If you are looking to register a company in Guatemala, the process involves five key steps, as outlined below.
Many investors launching in the market for the first time seek the assistance of a company formation agent in Guatemala, who will be able to offer guidance on the best type of entity to suit their needs, and use their expert knowledge to complete the business formation process in the most efficient manner possible.
Guatemala is the largest economy in Central America, and among the top ten economies in Latin America, with a GDP that hit $85.99 billion in 2021 (all figures in USD). That same year, gross national income (GNI) – a key prosperity marker – reached $4,940 per capita, placing the country as an upper-middle income nation according to standards established by the World Bank.
SEE ALSO: Do you need a PEO in Guatemala?
Notably, Guatemala registered GDP growth in 2020, when many other economies in the world contracted due to the COVID-19 pandemic, and the only year it has registered decline over the past two decades was during the 2008 global financial crisis.
The country’s strong economic performance over recent years has made it an increasingly attractive destination for foreign direct investment (FDI), which has similarly continued to grow, as highlighted by the fact that FDI has consistently represented between 1.3% and 2.9% of GDP throughout those years of strong GDP growth.
Part of the increasing attraction of Guatemala as an investment destination is also down to the fact that it has had success in dealing with its once notoriously high levels of violence – with intentional homicides more than halving since 2009.
The country also benefits from having a highly strategic location, dominating Mexico’s southern border, and forming a gateway between the three major economies of North America and the rest of Central America.
Guatemala has high-volume ports serving both the Pacific Ocean and Caribbean Sea, offering easy freight access to the rest of the Americas, as well as Asia-Pacific and Europe.
Coffee, bananas, and sugar are among some of the key exports from Gautemala’s famously large agricultural sector, which generates almost 10% of GDP. Manufacturing – with a massive garment producing industry at its center – contributes 22% of GDP.
The country’s fast-growing services sector, meanwhile, is responsible for 60% of GDP.
Entity types when you register a company in Guatemala
One of the first choices you will need to make when you register a company in Guatemala – and which a company formation agent will be able to assist you with – is which type of entity to establish.
Depending on the nature of your business and how you plan to structure it, some of the most likely options include:
Limited liability company (sociedad de responsabilidad limitada)
With a limited liability company, participation is not measured in shares, but in contributions from partners, with each partners’ liability limited to the capital they have contributed to the company. Partners are not personally liable for the debts that the company may face.
Other characteristics and requirements to establish this type of company include:
- For such an entity, a minimum of two and maximum of 20 partners are allowed, and they can be individuals or legal entities.
- Such a company must have an original name to trade under, which by law must also include the words ‘limited company’ (which may be abbreviated).
- Such a company cannot have an industrial partner (article 82 of the Commercial Code).
This type of company is generally chosen for small companies due to its requirements and characteristics, however even those tend to form as corporations..
Corporation (sociedad anónima)
For a corporation, participation is based on shares, with shareholder liability limited according to the number of shares they hold. A corporation’s overall liability is also limited to the assets it holds. Forming a corporation in Guatemala is done via the execution of a public deed, which must be registered at the country’s Commercial Registry and in the Superintendency of Tax Administration.
Other notable characteristics of a corporation in Guatemala include:
- High levels of privacy for shareholders and their meetings
- The need to appoint a legal representative in Guatemala (local or foreign, with a Guatemalan Tax ID)
- Contributions for capital formation can be in cash
- The name of the company must include the word corporation (which can be abbreviated as “S.A.”).
- Shareholders can be nationals or internationals, individuals or legal entities.
Branch of a foreign company
If you already have a business elsewhere, when you register a company in Guatemala, another option to consider is forming a foreign branch.
In order to do so, you will need to appoint a legal representative in Guatemala, who is a citizen or legal resident based in the country, and who will have the legal authority to act on the company’s behalf.
The process of establishing a foreign branch in Guatemala involves submitting documents from the parent company that have been properly legalized (apostilled or equivalent), as well as registering with various state entities in the Central American country. It is worth taking into account that these requirements mean the process can often take longer than setting up the aforementioned entity types.
Register a company with the help of a company formation agent in Guatemala
For many foreign investors looking to register a company in Guatemala, one of the biggest obstacles they face is lack of familiarity with the local market, as well the language barrier faced by anyone who doesn’t speak Spanish.
A company formation agent in Guatemala is able to help overcome both of those issues, guiding you through the process of establishing a business in the most efficient manner possible.
When you contract a provider to act as company formation agent that also offers other back office services, you can additionally receive support with the likes of accounting, recruitment, and ongoing legal matters beyond those involved in the process of getting your business off the ground.
How to register a company in Guatemala
When you register a company in Guatemala, supported by a company formation agent or otherwise, you must go through the following five steps:
1. Choose the type of entity
Based on your needs and the way you intend to structure your business, you will first need to choose which type of entity to register.
2. Register a company in Guatemala with an appropriate name
You will need to undertake a study in order to guarantee that the company name you wish to use is not already in use or too similar to an existing company, as well as include the entity type in the name, where that is a legal requirement.
3. Determine the amount of initial share capital and open a corporate bank account
An initial capital investment will be necessary to establish the company, and can be deposited in the company’s provisional corporate bank to start the process of its incorporation.
4. Establish the bylaws of your company
Working through a public notary, all of the internal regulations that will govern the operation of the company must be determined and laid out in a document signed by all shareholders, either in person or through a power of attorney (POA).
5. Registration of the company before Guatemalan state entities
In order to comply with the law and the formalization of the company, it is necessary to register it publicly so that it can operate legally. All entities must be registered at the Mercantile Registry and the Superintendency of Tax Administration.
Biz Latin Hub can assist you doing business in Guatemala
At Biz Latin Hub, we provide market entry and back office services throughout Latin America and the Caribbean, with more than a dozen offices around the region, including in Guatemala City.
Our portfolio of services includes company formation, accountign & taxation, legal services, bank account opening, and hiring & PEO, and our unrivaled regional presence means we are ideally placed to support multi-jurisdction market entries.
Contact us today to find out more about how we can support you doing business.