It is not too difficult to start a business in Ecuador. Many expatriates decide to create a small business in order to both earn an income and sometimes to stay longer in Ecuador if itâ€™s too difficult to meet the requirements for an investor or retirement visa. However, it is necessary to talk to a competent lawyer who has experience working with foreigners setting up a business in the particular city where the business will be located. A competent lawyer should explain all the steps involved in advance and should not require the lump fee paid in full before any action is taken, although itâ€™s customary to pay a partial advance to get the paperwork started.
A large incentive to creating a business in Ecuador is that foreigners are permitted to own 100% of an Ecuadorian business in most sectors. Luckily, you donâ€™t need a huge amount of money to start a small business, but you do need some, and a lot of creativity and patience. Expect in many cases to have to be in daily contact with your lawyer and to have small delays with all the municipalities. This is somewhat customary in Ecuador, but make sure your lawyer has a good reputation with expatriates and is managing everything properly.
What kinds of businesses can you start?
Many expatriates choose to start an export company and ship either natural resources like roses, or crafts made by artisans, to their country of origin. Regarding exports, those foreign companies that solely export Ecuadorian goods and do not own and operate a local facility, do not necessarily need to establish a business in Ecuador. However, if a foreigner does own a local facility, is involved with an Ecuadorian company in a joint venture, or ships goods to an Ecuadorian company that does not take ownership of the goods, the foreigner must establish a business legally. Either way, before embarking on an export business, consult a lawyer to make sure you are acting in accordance with the laws. Keep in mind as well that with certain types of visas it is illegal to earn money while in Ecuador.
Another popular company model is investing in real estate. In general, the most lucrative option in the real estate game is to buy a house on the coast near Salinas or MontaĂ±ita, or other places popular with expats, remodel the homes, and then sell them for profit. Ecuador is already a very attractive destination for retirees and designing properties with this in mind can be financially rewarding. Many other expatriates choose to open restaurants, hotels, bed and breakfasts or small shops. Whichever business model you choose, the first step of course is to create a business legally.
How to start a business
In order to start a company there must be either an Ecuadorian partner involved, or a foreign partner with a current visa. The process for a small business takes about two months and costs $1,500- 2,000 and requires clarity about what operations the company will perform. Starting a larger company, or establishing a branch in Ecuador of a pre-existing foreign company, is a bit more complicated and costs more money.
Most types of companies need to be registered with, and are regulated by, the Superintendence of Companies which is governed by the Companies Law. Typically a deed of incorporation, company by-laws, and proof of tax payment, along with various other forms depending on the type of business, must be submitted to the Superintendence of Companies. Once a company is officially incorporated, it must file a return with the Superintendence of Companies annually which includes financial statements, and reports by the external auditors, the legal representative, and the corporate controller. In addition, public companies must publish their financial statements in a local newspaper twice per year.
Steps for starting a business
In general, the process of beginning a business looks a little like this:
One should hire a lawyer to prepare the minutes of incorporation which should only take one day and cost $500-900. These minutes should include the constituting contract, articles of incorporation and the bylaws of the company and the formation of capital. These documents must be signed by the lawyer and notarized by a third party.
The next step is to reserve the company name at the Superintendent of Companies (Superintendencia de CompaĂ±Ăas, URL: www.supercias.gob.ec). This is free of charge, but have a couple of different names in mind for your company as Ecuadorian law requires that a businessâ€™ name not be similar to that of an existing company. The foreigner should then deposit 50 percent of paid-in capital into a bank account set up under the name of the company.
After the notary has notarized the bylaws of the company and the charter of incorporation the lawyer needs to present these documents to the Superintendent of Companies for approval. This step can take up to a week and the notary normally charges about 0.2 percent of the capital and around $300 for the stamp duty. The company must then publish an abstract of the charter in a local daily newspaper and then inscribe the charter and resolutions, and the names of the legal representative in the Mercantile Registry.
Once those steps are finished, the company must apply for the Registro Ăšnico de Contribuyentes, print invoices and VAT forms at an authorized printing shop, and sign up at the Instituto Ecuatoriano de Seguridad Social (IESS) to obtain approval of payroll forms at IESS and get issued an employerâ€™s identification number. Employees must all sign contracts with the company and the contracts must be registered with the Ministry of Labor to prevent exploitation of employees.
The municipality will then inspect everything and make sure everything is in order which can take up to a month. Once the municipality has finished with their inspection, the foreigner must obtain a commercial patent for the company and then begin working.
Here are some related tips to help plan your trip to Ecuador: Playas, Safety, Puerto El Morro, Pink Iguana, Marine Life - GalĂˇpagos, Lava Heron, Holidays and Fiestas, The GalĂˇpagos Fishing War, Punta Suarez and Tourism in Mainland Ecuador.