Many investors expanding into the Guatemalan market for the first time seek the assistance of a local company formation agent. This individual can 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) – another key prosperity marker – reached $4,940 per capita, making the country an upper-middle income nation according to World Bank standards.
SEE ALSO: Do you need a PEO in Guatemala?
The country’s strong economic performance over recent years has made it an increasingly attractive destination for foreign direct investment (FDI). FDI has continued to grow, consistently making up a significant portion of GDP. Over the past two decades, FDI has represented between 1.3% and 2.9% of GDP.
One of the reasons for Guatemala’s success in attracting investment is the government’s success in reducing its once notoriously high levels of violence – with intentional homicides more than halving since 2009.
The country also benefits from its highly strategic location. By dominating Mexico’s southern border, Guatemala forms 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 the Caribbean Sea, offering easy freight access to the rest of the Americas, as well as Asia-Pacific and Europe.
Guatemala has a famously large agricultural sector, which generates almost 10% of GDP. Coffee, bananas, and sugar are some of the key agricultural exports. Manufacturing is even more important. With a massive garment producing industry at its center, it contributes 22% of the GDP.
The country’s fast-growing sector is services, and it is responsible for 60% of GDP.
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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 the 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 (S.R.L.)
With a limited liability company (LLC), participation is not measured in shares, but in contributions from partners, with each partner’s 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 requirements to register an LLC in Guatemala are:
- A minimum of two (2) and a maximum of 20 partners are allowed, and they can be individuals or legal entities.
- The company must have an original name to trade under, which by law must also include the words ‘limited company’ (which may be abbreviated).
- The company cannot have an industrial partner (article 82 of the Commercial Code).
Small companies often choose to incorporate as an LLC. However, another option for small and big companies alike is a corporation.
Corporation (sociedad anónima)
In a corporation, participation is based on shares, with shareholder liability limited to the number of shares an individual holds. A corporation’s overall liability is limited to the assets it holds. Forming a corporation in Guatemala is done via execution of a public deed, which must be registered at the country’s Commercial Registry and at the Superintendency of Tax Administration.
Some characteristics of a corporation in Guatemala:
- They provide high levels of privacy for shareholders and their meetings.
- A legal representative in Guatemala (local or foreign, with a Guatemalan Tax ID) needs to be appointed.
- 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 foreigners, individuals, or legal entities.
Branch of a foreign company
If you already have a business elsewhere, and you are looking to register a company in Guatemala, you might consider forming a foreign branch.
In order to do so, you will need to appoint a legal representative in Guatemala, who must be a citizen or legal resident based in the country, and who will have the legal authority to act on the company’s behalf.
Forming a branch of a foreign company in Guatemala involves submitting documents from the parent company that have been properly legalized (apostilled or equivalent), as well as registering the local branch with various state entities. It is worth taking into account that these requirements mean the process can often take longer than is the case for other entity types.
Register a Company With the Help of a Company Formation Agent in Guatemala
For many foreign investors looking to set up a company in Guatemala, a lack of familiarity with the local market is a big obstacle. For those who do not speak Spanish, the language barrier may also create difficulties.
A company formation agent in Guatemala can help you overcome both of these issues and guide you through the process of establishing a business. With their help, you can register a company in Guatemala in the most efficient way.
When you contract a provider to act as a company formation agent, they may also offer other back office services such as accounting, recruitment, and ongoing legal support beyond what is necessary to get your business off the ground.
What are the minimum requirements to incorporate a Sociedad de Responsabilidad Limitada (S.R.L.) in Guatemala?
The Minimum requirements to incorporate an SRL in Guatemala are:
- Two (2) shareholders, which can be either natural (i.e. persons) or legal persons (i.e. entities)
- Three possible names for the legal entity,
- Business activity,
- Initial capital at the time of incorporation
- Approximate monthly amount invoiced by the entity,
Important Tip(s): The founding shareholders do not need to physically travel to the country as the establishment can be completed via a power of attorney
How to Register a Company in Guatemala
When you register a company in Guatemala, whether you are supported by a company formation agent or otherwise, you must complete the following five steps:
Step 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.
Step 2 – Register a Company in Guatemala with an appropriate name
To ensure the availability of the chosen company name and compliance with legal requirements, it is essential to conduct thorough research. This includes verifying that the chosen name is not already in use and that it sufficiently distinguishes itself from existing company names. Additionally, it is crucial to incorporate the appropriate entity type into the name where mandated by legal requirements.
Step 3 – Determine the Amount of Initial Share Capital and Open a Corporate Bank Account
To establish the company, an initial capital investment will be necessary. It can be deposited in the company’s provisional corporate bank at the start of the incorporation process.
Step 4 – Notarize and Establish the Bylaws of Your Company
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. This must be done at a public notary, either in person or through a power of attorney (POA). It is one of the most important steps to complete when registering a company in Guatemala.
Step 5 – Registration of the Company Before Guatemalan State Entities
In order to comply with the law and complete the formalization of the company, your legal entity must be registered at the Mercantile Registry and the Superintendency of Tax Administration.
Common Questions When Forming a Company in Guatemala
Based on our extensive experience these are the common questions and doubts of our clients on company registration in Guatemala:
Guatemala is considered good for business due to its strategic location, natural resources, young and growing population, and efforts to improve the business environment.
lt takes between 8 to 10 weeks to form a company in Guatemala after all required information and documentation have been provided.
Yes, a foreigner is eligible to own a business in Guatemala.
In Guatemala, “SA” stands for “Sociedad Anónima,” which is similar to a joint-stock company.
It requires a minimum of two (2) shareholders to form a company in Guatemala. Which can be either natural (i.e. persons) or legal persons (i.e. entities).
Biz Latin Hub Can Help You Register a Company 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, accounting & taxation, legal services, bank account opening, and hiring & PEO, and our unrivaled regional presence means we are ideally placed to support multi-jurisdiction market entries.
Contact us today to find out more about how we can support you in doing business.
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.