Step Up Your Business in Chile By Being Fully Knowledgeable with The Law
In the previous article, we have discussed the basic requisites and steps on how to register your business in Chile. “How To Register A Company in Chile: Requirements and Steps” if you haven’t read it yet. If you did already, then read further as we talk about the legalities involved in the process. This topic will help you further in knowing the legal procedures of business formation in Chile.
Starting up a company in Chile can often be too strenuous, technical, and expensive. As with any long-term goal, it requires time and patience to succeed. It is only practical to plan ahead of time in order to start the process efficiently. Get ahead of your competition and learn about 5 legal factors you should consider for your business formation in Chile.
Banking in Chile
Whether you like it or not, banking is a significant component of opening and operating any business venture. There are guidelines that banks lay down, and Chile is no different. All potential account holder must undergo strict evaluation procedures before banks grant permission to open an account.
Chilean banks consider these determinants when assessing a potential account holder:
- Financial solvency
- Residency within the country
- Credit history (especially within Chile)
In general, Chileans are more conventional about solvency, especially when dealing with foreign account holders. As a result, they may be stricter due to the individual or institution’s lack of residency and credit history within Chile. Opening a bank account might solve this issue. Just make sure you conform to Chile’s bank requirements and procedures if you wish to open a bank account in Chile.
Paying Taxes in Chile And Your Country of Origin
Even though you have commenced business formation in Chile, it doesn’t mean you are already exempt from paying taxes in your own country. Every nation has its own tax laws. These vary momentously between countries. You have to prepare yourself in paying taxes pursuant to both your local law and Chilean law.
Make certain that your company’s taxable activities comply with both the Chilean taxation laws and your international tax condition. Seeking consultation with local Chilean tax experts will help you with this concern.
Types of Business Formation in Chile
The concept of entrepreneurship has grown loosely but in a positive way. Before, we used to think that only large-scale industries can provide products and services for the general public. Nowadays, small-scale businesses are also joining the fray, leading to a drastic economy growth and a more diverse playing field.
Following this growth of small businesses, there are now a variety of legal entity structures to choose from when forming a company in Chile. Your company’s nature of operations suggests what structure you will need to follow. Below are some of these company structures and their general necessities.
Sociedad Anónima (S.A.) – Corporation
A corporation is a single but usually large business entity that multiple shareholders contribute to. The liabilities are dependent on each shareholder’s contribution. Some requirements include:
- A list containing the names of board of directors
- Mandatory record keeping of all data relative to the corporation
Chile Limited Liability Company
A limited liability company in Chile is an entity that partitions liability and capital among its shareholders. Some characteristics include:
- Minimum of two shareholders
- Reporting financial statements to the government is not required
- Foreigners may own company shares
Sociedad por Acciones – Share Company
This company is a perfect choice for any sole entrepreneur who wants to own their own company without other shareholders. Some features include:
- One shareholder claims total ownership and control
- Elastic management structure
Empresa Individual de Responsabilidad Limitada (E.I.R.L)
- Suitable for single foreign private investors
- It is often divided into minor companies based on tasks: one for human resource and another for operations management.
The Necessity of Legal Representation in Chile
It is compulsory for every company in Chile to have a “legal representative” for their operations. Basically, this representative must be a Chilean citizen or a full-time resident of Chile. You can find more details about legal representation here.
Articles of Incorporation in Chile
You need to also draft documents known as the articles of incorporation with your legal representative. It serves as the framework for all of your company’s rules, regulations, and activities. You have to take note that these company activities must be very detailed and specific.
Amending the articles of incorporation can be very costly. Exercise diligence and caution when drafting them in Chile before completion.
Business Formation in Chile: Challenging, yet Attainable
Even the most profitable companies in the world commit grave mistakes. This fact may instill fear to most business owners. However, complications and disputes are bound to happen when beginning your journey of business formation in Chile. It is unavoidable, but it can be lessened somehow. To possibly diminish these unnecessary errors, it is advisable to work with a local partner.
We know that you want more information or tailored advice for your business. Worry not, as Biz Latin Hub has a group of experts that can offer you guidance. We will offer you advice when starting business formation in Chile. In addition, we provide incorporation, professional accounting, legal, and financial services tailored to you and your company’s needs. Contact us for more information.
Further, if you are thinking of incorporating a company in any part of Latin America, learn how our market entry and back-office amenities can be valuable for your fruitful operations in the region.