Uruguay stands out for its favorable business climate, attracting entrepreneurs and companies from all over the world. It is crucial to understand the different types of companies that can be established in the country. This article explores the options available, helping interested parties to make informed decisions when opening a business in Uruguay.
What are the requirements to create a company in Uruguay?
To establish a company in Uruguay, the requirements vary according to the type of company. In general, they include:
- Be of legal age (18 years or older).
- Present a valid identity document in Uruguay (identity card or passport for foreigners).
- Determine the type of company (Unipersonal, S.R.L., S.A., etc.).
- Register the company with relevant entities such as the General Tax Directorate (DGI) and the Social Security Bank (BPS).
- Comply with the specific requirements for each type of company, such as minimum capital and legal documentation.
What are the steps I must follow to start a company in Uruguay?
The steps to create a company in Uruguay also depend on the type of company, but in general terms they are:
- Selection of the type of company: Choose the most appropriate business structure (Sole Proprietorship, S.R.L., S.A., etc.).
- Legal Registration: Register the company with the DGI and the BPS.
- Legal Documentation: Prepare and submit the necessary legal documents, such as bylaws, articles of incorporation, etc.
- Compliance with Specific Requirements: Depending on the type of company, it may be necessary to comply with additional requirements, such as capital contributions, social security, among others.
- Labor Registration: If hiring employees, register the company with the Ministry of Labor and Social Security and comply with applicable labor regulations.
Each type of company has a specific set of steps and requirements that must be carefully followed to ensure effective legal and operational compliance.
Types of Companies in the Uruguayan legal system
Sociedad Anónima (S.A.) in Uruguay
A Sociedad Anónima (S.A.) in Uruguay is a business structure where the capital is divided into shares. Shareholders limit their liability to the capital contributed.
Advantages:
- Limited liability for shareholders.
- Ability to attract investment.
- Flexibility in the transfer of shares.
Disadvantages:
- Higher cost and complexity in its constitution.
- Requires compliance with administrative formalities.
Requirements:
- At least two shareholders.
- Minimum capital established by law.
Formalities:
- Registration with entities such as DGI, BPS, and compliance with notarial and publication formalities.
For more detailed information, please refer to our guide on Uruguayan Corporations.
Limited Liability Company (S.R.L.) in Uruguay
A Limited Liability Company (S.R.L.) is a common option for small and medium-sized companies in Uruguay, where the liability of the partners is limited to their capital contribution.
Advantages:
- Protection of members’ personal assets.
- Requires less initial capital compared to S.A.’s.
Disadvantages:
- Limitations for the transfer of corporate shares.
- Restrictions on the increase of corporate capital.
Requirements:
- Between 2 and 50 members.
- Comply with registration and administration formalities.
Simplified Joint Stock Company (S.A.S.)
The Simplified Joint Stock Company (S.A.S.) in Uruguay represents a modern option for entrepreneurs, combining flexibility with a simplified incorporation and administration process. This business form is ideal for small businesses and allows for agile management. Although it offers advantages such as fewer restrictions in its structure and management, it may face certain limitations in terms of credit and financing compared to more traditional structures. The S.A.S. is well adapted to the needs of emerging and dynamic businesses.
Advantages:
- Flexibility in structure and administration.
- Fewer restrictions and formalities compared to S.A. or S.R.L.
- Easier creation and management process, ideal for startups and individual ventures.
Disadvantages:
- May face limitations in access to credit and financing.
- Less recognition and trust in the market compared to more traditional structures.
Requirements:
- Less demanding than S.A. or S.R.L., facilitating the creation and operation.
Formalities:
- Simplified registration with entities such as the DGI and the BPS, and fewer administrative formalities.
For more information, please refer to our complete guide on the creation of simplified joint stock companies in Uruguay.
Sole proprietorships
The Sole Proprietorship in Uruguay is a form of business managed by a single individual. It is a popular choice for entrepreneurs due to its simple structure and minimal bureaucratic requirements.
Advantages:
- Reduced bureaucracy for opening and closing.
- Individual and personal management.
- Few legal restrictions.
- Flexibility in the choice of business line.
Disadvantages:
- Unlimited liability of the owner for debts and obligations.
- Limitations on the transfer and sale of the company.
- More restricted capital raising.
Requirements:
- Age of majority and valid identity document.
- Verifiable fiscal address.
Formalities:
- Registration with the DGI.
- Registration with the BPS and MTSS.
- Possibility of affiliation to a mutual insurance company after registration with the BPS.
For detailed information visit our guide on sole proprietorship in Uruguay.
Comparison of corporate structures: SA, SRL and SAS
We point out the main differences between the legal regulation of Corporations (hereinafter, “SA”), Limited Liability Companies (hereinafter, “SRL”) and the new Simplified Corporations (hereinafter, “SAS”) incorporated by the recent Law No. 19,820, “Law for the Promotion of Entrepreneurship”.
The objective is for the entrepreneur to know, comparatively, the main characteristics of each social type in order to choose the one that best suits the circumstances and needs of his business project.
Object of the company.
The bylaws of the corporation and of the LLC must specifically establish the activities to be carried out by the corporation. Although in the case of the corporation, it is generally chosen to establish a broad purpose (known as omnibus purpose) so that the company can carry out almost any activity, in practice it is often necessary to amend the bylaws to include specific activities. The SAS will not face this problem since it may define in its articles of incorporation an indeterminate object: “any lawful activity”.
2. Deadline.
In both the SAS and the SA, a term of more than 30 years can be established. On the other hand, in the case of an LLC, the term cannot exceed 30 years, without prejudice to the permitted extensions.
3. Number of Partners or Shareholders.
The corporation and the limited liability company require two or more individuals or legal entities for their incorporation. In the SAS, on the other hand, the Law allows a single shareholder to incorporate the company and to remain in this form throughout the life of the company. In the case of the LLC, in addition, it is required that at least two partners (and never more than fifty) remain throughout the life of the legal entity. On the other hand, in the corporation, after its incorporation, the company may remain with only one shareholder indefinitely.
4. Voting per share or quota.
In both the LLC and the corporation, each share or quota has the right to one vote. On the other hand, in the SAS, singular or multiple voting may be attributed to the different classes of shares.
5. Transfer of quotas or shares.
In SAS it is possible to foresee by the bylaws restrictions on the sale of shares that even imply the prohibition of sale for a maximum period of 10 years. On the other hand: (i) in the joint stock company, the transfer of shares is free, notwithstanding the fact that restrictions that do not imply a prohibition to sell may be provided for by the bylaws or by means of share syndication agreements; (ii) in the LLC, the transfer of quotas is free among the partners; however, in order to transfer to third parties, the approval of 75% of the capital is required for companies with more than 5 partners and unanimity in the case of companies with less than 5 partners, foreseeing the need to resort to a judicial process to question the causes of opposition of the partners.
6. Integration of Contributions.
Regarding the integration of the contributions agreed upon by the partners: (i) in the corporation, at the time of incorporation, at least 25% of the authorized capital must be paid in and the remaining 50% must be subscribed. No deadline is established for integrating 100% of the contractual capital; (ii) in the LLC, each partner must subscribe at least 50% of its contribution in cash and 100% of the contributions in kind at the time of signing the articles of incorporation and have a term of 2 years to contribute 100% of the remaining capital in cash; (iii) in the case of SAS, each shareholder must integrate 10% of its contribution in cash and 100% of the contributions in kind at the time of incorporation of the company and will have a period of 2 years to contribute the rest.
7. Issue premiums for the issuance of quotas or shares.
An important innovation of the SAS is that it allows different premiums to be established in the same share issue. The above is expressly prohibited for the SA and the SRL.
8. Place of the meeting of the Assembly of partners or stockholders.
Meetings of partners or shareholders in the corporation and in the LLC must be held at the domicile of the corporation. On the other hand, in SAS, shareholders’ meetings may be held at the company’s domicile or at any other place that allows shareholders to participate considering the necessary quorums.
9. Exclusion of the partner or shareholder.
Regarding the possibility of excluding a partner or shareholder, there is no provision for the possibility of excluding shareholders of S.A. In the SRL there is the possibility of excluding partners in the event of serious noncompliance with their obligations. In the SAS it is possible to establish in the bylaws the exclusion of the minority shareholder (holder of up to 15% of the issued shares).
10. Liability of partners or shareholders for labor and tax obligations.
In the SAS and the SA the liability of the shareholders is limited to the contribution without exceptions (provided there is no fraud or abuse). In the LLC, the liability of the partners covers the debts of a salary nature, those derived from IRAE and Special Social Security Contributions.
11. Availability of partner agreements to the Company.
In the LLC, the partners’ agreements are not enforceable against the partnership. In the corporation, provided that certain requirements are met, the agreements are enforceable (delivery to the corporation of a copy with certified signatures, registration in the National Registry of Commerce, annotation in the share certificates). In the SAS, the agreements that are deposited in the offices where the corporate administration operates, will be enforceable against the company, which must control their compliance.
12. Communication of holders and beneficial owners to the BCU.
All three types of companies are required to report the holders and beneficial owners of the shares to the BCU. Only LLCs are exempted from this obligation when all their partners and beneficial owners are individuals.
13. Public offering of shares.
Only corporations may make public offerings of their shares.
14. Issuance of Negotiable Obligations.
Both the SA and the SAS may issue negotiable obligations, but not the SRL.
15. Control of the Internal Audit of the Nation (AIN).
It is not within the authority of the NIA to exercise control over LLCs. On the other hand, the corporation is subject to their control from the moment of its incorporation. For SAS, it was established that the AIN will control them only when their annual income exceeds 37,500,000 UI.
16. Publication of the constitution and social reforms.
The regulation of the SAS, unlike those of the S.A. and SRL that do require them, does not require the publication of the incorporation and amendments of the company.
17. Tax treatment.
The tax treatment of each type of company is as follows: (i) the corporation pays IRAE according to actual accounting (25% of net Uruguayan source income), ICOSA (approximately USD 500 per year); (ii) the LLC pays IRAE and may choose between real accounting or the fictitious regime when its annual income is less than UI 4,000,000; it does not pay ICOSA; (iii) the SAS pays IRAE and may choose between real accounting or the fictitious regime when its annual income is less than 4,000,000 UI and it does not pay ICOSA.
Conclusion
In conclusion, Uruguay offers a diverse and adaptable business environment, with various options of legal structures to meet different business needs and objectives. From the flexibility of a Sole Proprietorship to the formality of a Corporation, each type of company has its unique advantages and disadvantages. The choice depends on factors such as the size of the business, the need for capital, the level of responsibility desired and management preference. A detailed understanding of these options will facilitate informed decision making, which is crucial for business success in Uruguay.
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