Looking to establish a company in Ecuador? Sometimes, it’s difficult to find reliable information. Much of the online information is incomplete or hard to understand, and it’s mostly in Spanish. Company Formation Ecuador: Discover the main cities in Ecuador as you decide whether to start a business. Setting up a company in Ecuador may present some challenges, but these can be easily overcome by working with local partners who have experience doing business in Ecuador. Compared to other countries in the region, corporate law in Ecuador is relatively straightforward. With proper research and strategic thinking, companies in various commercial sectors can succeed. With that in mind, we have prepared a legal summary of everything you need to know to incorporate a company in Ecuador. Crucially, all the information is provided in English. Before diving into the key steps of company formation in Ecuador, let’s discuss some characteristics that explain why this is a favorable place to do business. Ecuador’s economy has shown positive performance in recent years and continues to attract significant foreign investment. It ranks as the eighth largest economy among Latin American countries, with a gross domestic product (GDP) of $106 million in 2021 (all figures in USD). Notably, it is also a leading destination for foreign direct investment (FDI) in the region, with inflows exceeding $630 million in 2021. However, this amount represents a decline compared to 2020, which recorded FDI inflows of $1 billion! How to Establish a Company in Ecuador: Key Details Here is some basic information that will be helpful when establishing a company in Ecuador. In Ecuador, 100% foreign ownership is allowed, so you don’t need an Ecuadorian partner. The minimum number of shareholders is two (2), and they can be natural persons, legal entities, or a combination of both. All legal entities in Ecuador require a President or Chairman and a General Manager or CEO. They must be Ecuadorian or a foreigner with a valid visa. The President and the CEO can act as the legal representatives, individually or together. Limited liability and unlimited liability companies are the most common entity types in Ecuador. Minimum capital requirements are USD$400 for limited liability companies and USD$800 for unlimited liability companies. All legal entities in Ecuador need to have a fiscal address. The official currency in Ecuador is the US Dollar. Read on for a summary of the company formation process in Ecuador, broken down into key steps. 6 Steps to Establish/Incorporate a Company in Ecuador. Incorporate a company in Ecuador Company Formation Process Investors looking to establish a company in Ecuador can choose between setting up limited liability or unlimited liability companies. This can be done online or by following the traditional “manual” process. We recommend using the online process as it is easier and faster, transferring a significant amount of the workload to the authorities. Steps to Follow to Establish Your Business in Ecuador The first step toward incorporating a company is for the shareholders to grant power of attorney to their legal representative, authorizing them to set up the company in Ecuador on their behalf. Learn about the different legal structures available for company formation in Ecuador. Incorporate the company in Ecuador. The legal representative, typically an attorney, will then initiate the setup process. If using the online process, the legal representative will reserve the company name and complete the required documentation, which includes information about the company’s fiscal/legal address, President, General Manager, shareholders’ names, and their respective holdings in the company. This application also requires completed company bylaws, the corporate purpose, and a description of the company’s activities. Once the application is submitted, a public notary will review and approve it. Subsequently, the President, General Manager, and the shareholders must sign the deed and the relevant documents. The notary will then send the deeds, documents, and all the information to the Mercantile Registry for review. If the documents are approved, the Mercantile Registry will proceed to register the company. This is the final step in establishing a company in Ecuador. Once the company is successfully set up, the tax authority will issue a tax identification number (RUC) for the company. 4 Additional Obligations to Establish a Company in Ecuador At this point, the company is legally incorporated in Ecuador. However, before commencing commercial activities, there are additional obligations that must be met: Step 1: Open a corporate bank account and deposit the company’s minimum capital. Step 2: Create an account with the ‘Superintendencia de CompañÃas’. Step 3: Register the company with the Social Security Agency (IESS). Step 4: Pay the municipal patent and obtain the license for economic activities. Common Questions When Establishing a Company in Ecuador Here are answers to some commonly asked questions we receive from our clients about company formation in Ecuador. 1. Can a foreigner own a business in Ecuador? Yes, a business can be 100% foreign-owned by either legal entities or individuals. 2. How long does it take to register a company in Ecuador? Registering a company in Ecuador takes approximately 5 weeks. 3. What does ‘S.A.S.’ stand for in a company name in Ecuador? ‘S.A.S.’ stands for “Sociedad por acciones Simplificada,” which translates to “Joint Stock Company.” It is a type of commercial company with its own legal personality and assets separate from those of its owners. Shareholders have limited liability, only up to the amount of their respective contributions toward the company’s shares. Shareholders are not liable for labor, tax, or any other obligations incurred by the company beyond their contribution, unless the company’s legal personality is rendered unenforceable. 4. What does ‘SRL’ stand for in a company name in Ecuador? ‘SRL’ stands for “Sociedad de Responsabilidad Limitada,” which translates to “Limited Liability Company” in English. This legal entity operates independently from its shareholders, offering them limited liability. SRL companies are popular due to their simplified requirements for business structures. 5. Which entity types offer Limited Liability in Ecuador? In Ecuador, the “S.R.L” (Sociedad de Responsabilidad Limitada) is a limited liability entity type. 6. What are the main differences between S.A.S and S.R.L in Ecuador? A. Number of shareholders: A SAS can have one or an unlimited number of shareholders, while an S.R.L must have at least two partners and a maximum of fifteen. B. Shareholders’ General Meeting: A SAS has flexibility in the organizational structure, but the General Assembly of Shareholders is commonly used, with resolutions adopted by a favorable vote of the majority of shareholders present. In contrast, an S.R.L. requires a mandatory General Meeting of Partners, with resolutions adopted by an absolute majority of attendees. C. Board of directors: A SAS is not required to have a board of directors, but it can be established with one or more administrators according to the bylaws. In an S.R.L., a board of directors is mandatory and can consist of two or more administrators. D. Legal representative: In a SAS, shareholders can remove or replace the legal representative without invoking any statutory or legal causes. In an S.R.L., legal representatives have certain legal obligations and may be removed or revoked from their positions for non-compliance. E. Duration: Both SAS and S.R.L can have an unlimited duration. F. Shareholders’ responsibility: In both entities, shareholders are jointly and severally liable for the company’s debts up to the amount of their contributions. However, in a SAS, shareholders can establish unlimited liability in the company’s bylaws. G. Social capital: SAS has no minimum capital requirement for incorporation, while an S.R.L. requires a minimum capital. H. Regulation: SAS is subject to easier regulation compared to an S.R.L., as it has fewer formalization and disclosure requirements. Do You Want to Establish a Company in Ecuador? If you have any questions or inquiries about setting up a company in Ecuador, our local Ecuadorian business experts have prepared a company formation presentation. We hope it helps! If you…
