For anyone interested in starting a business in Guatemala, one option that may be attractive is to register a subsidiary. Because when you register a subsidiary in Guatemala, you are able to enter the market quicker than you would with full company formation, while enjoying more limited liability than if you were to form a branch.
Dominating the border between Central America and Mexico, Guatemala benefits from its strategic location — both in terms of its proximity to its large northern neighbour and the rest of North America, as well as the fact it spans the width of the isthmus and has high-volume ports serving both the Pacific Ocean and the Caribbean Sea.
The country’s large agricultural sector generates almost 10% of gross domestic product (GDP), which hit $76.71 billion in 2019 following two decades of rapid and almost continuous growth (all figures in USD). Guatemala also has a significant manufacturing sector, accounting for almost 22% of GDP, while the services sector accounted for close to 63% of GDP in 2019.
Guatemala’s major export products include coffee, bananas, sugar, and manufactured garments, while Guatemala also boasts significant mineral and hydrocarbon deposits. The country also has a fast-growing tech sector, which is expected to make a significant contribution to post-pandemic economic recovery.
Guatemala has made significant strides in improving its security situation over recent years, with the intentional homicide rate almost halving between 2009 and 2019 — a period that also saw foreign direct investment (FDI) inflows rise from $499.8 million to $966.8 million.
If you are interested in entering this growing market, read on to better understand what a subsidiary is, as well as the steps you will need to undertake to register a subsidiary in Guatemala.
Or go ahead and contact us now to discuss your business needs.
What is a subsidiary and how does it differ from a branch?
A subsidiary in Guatemala must be at least 50% under the ownership of a holding company, which will usually be based elsewhere. A subsidiary is seen in the eyes of authorities as a separate legal entity to the holding company.
That means it has broad control over its own finances and affairs, meaning that while the parent company will be limited in its influence over the entity, its liabilities will be similarly limited. So if your subsidiary encounters legal issues of any kind, in many cases you will not be liable for all associated costs.
That stands in contrast to a branch, which is considered an extension of the holding company, and passes significantly more liability for legal issues onto its parent. When you form a branch, you effectively agree to operate under the same name and provide many of the same services as the holding company, while when you register a subsidiary in Guatemala, you are free to brand it in any way that doesn’t encroach on the intellectual property rights of another locally based company.
How to register a subsidiary in Guatemala: a 6-step guide
Below, you will find the six steps you must follow to register a subsidiary in Guatemala. Note that all required documents must be submitted in Spanish or accompanied by a certified Spanish translation.
1. Draft the subsidiary’s statutes
To register a subsidiary in Guatemala, you must first draft its statutes, which will clarify how the entity will be structured and provide other key details related to its operations. Your chosen corporate lawyer in Guatemala will be able to assist you in drawing up this document.
2. Certify the subsidiary’s registration
With the statutes drawn up, you or your representative will have to attend the Ministry of Foreign Relations in order to certify the subsidiary’s registration.
3. Register the subsidiary with Guatemala’s Mercantile Registry
Registering the subsidiary with Guatemala’s Mercantile Registry can be done online, and includes a fee based on the capital your holding company grants to the subsidiary.
4. Post an insurance bond
Before you can complete the process to register a subsidiary in Guatemala, the holding company must post a $50,000 bond to guarantee the operations of the subsidiary.
5. Register the physical office
Under Guatemalan corporate law, any registered entity must have a physical office, so depending on the nature and scale of your business, you will either need to find adequate facilities to house your operations, or a token office space where you can receive official correspondences.
6. Appoint a legal representative
If you register a subsidiary in Guatemala while remaining based elsewhere, it will be necessary to have a legal representative who is able to represent you in front of local authorities, including signing documents on your behalf. This person will ideally be someone with experience in business and investment, and you will confer these abilities upon them via a power of attorney.
Biz Latin Hub can help you register a subsidiary in Guatemala
At Biz Latin Hub, we have multilingual teams of corporate support experts present and available to assist you in 18 jurisdictions around Latin America and the Caribbean. Whether you need help with company formation, recruitment, or support with legal or accounting services, we have the personnel and portfolio to be your single point of contact when entering and doing business in the Americas and beyond.
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