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Payroll in Ecuador

Starting a Business in Ecuador: Complete Company Registration Guide

Business Opportunities in Ecuador

Ecuador is a coastal country located in South America. It has the 8th largest economy in Latin America, and agriculture, the oil industry, aquaculture, and mining mainly drive it. 26.1% of the labor force is involved in agriculture, contributing to 6.7% of the country’s GDP. 

The country is known as the world’s leading banana exporter. However, other than bananas, other agricultural products, like palm, cotton, sugar cane, coffee, corn, and rice, are abundant in Ecuador. Hence, any business related to these crops, like manufacturing jaggery sweet, coffee, food-related business, or fashion technology, can be profitable.

The oil industry contributes to around 40% of the country’s exports and helps maintain the trade balance positively. As a coastal country, Ecuador thrives in aquaculture, especially shrimp culture. Shrimp contributes around $3.06 billion, and canned fish contributes around $1.18 billion to the country’s exports. Mining has also contributed a significant part to the country’s economy. Ecuador, the 32nd largest gold producer in the world, has contributed over 21 tonnes of gold. It is also the 16th largest antimony producer in the world. Hence, all businesses related to these can bring success to any businessperson.

Benefits of Starting a Business in Ecuador

If you want to start a business in Ecuador, then you must know about the advantages of doing business in Ecuador:

Good economy

Ecuador has a good economy, per the Economic Commission for Latin America and the Caribbean. The catalysts behind it are known to be free trade zones and investment incentives provided by the government. These include no commercial barriers and tariffs with other Latin American countries like Peru, Bolivia, Venezuela, etc. Ecuador is also trying to build commercial relationships with these countries. Government incentives mean an easier way of setting up a business in Ecuador. Free trade zones mean a more liberalized business atmosphere that can bring success. Free trade zones also mean that investors can import machinery and raw materials and export semi or fully-finished processed items for their business without paying taxes. 

Welcoming environment for foreign investors

Ecuadorian government and law ensure no discrimination between local and foreign investors. They ensure that every investor is treated fairly and possesses the same rights as each other in the country. The law also promises freedom for entrepreneurship and promotes private investment to improve Ecuador’s economy. The government and law promote private investment by offering reduced capital exit tax, value-added tax, and income tax. 

Geographic location advantage

Ecuador is a coastal country in northern South America with direct access to the Pacific Ocean. This helps businesses with easy waterway logistics. Additionally, its location provides the country with a needed amount of daylight and perfect climate conditions for agriculture. That’s why any business related to agriculture prospers in Ecuador.

Extraordinary infrastructure

Being a coastal country, it has some of the best docks and ports. Its port system contains ten private docks and seven state ports. Besides these advanced ports, Ecuador has excellent road systems and airways. As per current statistics, the country is connected by 43197 km (26841 mi) of highways. They also have efficient national airlines – Ecuatoriana, Tame, and Saeta. These help logistics companies work smoother, helping businesses grow.

Requirements for Starting a Business in Ecuador

With the proper guidance, starting a business in Ecuador can be more accessible. Companies must be familiar with the correct procedures for setting up a business in Ecuador.

The documents, human resources, and other requirements to do business in Ecuador are –

  • Company name
  • Choosing the proper company structure
  • Written document of the company’s principal operations
  • If it’s the branch of an existing business, then its legal status 
  • For an existing company’s branch, a historical summary of the company, including the structure of the capital provided by shareholders
  • Other than their capital share, all shareholders’ name and other personal details
  • Names, personal, and professional details of the board of directors and other management employees
  • Registered address from where the company operations will commence
  • Official communication details of the company
  • Product or service details that will be the selling point for the company
  • If the settling company is part of an existing company, then past but latest financial details
  • If and when needed, analysis of the financial details
  • If the company has other branches or subsidiaries, their name and address details are required to start a business in Ecuador.

Types of Business Structures in Ecuador

There are mainly five legal business structures available in Ecuador. The business must choose the correct option from these during company incorporation in Ecuador.

Collective company (compañía en nombre colectivo)

Collective companies are quite common in Ecuador. It’s a fundamental type of company with no limit on minimum or maximum capital amount limit. This type of company does not fall under the jurisdiction of the Superintendence of Companies administration. It can have two or more members and must be a personal legal form. During the registration process, the businessperson must pay 50% of the capital they invest in their business. However, during company registration in Ecuador, it must be noted that a collective company cannot be a part of another existing company. 

Limited partnership and shareholder company (compañía en comandita simple y dividida por acciones)

Like collective companies, limited partnership and shareholder companies also don’t require a minimum capital amount as it doesn’t fall under the administration of the Superintendence of Companies. The hierarchy dictates that there can be one entity that will be the named partner. They will have all decisive responsibilities and control of the company. The others can only be silent partners liable for their company share. They can neither individually nor collectively have any control over the company. 

Limited liability company (compañía de responsabilidad limitada)

Limited liability companies should have a minimum of 2 and a maximum of 15 shareholders. Any new member or change in share of a member’s investment needs to be approved by all the company members. The minimum capital required to open a limited liability company in Ecuador is US $400. 

Anonymous company (compañía anónima)

Anonymous companies should have at least a minimum of 2 shareholders. There is no actual maximum limit to the number of shareholders. Additionally, when a shareholder is selling his share, buying more, or vending, they don’t need approval from the other shareholders. They also need to register the company under the Superintendence of Companies. The minimum capital required to open an anonymous company in Ecuador is $800.

Mixed company (compañía de economía mixta)

Mixed companies take elements from both private and public partnership companies. There are two shareholders: one will belong to the Ecuadorian government, and the other will be private. If the government share in the capital exceeds 50%, a director from the government’s side will be the president of all company shareholders. The company regulations are similar to that of an anonymous company, and this type of company has different tax regulations. 

Company Registration Process

There are rules and regulations one must follow for company registration in Ecuador. Following are the steps to incorporate a company in Ecuador –

Step 1

First, the investor needs to choose a name for their company. Having alternative names ready is always essential if the first choice is occupied.

Step 2

The second step of company registration in Ecuador is for the investor to elaborate on the company’s status with an attorney’s assistance. Then the necessary documents, like establishing required capital, Articles and Memorandum of Association, and the company constitution, will need to be notarized with the public notary to become a record in public deeds.

Step 3

All the documentation, including the company name, address, the company officials, including shareholders, and their details, need to be taken to the Superintendence of companies, where the company will then be registered under the Registro Mercantil or commercial register. This is a significant step in setting up a company in Ecuador.

Step 4

It’s essential to have a corporate bank account where the investor can deposit the capital amount to start a business in Ecuador. The documentation of that deposition is required for the registration process. Depending on the bank, the deposit amount can vary between $30 and $ 2000. Additionally, the investor will need to provide these to open a corporate bank account to conduct your business in Ecuador –

  • Signed acceptance of the bank’s online terms and conditions
  • Filled up and signed bank account application form
  • List of company shareholders and their details
  • Copy of the legal representative, mainly the General Manager’s appointment under the commercial register
  • If it’s the branch of an existing company, then the company’s past financial record
  • Signed bank account opening contract between the company and the bank
  • Certificate from the Superintendence of companies agreeing that the company’s obligations have been met
  • Copy of the legal representative, i.e., the General Manager’s ID
  • Copy of the company’s bylaws

Step 5

Once the company registration process in Ecuador has been completed under the commercial register, the investor will be handed the Registro Único de Contribuyentes or the National Taxpayers Register. Following this, the Superintendency of Companies will issue all the documents, including the authorization to dispose of the required capital. They will state that the company has been incorporated under the pertinent companies act. 

How Much Does it Cost to Incorporate a Company in Ecuador?

The total cost of incorporating a company in Ecuador depends on the type of company the investor wants to open. The investor can hire a lawyer. Completing the process through a lawyer costs about $500-900, along with the capital required for the specific type of company.

The average fee for every company-related engagement in Ecuador costs around $13950. This fee includes a legally registered office, corporate bank account, government registration fees, company secretary, and company incorporation. Company incorporation in Ecuador in the first year costs about $8450 and $1000 in the second year.

Are Foreigners in Ecuador on Certain Passes Allowed to Start a Business in Ecuador? 

Foreigners that are looking for a business to do in Ecuador need to possess one of the following visas –

  • Long-duration visa or Larga Duración – Non-immigrants seeking employment or doing business in Ecuador should apply for this visa. 
  • Indefinite visa or Tiempo Indeterminado – Foreigners who want to settle in Ecuador or stay for a long time for investment or business purposes should opt for this type of visa.
  • Visa 9 III or Visa Inversionista – This visa is especially suitable for businesspeople and foreign investors in Ecuador. However, the government will only give it on the assurance that the visa holder is to start a business in Ecuador. They must invest at least US $25,000 with a $500 increment on every additional dependent. This amount increases to US $30,000 when the investment goes into livestock, agriculture, or exporting merchandise. 
  • Temporary residency visa or Residencia Temporal – This visa type is perfect for foreigners who want to join the MERCOSUR organization. MERCOSUR members are Uruguay, Brazil, Bolivia, Paraguay, and Argentina. Venezuela was also a member, but their membership was revoked temporarily recently.
  • Permanent residency visa or Residencia Permanente – People who want to permanently settle down in the country should apply for this visa. These visa holders can invest and start a business in Ecuador.

Government Assistance for Foreign-owned Businesses 

The Ecuadorian government promotes foreign business, making it easier for foreign investors. This is done through tax exemptions, laws, and grants for starting a business in Ecuador. Such steps on the part of the government help reduce the risks of doing business in Ecuador.

  • The Ecuadorian government allows foreign investors to own 100% of their business, so it is optional for them to have an Ecuadorian partner.
  • The government has a law regarding Public-Private partnerships that provides incentives for foreign investors, like reduction of the capital exit tax, value-added tax, and income tax.
  • The government adopted Tax Fraud Prevention and The Organic Law of Production Incentives, which benefits some foreign investors by providing tax incentives on income tax rates and depreciation calculations.
  • There is no mandatory law that requires foreign investors to employ local workers.
  • Foreign IT providers don’t need to provide the government access to their source code or encryption. The government also doesn’t require them to store any data inside the country. Foreign IT companies can also transmit necessary data from the country outward and vice versa.

How Can Multiplier Help?

There are many requirements to do business in Ecuador. However, the most important is to have detailed knowledge of Ecuador’s laws and regulations. That’s where an EOR firm, like Multiplier, can help investors open their business in the country and also help run that business. As a result, Multiplier can speed up the complex process of starting and registering a new company while following local laws and regulations. 

As a trusted HR, payroll, and compliance solutions provider, Multiplier offers a comprehensive range of services to help businesses effectively manage their global workforce. From streamlining the onboarding process for new hires to handling payroll without the need to establish a subsidiary, Multiplier empowers businesses to expand their reach globally and efficiently recruit talent worldwide.

With a team of qualified professionals, Multiplier also provides day-to-day HR support, allowing businesses to focus on growing their company while leaving the administrative aspects to us. By partnering with Multiplier, businesses can mitigate the risk of costly penalties and legal issues, ensuring compliance with all relevant laws and regulations for a smooth and compliant operation.

Frequently Asked Questions

It takes about four months to complete the company registration process in Ecuador.

As per the World Bank’s Ease of Doing Business report, Ecuador ranks 129th among 190 countries, ranks 177th for the ease of starting a business, and 147th in paying taxes.

Ecuador provides double tax treaties with many countries worldwide, like Mexico, Brazil, China, Chile, and Argentina.

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