Are you interested in migrating to an amazing South America country? So much so that you would like to start a business there? Look no further than Chile.
A company formation in Chile can often be expensive and requires time and patience to succeed. That is why it is best to plan ahead of time in order to start the process smoothly. Get ahead of your competitors and learn about 5 essential ‘doing business’ factors you should consider before forming a company in Chile.
1. Company Formation – Banking in Chile
Banking is an important component of starting and operating any business venture. In every country, there are regulations that banks have in place; this is no different in Chile. A potential account holder must be evaluated before being granted permission before being able to open an account.
What banks in Chile consider when evaluating a potential account holder:
- Residency within the country
- Credit history (especially within Chile)
Chileans are more conservative about creditworthiness and may be more strict due to the lack of residency and credit history within Chile. Opening a bank account might help with this – make sure you follow Chile’s bank requirements and guidelines if you choose to open a bank account in Chile.
2. Corporate Taxes in Chile and Beyond
Every country has their own tax laws and these vary greatly between countries. Businesses in Chile are required to pay taxes according to local law.
Please note that you may be responsible to pay corporate taxes within your country of residence as well as in Chile.
It is very important to note that beginning a business in Chile does not exempt you from paying your own country’s taxes. Make sure that your company’s taxable activities comply with the Chilean taxation laws and those of your international tax situation. Consulting with local Chilean tax experts will help you navigate this step.
3. Types of Company Structures in Chile
Following the growth of entrepreneurship and small businesses, there are now a variety of different legal entity structures to choose from when forming a company in Chile. Your company’s operations will dictate what company structure you will need. Below are a few of the different Chilean company structures and their general requirements.
Sociedad Anónima (S.A.) – Corporation
A single equity that multiple shareholders contribute to. Liability is dependent on each shareholder’s contribution to the corporation. Some requirements include:
- Need to have a board of directors
- Obligatory record keeping
Chile Limited Liability Company (SRL)
A limited liability company in Chile that shares liability and capital among its shareholders. Some characteristics include:
- Minimum of two shareholders
- Does not have to report financial statements to the government
- Company shares may be owned by foreigners
Sociedad por Acciones (SpA)- Share Company
A perfect choice for a sole entrepreneur who wants to own their own company without any other shareholders. Some characteristics include:
- Ability to have one (1) shareholder
- Flexible management structure
Empresa Individual de Responsabilidad Limitada (E.I.R.L)
- An appropriate structure for single foreign private investors
- Often it is split into smaller companies based on tasks: one for hiring the employees and another for holding the company’s assets
Check out a more in-depth analysis of each of these and a few more Chilean company structures here.
4. Legal Representation in Chile
It is required that every company in Chile have a “legal representative.” This representative must be a Chilean citizen or a full-time resident of Chile.
5. Outline Company’s Activities
The articles of incorporation are documents drafted in Chile with an attorney that outlines all of your company’s rules, regulations, and activities.
Please note that the company activities must be very specific.
Many may be surprised at how detailed these articles are required to be in order to incorporate in Chile. Modifying the articles of incorporation is very costly and it is best to be very careful when drafting them in Chile before they are finalized.
Doing Business in Chile: Challenging and Attainable
There can often be complications when beginning your journey of starting a business in Chile, for this reason, it is recomendable to work with a local partner.
If you would like more information or personalized advice, Biz Latin Hub has a group of experts that can offer you guidance to set up your business in Chile. In addition to company formation and incorporation services, we offer professional accounting, legal, and financial services tailored to you and your company’s needs. Contact Allan here for more information.
If you are thinking of incorporating a company in Latin America, learn how our market entry and back-office services can be useful for successful operations in the Latin American region.