How to start a business in Chile II : Choosing a company structure

Choosing a company structure

After obtaining the RUT it is time to define the type of company you want to create. The one chosen will mainly depend on the business strategy, the amount of capital to be brought in and other factors.  It should also be recalled that these companies have different obligations regarding tax compliance; therefore it is recommended to get advised by a specialist accountant. Here we summarize the four types of company which can be used as a vehicle for foreign investment:

Individual Limited Liability Company

As an Empresa Individual de Responsabilidad Limitada or E.I.R.L (Individual Limited Liability Company) any individual can acquire the status of a legal entity. Its assets distinct from those of its owner, it does not require the participation of a third party and it has a commercial nature. These companies are subject to the Commercial Code and can undertake any type of civil and commercial activity, except those reserved by law for corporations.

It is the most used type of company for Businessmen who want to start a business without partners and be able to make all the decisions but with the assets are limited to the amount specified in their deeds and the owner is answerable only with personal goods up to the capital contributed to the company.

The company’s name must include that of its founder or an invented name that refers to its purpose and must also include the words “Empresa Individual de Responsabilidad Limitada” or “E.I.R.L.” The company’s purpose must indicate the nature of its activities and the specific sector in which it will operate.

Limited Liability Company

It is the type of company most used between partners who have a trusted relationship and are looking for few administrative formalities. Partners, in this case, can be a natural or legal person, national or foreigner, and their liability is limited to the amount of his capital contribution. They cannot be less than two or more than 50.

In these companies administration and control of these companies can be freely determined by their partners.

The name of the company may contain the name of one or more partners or a reference to its purpose and must include the word “Limitada”.

The general system of taxation is applied to these companies, being taxed with First Class taxed, global complementary or additional, which are determined through accounting.  Regarding VAT, the regime includes issuing sales documents and the obligation of keeping a sales and purchases book.

Corporation (S.A.)

It is a type of company widely used by big companies and corporations. Its main characteristic is that formed by a common fund provided by shareholders who are responsible only for their respective capital contributions and is administered by a board of directors, with at least three members who are essentially revocable, which elects a manager and the board’s chair. Decisions are taken by majority vote.

A corporation’s starting capital must be fully subscribed and paid in within a period of three years and, if this does not occur, its capital is automatically reduced to the amount effectively subscribed and paid in.

There are two types of Corporation:

  • Public: These are those corporations whose stock is publicly traded and have at least 500 shareholders or at least 10% of their subscribed capital is held by a minimum of 100 shareholders. The companies are subject to supervision by the Superintendencia de Valores y Seguros, SVS (Securities and Insurance Superintendency) and must be on the National Securities Register.
  • Close: These are those corporations that do not fall within the above definition but may voluntarily submit to the norms applying to public corporations.

A corporation is formed through a public deed that must contain information which includes the identity of all its shareholders, its specific purposes, duration, capital, forms of administration and the way in which profits will be distributed. The name of the company must contain the word “Sociedad Anónima” or its abbreviation “S.A”.

The corporation must subsequently register with the Companies’ Registry Office corresponding to its domicile and publish an extract of its deed in the Diario Oficial (Official Gazette). Both these formalities must be completed within 60 days of the date of the deed.

Stock Company (SpA)

It is a type of corporation. These companies can be formed by one or more persons; therefore if you do not have partners you can form it individually.  As in the S.A, participation in the capital is represented by shares, however, the SpA gives more freedom to the contracting parties, removing the main difficulties and problems S.A posses, especially the ones regarding its creation and administration, being this way cheaper.

SpAs are governed by the norms applying to close corporations and, in a requirement that is practically the same as for a corporation, must keep a shareholders’ register.

Stock companies are founded through a public deed or a private document signed by the participants in which case their signatures must be verified by a public notary who legalizes the document. This must be registered with the Companies’ Registry Office corresponding to their domicile and be published once in the Diario Oficial (Official Gazette) within a month of the date of the signing.