Apart from the excellent coffee bean that the nation is famous for, the Salvadoran economy is dependent on exports of sugar, gold, and textiles, while having a well-developed pharmaceutical industry thanks to an increased participation of Indian investors in the Central American country. In total, exports and imports make up 64% of the GDP and are, therefore, the most important economic driver of the country.
Company Formation Process in El Salvador
Companies in El Salvador can take on various legal entity forms, depending on their business needs and requirements. Usually, 3 types of legal entities are established in El Salvador, namely Limited Liability Companies, Corporations (S.A. de C.V.) or foreign branch offices. Nevertheless, the Sociedad Anónima de Capital Variable (S.A. de C.V.), which is a limited liability corporation with variable shares and a minimum requirement of two shareholders, is the most widely used legal entity among foreign and local investors. One great advantage of this legal entity type is that the shareholders can indicate several business activities, even though only a small number of those are ultimately executed.
1. Obtain local tax ID numbers for shareholders
2. Create and sign the company bylaws
3. Pay 5% of the share capital
4. Register the company bylaws, initial balance and obtain the license of commerce
5. Obtain a local company tax ID number (NRC)
6. Open a corporate bank account
7. Deposit of the required minimum capital to activate the corporate bank account
8. Register the company with all relevant government authorities
Required Company Information
If you have decided to establish your business in El Salvador, you will have to consider possible company names and establish the business activities that you will undertake. In addition, the following main points must be taken into consideration:
A shareholder takes the form of a natural or legal person (i.e. an individual or a company) that owns part of the company corresponding to the share contribution the person has made. Additionally, the share contribution is significant as the shareholder´s liability is limited to it. In El Salvador, the Corporate Law denotes that the S.A. de C.V. requires two or more shareholders in order to conduct the business. Local banks will request additional documentation if the company shareholder is a legal person (i.e. a company).
Company Share Capital
In order to start operating a business in El Salvador, a minimum of USD$2,000 needs to be subscribed during the company incorporation process. Apart from being the starting capital of the company, the share capital contribution plays a major role when requesting highly-graded bank loans or entering a joint venture. If desired, the share capital can be increased or decreased at any point during or after the incorporation process, but the share capital should be an amount that reflects the company’s size and business operations.
The minimum share capital is USD$2,000, with 5% of the share capital being paid at the moment of the company establishment. The remaining 95% will have to be paid within the first year of the company’s operations. Please note that depending on the type of business activities the company will exercise, additional registrations with local authorities may be involved.
Company Local Director/Legal Representative
The Local Director/Legal Representative represents the company and its operations. The Local Director plays an important role in the company to ensure that the company operates in accordance with local law and regulation. Once the legal representative certificate has expired, it can be renewed for another 7 years. Furthermore, a legal substitute for the local director must be appointed.
A fiscal address registration is a necessary requirement for all legal entities to be established in El Salvador and must be recorded by the Salvadoran tax authority (Ministerio de Hacienda). In turn, the newly established company receives its unique taxpayer number (NRC), which identifies the registered address of the company, and as such, will be used for all tax purposes and other official communication.
Corporate Bank Account
The last of the main requisites is the opening of a corporate bank account with a Salvadoran bank. Depending on the local bank chosen, the minimum required capital to open a bank account is between USD$100-USD$500.
How we can help you
If you are considering forming a business or you need expert help with company registration in El-Salvador, LegalGenius™ is ready to assist you with its skilled team of lawyers, consultants and tax experts. We are committed to making the process as stress-free and streamlined as possible for you, and we will take care of all your document preparation and administrative tasks regarding the registration forms, payment of government fees, local address registration, banking support, etc., whilst always keeping your exact objectives and unique vision in mind throughout the process.
Please use our Company Formation Wizard if you would like to set up your registered company in El-Salvador or if you would like to know the costs involved prior to proceeding with our exceptional services. For other queries and special requests for complex or customised company formation services, please contact us at email@example.com