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Find out the steps to incorporate a company in Guatemala, a rising hotspot for expanding multinationals in Central America. While its larger neighbors often steal the limelight, there’s a lot to recommend the country. In recent years there has been an increasing focus on foreign investments.
Guatemala’s connection between its seaports and container terminal presents clear international trade opportunities for businesses operating from this country. With easy access to North America as well as the Pacific and Caribbean, you will have good trade links if you incorporate a company in Guatemala.
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The country is a developing economy, meaning there are lots of sectors ripe for growth. Excepting COVID the country has posted solid growth figures in all but two years this century. Although there is certainly a long way to go, the country is on the right track. An increasing openness to foreign investment, makes it a good time to incorporate a company in Guatemala.
SEE ALSO: Employment Law in Guatemala: a Guide
6 Steps to Incorporate a Company in Guatemala
Generally, there are 6 key steps to incorporate your company in Guatemala:
- Step 1 – Seek advice from local market entry and legal experts.
- Step 2 – Choose the appropriate legal entity based on your business needs.
- Step 3 – Choose the company name.
- Step 4 – Register company statutes and incorporation articles with the Public Notary.
- Step 5 – Payment of fees, edicts, appointments and registration.
- Step 6 – Register the company with the Mercantile Registry.
1. Seek advice from local market entry and legal experts
Before expanding a business, it’s important to establish a road map or market entry strategy. Seek advice from local legal and market entry experts to incorporate a company in Guatemala, in order to ensure you can set up and begin operations in full compliance with the law. These experts will help you choose the most appropriate pathway to expansion for your business needs.
Appointing a legal representative
Companies in Guatemala require a Legal Representative to act on their behalf on local legal matters. The Legal Representative is responsible for ensuring the legal compliance of the company with local regulations. They are obliged to act in the company’s best interests in this role.
It’s recommended to engage with local experts in appointing this role, as they are able to fully understand the company’s obligations in accordance with commercial and corporate law, and ensure your company’s compliance.
2. Choose the appropriate legal entity based on your business needs
Expanding your business to LATAM and setting up a company in Guatemala involves making some important decisions. It is important to consider the following factors:
- Size of the company
- Number of partners
- Company’s objectives
- Capital contribution you must make upfront to start operations.
From this information, you can select the appropriate legal entity to incorporate in Guatemala.
In Guatemala, as in other countries in the region, there are various types of companies. Of the entities on offer in Guatemala, 2 entities typically offer the best opportunities to foreign executives in terms of protection of their assets. These are:
- Limited Liability Company (Sociedad de Responsabilidad Limitada)
- Public Limited Company (Sociedad Anónima).
Limited Liability Company – Sociedad de Responsabilidad Limitada (SRL)
This commercial company can be constituted with a minimum of 2 partners and a maximum of 20. The SRL in Guatemala allows executives to appoint a board of directors for its governing body or be managed by a single Director.
Public Limited Company – Sociedad Anónima (SA)
The Sociedad Anónima or SA is a legal entity which can be constituted through 2 or more shareholders. This offers the opportunity to scale the number of partners.
These shareholders can be natural or legal persons. An SA can appoint a Board of Directors or a single individual or Manager as its governance structure.
The capital contribution will be represented by negotiable titles called shares, and there is no limit to the maximum share capital or number of shareholders.
The Sociedad Anónima entity tends to be more popular for multinationals when seeking to incorporate a company in Guatemala.
3. Choose the company name
Highlight your product or the quality of your service by choosing a relevant, suitable name for your company. For SRL and SA entities, the company name choice has few restrictions, except that in for the Limited Liability Company (SRL), the name must refer to its commercial objective.
Company names must be unique. It is therefore recommended to think of at least 3 possible names for your company in Guatemala to ensure the availability of a preferred name.
4. Register company statutes and incorporation articles with the Public Notary
A key institution that supports company incorporation in Guatemala is the notary public. This person will formalize the company statutes – the internal regulations of the company – in a public deed. These statutes outline the details decided upon in Step 1 (company size, shareholders, objective and capital, and the governance of the company.
Shareholders must also sign the articles of incorporation so that the new company can be duly registered before the Guatemalan Mercantile Registry.
The notary will also formalize the appointment of the company’s legal representative. This document will be required at the time of registering the company in the Mercantile Registry.
5. Payment of fees, edicts, appointments and registration
Companies must pay certain fees associated with company incorporation in Guatemala, including the right to register the company, publication of the company, and also appointment rights.
6. Register the company with the Mercantile Registry
The final step to incorporate a company in Guatemala is to register the company with the Mercantile Registry (Registro Mercantil). This can be done in person or through the agency’s online portal.
Required documentation for this step includes:
- Public deed of constitution
- Certificate of appointment of the legal representative(s)
- Identification of business owner(s)
- Tax domicile of the company
- Receipts or other proof of payment of fees.
The Mercantile Registry will then authorize the company’s books, the printing company that will process the invoices and the details of the company’s tax system.
Once the process is approved by the Mercantile Registry and the country’s tax authority, the decision will be published.
Common FAQs when forming a company in Guatemala
From our extensive experience in the region, these are the common questions and concerns of our clients.
1 . Can a foreigner own a business in Guatemala?
Yes, a business can be 100% foreign owned by either legal persons (legal entities) or natural persons (individuals).
2. How long does it take to register a company in Guatemala?
Registering a company in Guatemala takes 4 to 6 weeks.
3. What does an S.A. company name mean in Guatemala?
The S.A. in a company name in Guatemala refers to a Sociedad Anónima, which is similar to a Joint Stock Company. This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, creating a safeguarded boundary. The S.A. structure holds substantial prominence in Guatemala due to its exceptional adaptability and flexibility, rendering it the favored option for a diverse range of business ventures.
4. What entity types offer Limited Liability in Guatemala?
In Guatemala, the Sociedad Anónima (S.A.) is a type of Limited Liability Company.
5. What are the tax implications for businesses operating in Guatemala?
Businesses in Guatemala are subject to corporate income tax, value-added tax (VAT), and other taxes. It’s important to consult with a tax advisor to understand your specific tax obligations.
Comparison of Corporation (SA) and Limited Liability Company (SRL)
| Aspect | Corporation (SA) | Limited Liability Company (SRL) |
|---|---|---|
| Personal Element and Capital Stock | Shareholders participate (minimum of two legal entities or individuals, foreign or Guatemalan) with capital stock made up of shares. | Partners participate through contributions. |
| Type of Commercial Company | Capitalist | Mixed type |
| Identification | Identified with a freely formed corporate name plus Sociedad Anónima and abbreviated S.A. | Can be identified through a corporate name. |
| Liability of Shareholders | Liability is limited to the payment of subscribed shares. | Liability is limited to the payment of contributions. |
Get support from bilingual legal specialists to incorporate a company in Guatemala
Guatemala is a popular option for multinational expansion in Central America. When expanding, seek expert legal and accounting advice to ensure you incorporate your company in Guatemala in compliance with all local regulations.
At Biz Latin Hub, our team of legal and expatriate professionals offers a range of market entry and back-office solutions to ensure businesses can begin operations in Latin America with minimal risk and the greatest chances of success.
Talk to us for advice on incorporating your company in Guatemala and the Central American region. Contact us here at Biz Latin Hub for personalized guidance.
Learn more about our team and expert authors.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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