Peru is one of the fastest growing economies in Latin America and therefore an attractive emerging market for foreign investors. Out of 190 countries, Peru is ranked 54th on the ease of doing business index, according to the World Bank Group. Also included in the World Bank report was that Peru had an annual average growth rate from 2002 to 2016 of 5.6% with a stable exchange rate and low inflation of 2.9%. Because of their free market economy, the conditions for foreigner and local investors are similar. There are several free trade agreements and freedom for importing and exporting different kinds of lawful goods and services. To incorporate a business in Peru, investors need to know about the different types of legal structures in the country. We will go over these for you so that you can see which type of legal entity best suits your business needs!
The Most Common Types of Legal Structures in Peru:
- Joint Stock Companies (Sociedades Anónimas, S.A.)
- Closely Held Corporations (Sociedad Anónima Cerrada, S.A.C.)
- Publicly Held Corporations (Sociedad Anónima Abierta, S.A.A.)
- Limited Liability Companies (Sociedad Comercial de Responsabilidad Limitada, S.R.L.)
We will be going over each of these company structures below in detail so you can see which one is best for you!
Joint Stock Companies (S.A.)
Joint Stock Companies are the most popular types of legal structures because it is known to be the easiest way to open a business in Peru. It requires a minimum of two shareholders, and the initial capital contribution must be deposited in a local bank. Furthermore, there is no minimum capital amount required by law, but financial institutions require a minimum initial deposit of $1,000 SOLES. The denomination must include the indication “Sociedad Anónima” or the abbreviation “S.A.”. Liability is limited to the amount of the par value of the shares they hold, and the joint stock company must have a General Manager and a Board of Directors. At the end of the article, we have a video that outlines the steps to open this kind of company in Peru.
Closely Held Corporations (S.A.C.)
Closely held corporations must have a minimum of 2 and a maximum of 20 shareholders. Shares cannot be registered in the Public Registry listed on the Stock Exchange. The Denomination must include the indication “Sociedad Anónima Cerrada” or the abbreviation “S.A.C.”. The corporation must have a General Manager, but a Board of Directors is optional.
Publicly Held Corporations (S.A.A.)
Publicly held corporations are a good option for companies with many shareholders (750 or more), or if they have debts that can be converted into shares. More than 35% of the companies capital must belong to 175 or more shareholders. The denomination must include the indication “Sociedad Anónima Abierta” or the abbreviation “S.A.A.”, and they must be registered in the Public Registry listed on the Stock Exchange. There are no restrictions or limitations on the transfer of shares; it is completely free.
Limited Liability Companies (S.R.L.)
Limited liability companies require a minimum of 2 and a maximum of 20 partners. This type of company does not issue shares, and the incorporation procedures are the same as those for all other corporations. The capital is divided into the ownership interests, which are indivisible and all partners have a limited liability. The denomination must include the indication “Sociedad de Resonsabilidad Limitada” or the abbreviation “S.R.L.”. If owners want to transfer ownership interests to third parties, they have to be approved by the existing partners and must be registered in the Public Records Office. Death, bankruptcy, illness, retirement or resignation of any partner does not cause the closing of the legal entity.
Foreign companies can easily incorporate a branch in Peru. However, they must first be registered in the “Ministerio de Relaciones Exteriores” (RREE) and must include the indication “Sucursal” in the company. The mother company must send a permanent legal representative, and the branch has to fulfill the same operations as the head office. Furthermore, the mother company must prove with a legal confirmation with the country of origin that neither associative agreements nor their articles of incorporation are prohibited for an establishment of branches abroad.
Which Type of Company Structure in Peru is Right For Me?
Choosing the best type of company structure for your business needs can depend on a variety of factors. Knowing which one to choose is the first step in starting your business in Peru! If you need help assessing your company to fit within one of these types of legal structures, you can reach out to our country manager, Karl at [email protected] and he will be more than happy to assist you. Our team of local and foreign experts at Biz Latin Hub offer a wide range of professional multilingual market entry and back-office services that can help you start your company in Peru.
If you want to learn more about forming a company in Peru, using the most common legal structure in the country, check out this video!