At first glance, it looks hard to set up a company in Ecuador. It can come with a few challenges, but they can be easily overcome by working with local partners who have experience doing business in the country.
With that in mind, we have prepared a legal summary of everything you need to know before you set up a company in Ecuador. Crucially, all the information is provided in English. Ecuador’s economy has performed well in recent years and continued to attract significant levels of foreign investment.
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Compared to some other countries in the region, corporate law is relatively simple, making it easy to set up a company in Ecuador. With due diligence and proper strategic thinking, companies in many different commercial sectors can succeed.
In 2024, Ecuador’s Gross Domestic Product (GDP) is valued at approximately USD$115.05 billion. This represents an increase from the $109.167 billion reported in 2022. In terms of Foreign Direct Investment (FDI), the latest available data is from September 2023, which shows that Ecuador received an increase of USD$155 million in FDI.
Business Formation: Decide on the entity type in Ecuador
After deciding to start the company formation in the Ecuador process, the first step involves selecting the best type of legal entity to suit your business needs and goals. The most common types of legal entities are outlined below:
- Simplified Stock Company (Sociedad por Acciones Simplificadas SAS): This type of company facilitates the incorporation of a company by simplifying procedures, costs and allowing for a flexible corporate structure. The SAS are companies where the ownership can be relied on by a sole person, it requires a legal representative to be appointed within the company bylaws, a fiscal address, and no minimum capital.
- Limited Liability Company (Sociedad de Responsabilidad Limitada LLC): Suitable for small and medium-sized businesses. The purpose of a LLC is to protect the personal assets of its members. Therefore, the members of the company are only liable for the company’s obligations up to the amount of their contributions. This type of company is usually created for a specific purpose of commercial or civil economic activity, with no banking, insurance, capitalization, or savings operations allowed. It can be incorporated with a minimum of 2 and a maximum of 15 shareholders and requires a minimum capital of USD$400.00.
- Branch (Sucursal): In Ecuador, a foreign entity may be domiciled in the country as a secondary establishment or branch. In this case, it will continue to be dependent on the parent entity, but will have legal presence in the country, including a tax domicile and an attorney-in-fact who will act as representative of the foreign branch. A minimum capital of USD$2,000 is required.
What are the minimum requirements to incorporate a SAS in Ecuador?
The minimum requirements to incorporate an SAS in Ecuador are:
- Minimum of (1) shareholders, which can be either natural (i.e. persons) or legal persons (i.e. entities.)
- The S.A.S. allows 100% foreign ownership.
- No minimum capital is required to establish an S.A.S. However, in our experience, we strongly recommend a minimum capital of USD$400.
- Appoint a Legal Representative within the company bylaws, who must be a local national or a foreigner with a residency visa.
- Register a Fiscal Address which must be within the country and used for official correspondence.
What documents do you need to set up a company in Ecuador?
To begin incorporating your new subsidiary company in Ecuador, you will need to provide the following documents:
- A name for your legal entity.
- Shareholders’ identification documents.
- Confirm the business activities, corporate purpose, and primary operations.
- Minimum initial capital contribution.
- Appointment of General Proxy for foreign shareholders, who must be a local national.
Once you have the legal documentation, you can start the process of company incorporation.
Read on for an overview of the company formation process in Ecuador broken down into key steps.
How to Set Up a Company in Ecuador: Key Details
Investors seeking to set up a company in Ecuador can choose to establish both limited liability and unlimited liability companies. This can be done online or by following the normal offline process. We recommend using the online process because it is a lot easier and faster, and transfers a significant amount of the workload to the authorities.
The 6 Steps to Set Up Your Business in Ecuador
The 6 key steps that you need to complete in order to form your company in Ecuador:
- The first Step: Ensure that the shareholders grant power of attorney to their legal representative, permitting them to set up the company in Ecuador on their behalf.
- The second Step: The legal representative, will then start the setup process before the Superintendency of Companies, Securities, and Insurance. If completing the process online, the legal representative will reserve the company name, and fill out documentation with all the required information about the company. This includes fiscal/legal address, president, general manager, name of the shareholders, and how much each shareholder holds in the company.
- The third Step: Once the application is ready, it must be submitted with all the enabling documents to the Superintendency of Companies, Securities and Insurance for approval. For certain types of companies, once the company formation is approved, it is also necessary to register with the Mercantile Registry to complete the process.
- The fourth Step: Once the company has been successfully set up, the tax authority will grant it a tax identification number (Registro Único de Contribuyentes, RUC).
- The fifth Step: The notary will send the deeds, documents and all the necessary information to the Commercial Registry.
- The sixth step: If approved, the company will be registered. The tax authority will grant the company its tax identification number (RUC). At this point, the company is legally incorporated.
Additional Obligations to Set Up a Company in Ecuador
At this point, the company is legally incorporated in Ecuador. However, before you begin commercial activities, you must meet these obligations:
- Open a corporate bank account and deposit the company’s minimum capital.
- Create an account with the ‘Superintendencia de Compañías’.
- Register the company with the Social Security Agency (IESS).
- Pay the municipal patent and get the license for economic activities.
FAQ When Forming a Company in Ecuador
Answers to some of the most common questions we get asked by our clients.
Can a foreigner own a business in Ecuador?
Yes, a business can be 100% foreign-owned by either legal persons (legal entities) or natural persons (individuals).
What is the Ecuador Company Tax ID?
The Ecuador Company Tax ID is known as RUC (Registro Único de Contribuyentes), which translates in English to Single Taxpayer Registry a unique identification number for tax purposes in Ecuador.
How long does it take to register a company in Ecuador?
Registering a company in Ecuador takes 6 weeks.
What does a S.A.S company name mean in Ecuador?
S.A.S means Sociedad por acciones Simplificada, which is similar to a Joint Stock Company. This is a type of commercial company with legal personhood and assets independent from those of its owners. Shareholders are liable only up to the amount of their respective contributions. Shareholders are not liable for labor, tax, or any other type of obligations incurred by the company beyond their contribution, except if the legal personhood of the company is declared unenforceable.
What does an SRL company name mean in Ecuador?
SRL in Ecuador stands for Sociedad de Responsabilidad Limitada, which tis ismilar to a Limited Liability Company in English. This legal entity operates independently from its shareholders, offering them limited liability. SRL companies are prevalent due to their simplified requirements, making them a popular choice for business structures.
What entity types offer Limited Liability in Ecuador?
In Ecuador the S.R.L (Sociedad de Responsabilidad Limitada) is a limited liability entity type.
What are the main differences between S.A.S and S.R.L in Ecuador?
| S.A.S (Sociedad por Acciones Simplificada) | S.R.L (Sociedad de Responsabilidad Limitada) | |
|---|---|---|
| Number of shareholders | One to an unlimited number | At least two partners, maximum fifteen |
| Shareholders’ General Meeting | General Assembly of Shareholders; resolutions by absolute majority | General Meeting of Partners; resolutions by absolute majority |
| Board of directors | Not mandatory; one or more administrators | Mandatory; two or more administrators |
| Legal representative | Can be removed or replaced without specific cause | Must comply with legal obligations; can be removed or revoked |
| Duration | Unlimited | Unlimited |
| Responsibility of shareholders | Jointly and severally liable; possibility of unlimited liability | Jointly and severally liable |
| Social capital | No minimum capital requirement | Requires minimum capital (USD$400) |
| Regulation | Easier regulation with fewer formalization and disclosure requirements | Subject to more formalization and disclosure requirements |
Do You Want to Form a Company in Ecuador?
If you have any questions or inquiries about how to set up a company in Ecuador, our local Ecuadorian business experts have created a company formation presentation.
If you have any more questions about how to incorporate your company in Ecuador, please do not hesitate to contact us now. Our Biz Latin Hub team in Ecuador includes local and expat professionals who have the knowledge and expertise to support you throughout the process.
