Foreign investors can complete the process of company formation in El Salvador following the basic registration procedures that are mandatory for local businessmen as well. Usually, businessmen opt to register limited companies, such as the limited liability company or the joint stock company (the latter can listed on the stock exchange).
It is also possible to expand on the local market through a branch office. These company types have similar registration requirements, but the overall process for company incorporation in El Salvador will take longer in the case of a branch, for example.
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Main company registration steps in El Salvador
The process to open a company in El Salvador implies similar (yet not identical) steps for all the entities that we have mentioned above. After deciding on the most suitable business form (the decision relies on the available capital investors have, the size of the company, the business plans they have with it, etc.), the company’s representatives should complete the following:
- reserve a business name;
- prepare the registration file, containing a variety of documents, including the company’s statutory papers;
- submit the application file;
- open a bank account at a local commercial bank, assigned to the new legal entity;
- obtain business licenses;
- register for tax purposes.
For all the aspects presented in the list above, investors can rely on the professional services of our team of consultants in company formation in El Salvador.
The basics of opening a limited liability company in El Salvador
The limited liability company (LLC) is the most common way to engage in a business activity in El Salvador, just like in other jurisdictions as well, given that this entity is designed for the needs of small and medium sized companies, operating as private businesses.
The LLC provides limited liability against corporate debts to its founders and another advantage is that there is a clear legal distinction between the owners and the company itself, as the latter has its own legal personality. These attributes make this business form a secure way of doing business. Some of its basics traits are:
- in order to set up a company in El Salvador as an LLC at least 2 investors have to associate as the shareholders of the business;
- it is also necessary to appoint 1 director (the person must be a resident of El Salvador);
- the minimum share capital is $2,000;
- during the process of company incorporation in El Salvador, the shareholders will need to deposit only 5% of the capital;
- it can take around 4 weeks to set up the LLC.
What are the main obligations after the registration of a legal entity?
Once the company has gained legal recognition, its representatives must register the entity with several authorities. Many of these are in charge with employment related matters, such as the Ministry of Labour and the Salvadorian Institute of Social Security. The registration with these institutions should begin once the company hires the first employee.
Is it necessary to travel to El Salvador for opening a company?
No, foreign investors are not legally required to arrive to El Salvador to complete the registration process. If they want to personally handle the procedure or to supervise it, they can arrive here on a short-term basis, but they do not have this obligation.
The process of company formation in El Salvador can be completed by our team of consultants, who can provide full registration services through the power of attorney. The same rule applies during the process of opening a bank account.
If you want to know more on how to open a company in El Salvador, we invite you to get in touch with our team of specialists. You can receive up-to-date information on the investment law, corporate tax base, accounting obligations and many others.