When globally expanding companies register a business in Latin America–also known as company formation or company incorporation—they are, simply put, establishing a type of commercial presence in a given jurisdiction via the creation of a local legal entity. The subsequent business activities are then conducted through that legal entity. Given the range of advantages, formally registering a business in Latin America is one of the most rewarding methods of fruitfully enjoying its commercial opportunities–a diversity of which is present across the whole of Latin America. The region is an investment destination where company formation provides an ideal way for businesses to ease into their new market(s).
Some of the benefits of registering a business in Latin America include:
- Government policies and initiatives targeted at directing foreign investment
- Large variation of both existing and potential industries due to the varied landscapes and thriving, unique interests of each country’s economy
- A large, bilingual and progressive educated workforce at a cheaper cost than in most other affluent regions
Why Form/Incorporate a Company in Latin America?
Over the last decade and presently, Latin America has experienced what would be considered a purple-patch: newly-developed industries, sustained growth, and significant foreign investment. It would be of much benefit to investors to take some time to appreciate the range of opportunities Latin America has to offer across a variety of sectors and lifestyle aspects. Listed below are a few reasons why an organization should consider Latin America as a new home:
- Stable growth: One of the region’s most attractive traits is the trend of GDP growth. Many Latin American governments (on the back of some of the less positive happenings prior to the turn of the millennium) have made special efforts to transform some of the harsher realities of their countries—in many aspects, this has gone extremely well. For example, The World Bank estimates that regional growth for Latin America and the Caribbean should reach an average increase of 2% in 2018, rising to 2.6% in 2019. Furthermore, a few countries are performing well above of the regional average; in that same period Peru is projected to grow at a rate of around 3.8%, and Colombia is yet to experience yearly growth below 2% since 2000.
As well as regional growth, real wealth is improving, with more and more people benefitting from national economic growth. According to the World Bank, moderate poverty in the region fell by 10% in the decade 2000-2010. This translates to almost 50 million people escaping poverty and moving themselves into a quickly expanding middle class. Uruguay, proportionally, has the largest middle class population in all of Latin America, equating to around 60% of the population.
- Unexplored industries: One of the incredible benefits about investing in 2018 Latin America is that the region is currently playing what could be considered a ‘catch-up game’ with Europe & North America. What this means is that many industries are now settling into the heights of their development in Europe; some are only in their infancy in Latin America, waiting for interested investors to drive them forward. The technology industry is becoming particularly prominent across Latin America.
- Tourism: Without much need for explanation, Latin America is one of the world’s most coveted tourist destinations. Not only does the region feature picture-perfect sights like Machu Picchu and Cristo Redentor, but it also offers hidden, less touristed natural beauty—but it’s its people who make visitors want to return.
Which are the Primary Legal Structures in Latin America?
There are four primary types of companies throughout all of Central and South America. Between countries, it is possible to identify slight variations in characteristics, creation requirements, and operations. But the most prominent structures are:
- A Corporation (Sociedad Anónima – ‘S.A’)
- A Simplified Shares Company (Sociedad por Acciones Simplificadas – ‘S.A.S’
- A Limited Liability Company (Sociedad de Responsabilidad Limitada – ‘S.R.L or ‘LTDA’)
- A Branch Office of a Foreign Company (Sucursal de Sociedad Extranjera)
Where a jurisdiction permits doing so, creating a Simplified Shares Company is the ‘best’ legal structure under which to operate for most business applications.
The Incorporation Process: The Key Steps
Arguably, Latin America’s greatest selling point is how incredibly diverse it is as a region. However, this diversity also presents willing investors with variations in time periods and setup costs. The saving grace, though, is that the general procedural elements tend to be relatively similar.
It is highly recommended that businesses seek partnership with a local partner who can help facilitate its incorporation process. Not only is it important to ensure that the chosen legal entity reflects the activities of the business, but most legal constitutions also hold a world of fiscal benefits for particular types of legal entities and business operations. Assistance throughout the entirety of the formation process will prove most beneficial. Some of the more highly-valued services include:
- Completing the company name search
- Confirmation of the most appropriate legal structure
- Preparation of company bylaws
- Obtaining the official company books
- Registering with the local authorities
- Obtaining the company tax ID
- Opening a corporate bank account
Company Legal Compliance Requirements
Most Latin American jurisdictions require local entities to meet minimum statutory requirements. Similarly, to the types of legal structure, the statutory requirements carry slight variations between countries, but the basic few include:
- Appointment of a Legal Representative (‘Local Director’)–This person is the legal face of the company where governmental authorities are concerned and, in turn, is responsible for the legal operation and good standing of the company. In most cases, this person must be a national of the country or a foreign national with the right to live/work in the country.
- Register a legal/fiscal address–This is the legal address of the company and will be used for all official communication (including filing of taxes). This must be a physical address within the country.
- Tax declarations–Most legal entities within Latin America must file monthly and annual tax declarations with the national tax authority of the given jurisdiction.
Wherever Your Next Steps Lead, Take an Experienced Expansion Partner with You
There’s no shortage of investment and expansion opportunities in Latin America, but pursuing these opportunities can prove difficult without the right partner. Velocity Global has helped hundreds of organizations establish their presence in new markets all across the globe—and we can do the same for your organization in Latin America. Ready to establish your permanent presence and register your business in Latin America? Let’s talk.