Establishing an Ecuador subsidiary is key to beginning operations in the country. You need a subsidiary to run your company and handle important tasks such as hiring employees, starting payroll, and giving out benefits and compensation.
However, setting up an Ecuador subsidiary is not without challenges. Depending on the type of entity, the process can be lengthy and will require fees along the way.
As a global EOR, we enable companies to bypass this requirement. With us, you can start working in Ecuador in minutes, not months. We take on all matters of employment compliance and hire employees on your behalf, add them to an existing payroll, and ensure that they’re receiving the right compensation and benefits.
How to set up an Ecuador subsidiary
Establishing an Ecuador subsidiary is often a time-consuming and tricky process. You should first define your business goals and choose a location for your company since different regions may have their own regulations.
Employers have different types of legal forms available in Ecuador. These include Sociedad Anónima or corporation, Sociedad de Acciones Simplificada or simplified stock corporation, and Sociedad de responsabilidad limitada or limited liability company (LLC), among others.
Incorporating any company in Ecuador is a challenging process that can cost a significant amount of time and money even before the setup is complete. Most businesses choose an LLC, and the incorporation process includes the following steps:
- Appointing a local legal representative as General Manager and President of the new company. International workers can be appointed as managers; however, a visa is required for this purpose and may be subject to personal tax liabilities.
- Obtaining an address/office service provider, as this is a mandatory requirement for the establishment of the company.
- Drafting the new company’s bylaws, along with additional incorporation documentation that must be prepared by a local attorney.
- Securing a name reservation with the Superintendence of Companies and Mercantile Registry.
- Obtaining all notarized and apostilled documentation of the parent company. Documents in other languages must be translated to Spanish by a certified translator.
- Executing the bylaws, incorporating deed, and providing all incorporation documentation to an Ecuadorian public notary.
- Registering the incorporation deed and all corresponding documentation with the Superintendence of Companies and Mercantile Registry.
- Opening a bank account and depositing the minimum capital.
Once the entity has been fully registered, a local tax ID number must be obtained, along with a municipal tax number. Additionally, your company must be enrolled with the social security authorities and obtain the corresponding local licensing, which may include a municipal patent, depending on the location of your company. After the registration, your company’s office space will be subject to an inspection from the local Fire Department.
Ecuador subsidiary laws
Many companies choose to incorporate as an LLC because the related Ecuador subsidiary laws are typically friendly to international investment. LLCs must have at least 2 members, but no more than 15. Minimum share capital requirements are at least USD 400, and at least 50% of your capital must be paid-in at the time of formation. However, if your company intends to sponsor visas, the minimum suggested capital is USD 12,500.
As mentioned above, you must have a legal representative who can help you comply with Ecuador’s subsidiary laws and represent your company with all corresponding authorities. Every January, your company’s attorney must file a list of the international companies that are partners or shareholders of your company to the Superintendent of Companies.
This list must include name, nationality, address, and notarized copies of the incorporation certificates of the shareholders. In addition, ultimate beneficial owner legislation has been put in place in this country, and all international companies will have to disclose their ownership structure all the way up to a natural person or a public company and provide the corresponding notarized and apostilled documentation to prove it. The natural persons considered as beneficial owners must disclose personal information such as name, residential address, marital status, among others.
Benefits of setting up an Ecuador subsidiary
Setting up a subsidiary in Ecuador offers several benefits. 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 Ecuador’s culture and workplace practices.
However, failing to comply with Ecuador’s subsidiary laws could lead to penalties for your company. Fortunately, G-P can help you expand with ease, without setting up an entity. We take on all matters of employment compliance as the Employer of Record, so you can focus on running your business.
Other important considerations
Before setting up a subsidiary in Ecuador, it is advisable to recognize the amount of time and resources it takes. It is possible that someone from your company will need to learn every aspect of Ecuador subsidiary laws or invest significant amounts of money to hire professional counsel to help you ensure compliance with local laws and regulations.
Enter new markets with G-P — no new entities required.
Beat the competition and enter new markets in minutes, not months, with G-P. We’ve paired our industry-leading team of in-region HR and legal experts with our global employment platform to help you hire compliantly in 180+ countries, eliminating the need to set up local entities or subsidiaries.
Get in touch today to learn more about how we can streamline the global growth process.