Although it can lead to profitable new business relationships, setting up a Paraguay subsidiary is not without challenges. Several matters must be completed, from setting up payroll to deciding which supplemental benefits to provide employees. On top of that, you’ll have to learn and follow Paraguay’s subsidiary laws to stay compliant.
Luckily, G-P offers an alternative. As a global EOR, companies can leverage our global entity infrastructure and begin hiring in a fraction of the time. We assure employment compliance and manage the entire employee lifecycle, including hiring new talent for your team, streamlining payroll, and making sure your professionals get the right compensation and benefits.
How to set up a Paraguay subsidiary
Before setting up a Paraguay subsidiary, you can make the process easier by considering a few important factors. Start by deciding on a location for your office space. Paraguay’s subsidiary laws can vary by region or city, so it’s essential to find a good place that’s friendly to international incorporations. If you’re not sure which place is best, consider meeting with a consultant or another third party who can help guide you.
Next, it’s important to define the activities that will be conducted in the country, as this can influence the legal form of the new company. Paraguay has different subsidiary options, such as Sociedad Anónima or joint stock company, Sociedad de Responsabilidad Limitada or limited liability company (LLC), and branch office, among others. Each one has unique restrictions and different incorporation requirements.
Most business choose the LLC. The steps to incorporate an LLC are the following:
- Appointing a local legal representative as General Manager of the new company. Non-nationals can be appointed as managers; however, it is required to obtain a permanent residence first for this purpose, as well as a Paraguayan identity card.
- Securing an address/office service provider, since this is a mandatory requirement for the establishment of the company.
- Acquiring notarized and apostilled documents from the new company’s shareholders. These include certificates of registration, articles of association, tax registrations, and powers of attorneys, among others. Some of these documents need to be locally notarized and registered with the Paraguayan Public Registry prior to the filing for the incorporation.
- Drafting, executing, and notarizing the company by-laws and incorporation documents.
- Paying, at least 50% of the new company’s authorized capital to the Banco Nacional de Fomentos (BNF).
- Filing all documentation along with proof of payment of the company’s capital with the Paraguayan Public Registry.
Once the entity has been fully registered, you must immediately file a beneficial ownership declaration along with documentation related to all shareholders and all the way up in the ownership chain until the corresponding natural person is identified. Bear in mind that all this documentation must be notarized, apostilled, and translated into the Spanish language. Additionally, tax, social security, and labor registrations are required upon incorporation, as well as the opening of a local bank account.
Paraguay subsidiary laws
Paraguay subsidiary laws can change depending on the type of entity you choose. For example, LLCs need to have at least 2 shareholders and at least 1 manager who should preferably be a local.
There are no minimum capital requirements. Your company’s capital should get divided into nominal quotas of 1 Paraguayan guaraní. However, it is recommended to have an authorized capital according to your company’s operations. Once 50% of the authorized capital is deposited to the BNF, it will remain “frozen” until the entity is fully registered, and a bank account is opened.
Keep in mind that it usually takes 12 to 16 weeks for an LLC to be fully registered once all the shareholders’ documentation has been gathered. Corporate governance in this country is also very important. Subsidiary laws in Paraguay include an extensive amount of maintenance for LLCs, including the preparation and filing of financial statements and the manager’s resolution to approve them, in addition to the annual beneficial ownership information confirmation. Noncompliance with these obligations may result in penalties and fines for your Paraguayan subsidiary.
Benefits of setting up a Paraguay subsidiary
Setting up a subsidiary in Paraguay offers several benefits. Once the lengthy setup process has been completed, your company will be ready to start hiring talented employees.
Also, an LLC operates independently from the parent company. This arrangement can protect the parent company from any losses or litigation. Plus, it allows the subsidiary to create its own structure that fits Paraguay’s culture and workplace practices.
Other important considerations
Before setting up a subsidiary in Paraguay, consider the amount of time and resources it’ll take. It is possible that someone from your company will need to learn every aspect of Paraguay’s subsidiary laws or invest significant amounts of money to hire professional counsel to assist with the setup and maintenance of the Paraguayan subsidiary.
However, G-P can take the hassle out of setting up a subsidiary by hiring employees on your behalf so that you can start working in minutes not months. When you work with G-P, we will manage compliance so that you can stay focused on growing your company in a new location.
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