitely improve the GDP (Gross Domestic Product) of Ecuador. Some of the facts regarding the Ecuador’s foreign investment and economic growth, which can also be key to create a corporation in Ecuador are:
- GDP of Ecuador was around USD $98.1 billion in the year 2017
- A free trade agreement was signed between Ecuador and Iceland, Norway, Switzerland and Liechtenstein in June, 2018.
- 56% of GDP’s growth is contributed by the service sector only
- The second largest industry of this country is Food Processing, while Oil stands as the largest
- Crude Petroleum and Banana are two major export items of Ecuador.
The diversified sectors in Ecuador is letting the foreigners to invest more as their commercial interest increases.
How to create a corporation in Ecuador?
There are 9 basic steps to create a corporation in Ecuador which are described in detail below:
1. Choosing the right business structure for your company
There are 5 types of business entity structure in Ecuador, however two major types of business models are described below:
- Anonymous Societies
- Limited Liability Companies
Each of these business structures have different investing capital with different requirement for number of shareholders. The purpose of business and the activities conducted will help you decide the right legal entity structure. The insurance companies and the bank must adopt anonymous societies and the assistance from the local agent will guide you to select the right business model.
2. Appoint a corporate lawyer
Every country has their own jurisdiction which are complex in its own way. The internal legal processes can waste a lot of time and money if handled by an inexperienced. The local corporate lawyer can be of a great help while handling any legal complications are they are equipped with good knowledge about the peculiarities of Ecuador. The process of setting up a company in Ecuador can be simplified and can be eased. The legal advices from corporate lawyer can give you a good entry into the Ecuador’s market.
3. Keep yourself updated with legal requirements
The company’s legal representatives must be a citizen/resident of Ecuador and they become the legal faces of your organization. Both the type of business models, Anonymous Societies and Limited Liability Companies require 2 legal representatives, President and General Manager who will take up the responsibility of the company such as:
- Presenting the documents of the organization before the required public authorities
- Assisting the company for registration and renewal processes
- Providing the right guidance about the legislation and regulations of the country
- Help in opening a bank account
4. Perform business with a social objective
To create a corporation in Ecuador, it is necessary to establish at least one social objective with five additional activities. For successful business operations, it is important that every business must have one social objective which matches with their commercial activities, otherwise the organizations cannot perform in this country.
5. Selecting the company’s name
The company’s name must be booked/reserved using the company superintendent web page. It is required that within 30 days, one must complete their process of formation of the company before the reservation of the name expires.
6. Form your business online
The business models such as LLC or Anonymous Societies can be formed through an online process in Ecuador. The information of the company such as the name of the company, details about the shareholders and partners, capital investment must be filled out. These details about the company which has been filled out must be approved via a Public Notary and the documents must be signed together with the proof of a legal representative. After all the documents have been checked and after the approval, the company is provided with a company tax ID and a tributary ID number.
7. Register with Social Service Institute (IESS)
To hire employees, the company must register with Social Service Institute (IESS). Using the online platform, one can get benefits about payments and the contributions made by the employees. A local agent is the best source to complete the registration process.
8. Make the payment for municipal patent
Once the corporation has been set up, the company must register for the company’s address and shall pay against municipal patent and license to conduct commercial activity.
The attractive process of creating a corporation in Ecuador is a very profitable business. The tax benefits provided by the government is thus inviting foreign businessmen. Other laws such as productivity development law is another beneficial law for the foreign investors.