Company Formation in Latin America

For open-minded and entrepreneurial international investors looking to start a new venture overseas, Latin America is an inviting region to consider. Many of the traditionally conservative states that once preferred closed economies are now opening up. While protectionism dominated in the past, the success of countries like Chile and Peru—driven by a plethora of free trade deals—demonstrates the potential of entering the global economy.

This article provides a step-by-step guide to successful company formation for launching Latin American start-ups, covering key considerations, benefits, and strategies for expanding internationally and establishing a strong market presence in this dynamic region.

Why Latin America is a Prime Choice for International Expansion

For U.S.-focused businesses interested in nearshoring or friendshoring, Latin America stands out for a number of reasons. Time zones are rarely an issue, the business culture is closely aligned with that of the U.S. and Europe, and regional governments maintain stable, strong trade links across the Americas. Many countries also have a surplus of skilled, graduate-level talent looking to work with international companies.

Nearshoring and friendshoring refer to the practice of outsourcing production or services to a nearby country with diplomatic ties. This enables cost efficiencies in wages and operations while minimising risk to supply chains. Additionally, multiple countries in the region offer advantageous trade agreements, reducing or eliminating tariffs.

In recent years, many Latin American countries have made business incorporation simpler, with free trade zones designed to attract Foreign Direct Investment (FDI). While the region is more open to foreign businesses than ever, each country has specific regulations, making local expertise essential.

Entrepreneurs from markets like the USA or UK may be surprised to find that launching a Latin American start-up cannot always be done as quickly as company formation in their home countries; it’s not a region you can just breeze into. Working with established partners like the ConnectaVerse and Biz Latin Hub can help navigate legalities and bureaucratic processes, allowing businesses to focus on growth.

Choosing the Right Latin American Market for Your Business

Latin America is a large region with significant local variation. While the countries share much in common, they also have important differences that you should assess carefully before determining which suits your international expansion plans.

In North and Central America, Mexico is the biggest and most developed economy; however, this often means more competition and less bureaucratic flexibility. Panama and Costa Rica are notable for their extensive free zone systems, designed to attract foreign businesses, while Guatemala and El Salvador generally focus on manufacturing.

If you plan to provide services or operate in the knowledge economy, the more developed economies may be most suitable. Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay each boast a well-educated workforce and significant internal demand, with room for growth in the labour market.

To avoid dealing with foreign currency fluctuations, consider dollarised economies. Ecuador, Panama, and El Salvador use the US dollar directly, with El Salvador also accepting Bitcoin as a national currency. Belize, meanwhile, maintains a hard peg to the US dollar at a 2:1 ratio.

For international trade, countries like Chile and Peru are excellent bases due to their strong commitment to multiple free trade agreements. Panama, Paraguay, and Uruguay offer investor-friendly tax regimes, and the Caribbean region provides additional options.

4 Essential Entity Types for Company Formation in Latin America

Company formation in Latin America is a multi-step process, and one of the most crucial early decisions is selecting the appropriate company structure. The type of entity you choose will have significant implications for liability, taxation, and administrative requirements, which may differ substantially from structures in other jurisdictions.

Latin America offers several company types, each with unique characteristics and regulatory requirements. Below, we provide an overview of the most common entity types in the region to help you understand your options and make an informed decision.

1. Sociedad de Responsabilidad Limitada (SRL)

Similar to an LLC in other jurisdictions, the SRL structure accommodates between 1 and 50 shareholders. The company name must either describe the goods or services provided or include the name of one or more partners. Personal liability is limited to the value of shares held or capital invested.

2. Sociedad Anónima (SA)

The Sociedad Anónima, or public limited company, is another common option for company formation in Latin America. Each shareholder’s liability is limited to their capital contribution. These companies can sometimes be traded publicly, though this is not always the case.

3. Sociedad de Acciones Simplificada (SAS)

The SAS structure simplifies incorporation by reducing procedural requirements and costs, offering a flexible corporate structure. This model, often aimed at smaller businesses, allows for sole ownership and requires only a legal representative, a fiscal address, and no minimum capital investment.

4. Branch of a foreign company (Sucursal)

A foreign company may establish a branch in Latin America, which does not possess an independent legal status separate from the parent company. This option is ideal for large conglomerates seeking to retain brand consistency or integrate with existing internal processes.

NB: These are the entity types most commonly used by international investors, though Latin American company formation also includes additional structures typically suited to smaller operators, such as sole proprietorships.

Minimum Requirements for Company Formation in Latin America

To incorporate a business in Latin America, the following minimum requirements are generally needed:

A legally registered name for your entity,
At least one shareholder, who may be either an individual (natural person) or an entity (legal person),
A legal representative appointed within the company bylaws,
A registered fiscal address within the country, designated for official correspondence,
Defined business activities, corporate purpose, and primary operations,
Minimum initial capital to be registered.

These are the standard requirements for company formation across the region, though the incorporation process may involve additional steps and documentation depending on the specific circumstances and entity type. Seeking professional legal and business guidance is highly recommended to ensure regulatory compliance and facilitate a smooth formation process. Typically, one local representative is also required, who does not need to be a national but must reside within the country.

Important Tip: It’s advisable to have a preferred legal name and two alternative names prepared in case your primary choice is unavailable.

Step-by-Step Guide to Company Formation in Latin America

Before starting the company formation process, it’s essential to understand each step. This detailed company formation guide will help you navigate the system efficiently.

In Latin America, the process generally takes between two and sixteen weeks. Once you’ve gathered the required documents, follow these common steps:

1. Register the Company

Registration is usually completed with the local chamber of commerce and/or business office. If operating in a free trade zone, additional registration may be required.

2. Draft the Company Constitution or Bylaws

This is a crucial aspect to get right. In almost all countries, the company bylaws will inform how ongoing compliance is conducted. Future amendments to the bylaws are possible but may be time-consuming and bureaucratic.

3. Obtain a Local Tax Number

Known as an NIT (Número de Identificación Tributaria) or RUC (Registro Único de Contribuyentes), this is your unique tax registration number. Latin America emphasises tax transparency, so your tax records must be accessible for review. In some countries, large taxpayers may need an external auditor.

4. Make an Official Declaration with the Local Gazette (in some countries)

This requirement is a holdover from earlier practices when such publications were the primary form of official communication. It remains relevant in a few countries, particularly in the Southern Cone, where formal announcements may need to be published in one or more newspapers, gazettes, or official records—all well-equipped to handle this process.

5. Set up a Company Bank Account

Setting up a corporate bank account is more complex than a regular direct account. You will need to confirm who has access to the account, who can make withdrawals or payments, and authorise card use. Depending on the type of company and country, you may need to complete Know Your Customer (KYC) checks as well.

6. Supply UBO Information

In line with recent efforts to enhance transparency and promote open business, many Latin American countries now require Ultimate Beneficial Owner (UBO) registration. Several nations have established or are developing databases that record individuals with either a controlling interest or a significant shareholding in a company.

Important Tip: If your company has foreign shareholders, a Power of Attorney (POA), apostille process, and document translation may be required.

What’s Next: Compliance and International Business Expansion in Latin America

After setting up your company, it’s essential to focus on ongoing compliance requirements. You may need to retain an external auditor for annual financial reports, keep UBO details current, and, of course, follow your company’s bylaws. Proper groundwork makes doing business in Latin America significantly smoother, highlighting the importance of thorough due diligence from the start.

To allow yourself to really focus on your new start-up venture, partnering with a reliable business support team can be invaluable throughout your company’s lifecycle. The ConnectaVerse connects companies with trusted local partners, such as Biz Latin Hub, to handle complex bureaucratic tasks and ensure full compliance. With these experienced partners managing the details, you can focus on what you do best—growing your new business.