Foreign companies expanding to Paraguay may choose to form a Limited Liability Company (LLC), due to the familiarity of the entity type with that of their home country. In Paraguay, an LLC is called a Sociedad de Responsabilidad Limitada, or SRL.
There are several steps to form a Limited Liability Company in Paraguay. Expanding companies will also need a few key components to go through this process, including support from an experienced legal services provider operating locally.
Characteristics of a Limited Liability Company (LLC) in Paraguay
Like many LLC entity types in other countries, Paraguay’s Sociedad de Responsabilidad Limitada offers protection of personal assets from company liabilities or debts. The Limited Liability Company in Paraguay is therefore a popular choice for foreign investors expanding into the country.
This entity type also allows full foreign ownership, and requires a minimum of one director, two shareholders and US$1 share capital (though note this requirement may change if you plan to carry out import or export activities). These conditions make the LLC in Paraguay a more accessible business structure for foreigners.
Steps to open your LLC in Paraguay
1. Draft and Sign a Power of Attorney
Paraguayan corporate law states that companies must have a Legal Representative to act on their behalf for legal matters. This person must have sound knowledge of local legal compliance requirements, in order to act in the best interests of your Limited Liability Company in Paraguay.
To appoint a Legal Representative in Paraguay, you’ll need to draft a Power of Attorney document, which must be signed by yourself as the company owner, and the person you’re appointing. This document legally binds your representative to a set of obligations to act with best intent.
You can choose to limit the powers of the Legal Representative to act for your LLC through the Power of Attorney document. However, note that restricting the Legal Representative’s powers will mean you’ll have a greater responsibility to identify your legal obligations and will need to find another external provider to assist you. Instead, it’s better to find a trusted corporate law expert in Paraguay with the knowledge, experience, and credibility to carry out the necessary functions.
2. Reserve your company name
Next, you’ll need to choose and reserve the name for your LLC in Paraguay. To do this, you’ll need to check with the Paraguayan Advocacy Institution that the name you want is available. This Institution can also help you change your company name, if you decide to do this later.
3. Draft the company constitution (bylaws)
After choosing and reserving your company name, you can then draft the bylaws for your LLC in Paraguay. The bylaws act as the constitution for the LLC, and outline the company’s governance structure.
Your Legal Representative should assist you with this process, as these bylaws must be submitted to a Public Notary.
4. Register your Limited Liability Company in Paraguay
You’ll then be able to formally register your company with Paraguayan authorities. This includes the Public Registry of Commerce and Public Registry of Legal Entities.
Your Legal Representative must submit your deed of incorporation and formal capital contribution to the Public Notary. You’ll be given a merchant’s registration for your LLC and can then initiate your accounting and corporate books.
A summary of your company’s constitution must then be published in the Official Gazette or in a widely-circulated newspaper in Paraguay.
5. Obtain your tax identification
To get a tax identification number, you must register your Limited Liability Company in the SET (Subsecretaría de Estado de Tributación, or State Secretariat of Taxation).
Doing so will generate a RUC number (Registro Único del Contribuyente), which is your company’s unique tax number. The SET offers an online platform for you to complete this step.
You’ll need to submit a number of documents to the SET portal to get a company RUC, including copies of identification and residence details of yourself, your shareholders and directors. You’ll also need to provide the company’s deed of incorporation, publication in the Official Gazette or other newspaper, proof of address and capital deposit slip from the Central Bank.
6. Open a corporate bank account
Finally, you’ll want to open a corporate bank account for your Limited Liability Company in Paraguay. There are several banks to choose from in Paraguay to open your corporate bank account, and you’ll want to choose the best one suited for your needs.
Two good options are Banco Continental, as it offers several choices for corporate accounts; or Banco Regional S.A.E.C.A., the largest bank in Paraguay with 32 branches (making it the most accessible).
The process to open a corporate bank account in Paraguay can take about 4 weeks, so make sure you carry out this step as soon as your LLC is registered.
Registering employee contributions
If you have employees, you must register as an employer with the Social Security Institute (IPS) and the Ministry of Labor, Employment and Social Security (MTESS). These agencies will issue access codes for your company to the reporting systems of each entity. You’ll need to make social security contributions at certain rates for your employees in accordance with Paraguayan employment law.
Register capital contributions
Capital contributions in the form of tangible and intangible assets must be fully registered. For assets such as real estate, vehicles, furniture or merchandise, you must present valid ownership documents to the Public Notary. The Notary will then document the transfer of these assets to your Limited Liability Company in Paraguay.
Get support from corporate legal experts for your Limited Liability Company (LLC) in Paraguay
Under local corporate law, you must work with a Legal Representative to form your Limited Liability Company (LLC) in Paraguay. For this, you’ll want to connect with a trusted, expert legal services provider who understand local regulations and has a proven record of acting in companies’ best interests.
Biz Latin Hub can help. Our team of local and expatriate professionals are market leaders in supporting expanding companies in Latin America and the South Pacific. We offer a full suite of market entry and back-office solutions to support your commercial success in a new market.
Contact us today here for a customized quote for company formation, corporate compliance, accounting and taxation, and other services. We’re your single point of contact for all your corporate secretarial needs.
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