Limited Liability Corporation, Ltd or Corporation – Incorporation in Costa Rica

If you want to business in Costa Rica, the first decision to take is what kind of corporation structure is better for you.

 

There are commonly two options, Corporation and Limited Liability (limitada):

 

Corporation or S.A: is the most common structure used in Costa Rica, and its most characteristics aspects are:

a.       Has a Board of Directors, with at least three members : President, Treasurer and Secretary.

b.      Is needed to have a Fiscal or Controller, cant be a Board of Director member or shareholders.

c.       The capital is represented by shares, is possible to create different kind of shares, with different rights(access to profits but not to vote for example). For example is the company needed funds is possible to sell the shares in the primary stock market.

it was create for large companies, where the BOD takes decisions according with the Shareholder instructions. 

 

Costa Rican LLC `s characterization:

  

Social Patrimony: represented by quotas instead of shares (like in the S.A.). They cannot be endorsed and could only be transferred following a formal and pre-established procedure. These transferences shall be registered in the Book of Partners.

Transference of quotas: there shall be an express, previous and unanimous authorization from the partners, unless there is a clause in the Corporations bylaws authorizing the requirement of only three fourths (3/4) of the social patrimony. If there is no consent, partners will have the right to offer for acquiring those quotas (preferential right). If none of them offer to acquire those quotas, they could be transferred to a third party.

 

The main differences between the shares from the S.A. and the quotas or equity participation in the LLC are the following:

 

1. LLC`s: The partner condition requires the approval by the rest of partners, because it is oriented towards the personal characteristics of the partner.

2. LLC`s: the participation certificate cannot be transferred by endorsement, it isn’t created for its circulation.

 

Quotas: cannot be expressed in foreign currency, but this is not a limitation for business.

 

Capital Calls: The Corporation could be able to increase the capital or patrimony. The procedure for the capital call shall be described and explained in the Corporation bylaws. The partners shall have preferred rights for increasing the patrimony and within a period of 15 days shall cancel that amount, if not then the rest of the partners could subscribe the correspondent capital percentage.

 

Administration: They are administered by one or two managers (that can be partners or third parties). Those positions can be revoked by a relative majority of votes. The bylaws define the faculties of the Managers.-

 

The LLC was created for small and middle size business, where usually the (a sole) shareholder is the same who decide, due this is not necessary the controller.-

 

So, depending what is your business idea or the purposes to create the corporation, you first should take in consideration which one is better.   in both cases the expenses and legal fees are the same. Regarding the taxes regulations in front Tax Administration is the same. 

 

 

 

Posted in English.

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