Business opportunities in Ecuador are becoming more and more enticing for foreign investors. The Ecuadorian government has been more than open in its intentions to attract foreign investment and recent legislation is indicative of this. There are many factors that are contributing to Ecuador’s current ‘purple patch’. A strong and stable national currency in the form of the US Dollar has helped enormously, as well as an embarrassing wealth of natural resources are just some of the key reasons Ecuador is an ideal place to form a business.
Ecuadorian Company Law (La Ley de Compañías del Ecuador) recognises 5 different types of company that can be established in the country. Each one serves a distinct purpose and will satisfy different objectives. It is therefore very important that companies properly consider each structure and the relevant benefits that they provide. There are numerous types of companies / legal entities in Ecuador, however, by far the two most common types of companies are the:
- Unlimited Liability Company / Corporation or ‘Sociedad Anónima’ (S.A.)
- Limited Liability Company or ‘La Compañía de Responsabilidad Limitada’ (LLC)
Keep reading if you are interested in doing business in Ecuador and need to find out about the different types of companies available.
What are the different Companies / Legal Entity Types in Ecuador?
See below the different types of companies / legal entities in Ecuador:
- Collective Name company (Compañía en nombre colectivo.)
- Limited Partnership (Compañía en comandita simple y dividida por acciones)
- Limited Liability Company (LLC) (Compañía de responsabilidad limitada Cía. Ltda)
- Unlimited Liability Company/Corporation (Sociedad anónima S.A.)
- Mixed-capital Company (Compañía de economía mixta)
All these legal entities must have a company legal representative and a legal/fiscal address in Ecuador. They also must make monthly and annual tax declarations to the local tax authorities.
Differences between the main types of companies in Ecuador
By quite a distance, the most used company structure in Ecuador is the LLC, followed by the Unlimited Liability Company/Corporation. The main difference between the two is found in the freedom to negotiate business dealings and make corporate decisions. In the former, a unanimous agreement is required by all the members of the board. However, in the latter, any decision is not subject to such an agreement.
Limited Liability Company – Ecuador
LLCs can have the following corporate objectives: civil and commercial or sales services. They cannot operate as banks or insurance companies.
Partners: These companies must have a minimum of 2 partners and can have up to, but not exceeding 15.
Capital: The minimum capital required to start an LLC is USD$400. The money is divided into instalments and at least 50% must be paid upon forming the entity, with the rest needing to be paid in the following 12 months.
Administration: These companies must have a General Manager and a President who will have the role of legal, judicial and extrajudicial representation, this can either be a shared or sole responsibility.
Unlimited Liability Companies/Corporations – Ecuador
The Unlimited Liability Companies/Corporations, also known as an Anonymous Society in English as it is known in Spanish (however this is a less common name!), is a company whose capital is divided by negotiable amounts of shares. It is formed by a contribution from the shareholders who have influence according to the size of their shares.
Partners: A minimum of two with no limit.
Capital: The minimum capital required to start a Joint-Stock Company is USD$800. The capital is divided into shares and the minimum quantity for shares is defined by the board.
Shares: Shares will always be nominative and can be ordinary or preference shares. Ordinary shares only offer the fundamental role of a share, as found in the relevant legislation, whilst preference shares cannot be put up to vote but can have special rights in terms of dividend payments and in the case of company liquidation.
a) The General Assembly of Shareholders is the main body of the company.
b) These companies must have a General Manager and a President who will have the role of legal, judicial and extrajudicial representation, this can either be a shared or sole responsibility.
Creating an online company in Ecuador
Simplified companies do not exist in Ecuador as they do in other countries (such as Colombia or Argentina). However, using the Company Superintendence service, you can create a company online. This is a very easy, quick and cost-effective way form either Joint-Stock Corporations or LLCs. If choosing to use this online service, you must choose one social objective and a maximum of 5 complimentary activities as listed in the International Standard Industrial Classification (ISIC). The Company Law includes information on the company, the partner and shareholder rights and obligations and the methods and deadlines for the Board, the statutes which you receive through this online process are very simple. The statutes can be reformed if the General Assembly permits it by following an established and straightforward legal process.
Do you have commercial plans in Ecuador?
Ecuador is eager to attract more and more foreign investment to its shores. There is an almost infinite number of opportunities in Ecuador, and this is one of the most exciting periods in Ecuador’s recent history.
If you are interested in taking the most of the enormous benefits that investing and forming a company in Ecuador can bring, don’t hesitate to contact Ernesto, our Country Manager in Ecuador. The Biz Latin Hub team is experienced in assisting clients in starting their business ventures in Ecuador and across the Latin American region through providing an extensive and multi-lingual suite of back-office services.
Looking for the best ‘route-to-market’ in Ecuador? Watch the short below and discover how we can assist.