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Expat Life

Opening a small business in Ecuador

By Sara Chaca

For any new (or possibly not so new) expat who has moved to Ecuador, the question that often arises is what to do with one’s time.  Unless one plans to devote their energy, time and investment towards a preexisting organization (i.e. a charity or other not for profit organization), the idea of opening a business in Ecuador becomes very appealing; especially with the costs of funding most startups in Ecuador being a very small fraction of what the same would otherwise cost in say, the US, Canada, Europe or Australia.

With that in mind, let me offer the short version of what is involved in opening a company in Ecuador.  Please note that in discussing how to register a company in Ecuador, one should be aware that there are many forms of businesses opportunities in the country. So don’t fret if you don’t see your own Ecuador business idea mentioned in a Google search or article!

Please note that the opening of one’s company is a separate matter from that of obtaining any specific permits/registrations, such as for creating or registering a self-created product in Ecuador, obtaining any licenses to practice in one’s chosen field (i.e. as a doctor, engineer, lawyer, psychologist, etc.), or securing the authorization to import/export to or from Ecuador.

Generally, the most common type of company in Ecuador for small business owners (besides otherwise opening a business as a natural person using one’s Ecuadorian Tax ID number), is known as a “limited corporation.” The requirements for opening a limited corporation are:

– The object of the Corporation, i.e. what services will the corporation offer.

– A minimum of 1% ownership must be granted to an Ecuadorian partner OR Foreigner who also has residency in Ecuador (after some months or years you can of course enter into an “arms length” transaction to buy out your original partner if it becomes desirable or necessary.).

– The company must be opened with a minimum of $400.00USD capital to be deposited in an Ecuadorian bank account on behalf of the corporation (that is of course YOUR OWN money as capital of the corporation).

To fully open a corporation takes around 30 working days.

Another benefit (or opportunity) of opening/buying an Ecuadorian business, is that if someone isn’t already a resident of Ecuador, but is interested in moving to Ecuador on the basis of owning or starting a company as their qualification for moving here, that can be done if they invest at least $30,880 in their business itself as an initial buy-in/start-up in Ecuador.

Your company in must file monthly tax reports to Ecuador’s Internal Revenue Service (“SRI”), in addition to certain other quarterly, semi-annual and/or annual tax requirements.  It must also comply with mandatory health insurance/pension requirements with the Ecuadorian Institute of Social Security (“IESS”) on behalf of any employees of the company.

The option also exists to pay certain persons as “Independent Contractors,” so long as the number of hours they work and/or the type of work they’re doing for your business, is reasonably able to consider and label them as such.

Beyond certain other aspects and requirements related to the form of business one might wish to open, please note that though one can attempt to go it alone in the process of starting a business in Ecuador, competent legal counsel is generally advisable.  Your Attorney in Ecuador can assist you with opening up and registering any form of business in a fully legal and transparent way, of which naturally, certain business types are somewhat easier and require less legal work to do so (i.e. restaurants and hostels/hotels).

It is sincerely my hope as well as trust, that by reading this article, even more expats will seize upon the opportunity to turn their foreigner dreams into reality that can/will benefit both themselves and their fellow expat and Ecuadorian brethren alike.
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Sara Chaca is a Cuenca attorney who specializes in providing legal services to expats. She can be contacted at sara@ecuadorvisas.com or by phone at 099.296.2065.