Starting a company in Chile, starts with making some serious decisions about what overall business goals are in Chile and what activities your new company will engage in now and in the future. These decisions should be made carefully now, as the articles of incorporation in Chile can be expensive and time consuming to modify. We will take a brief look at what you need to consider for drafting the articles of incorporation for a new company in Chile.

Opening a bank account in Chile for most new companies is one of those things taken for granted by many foreigners, but in Chile banks are very conservative and prefer to play it safe when in doubt about the credit worthiness of client. Especially when foreign without residency in Chile and unknown legal entities are concerned. This is especially problematic for foreigners, as often the partners in the new company have no credit history of their own inside the country and the new company has very little capital or assets. If opening a bank account is an immediate goal of the company, then we often recommend that drafting articles of incorporation start by asking the banks what they require.

Another common area of concern is taxes. Foreigners as private individuals and foreign companies planning to do business in Chile, often have far more to consider in terms of taxes than just what Chile will charge. They must insure that their taxable activities in Chile are synchronized with their World wide tax situation both in terms of minimizing tax and financial consequences and in terms of insuring they are complying with both Chilean tax law and any foreign jurisdiction. For clients that have such issues, we often recommend to coordinate with tax experts inside Chile and with their tax experts outside Chile before drafting the articles of incorporation for the new Chilean company.

Scope of the articles of incorporation is another area to consider carefully. A foreigner, and even relatively large foreign companies, tend to want to jump in to forming a a full sociedad anónima (S.A.) from the start. Sometimes however, even for large transnational companies, that is much more than is required such as in the case of opening a simple sales office. A full S.A. Type company in Chile simply brings greater regulatory and record keeping costs, when a standard Chilean Limited Liability company would be just fine. For a single foreign private investors in Chile, often the E.I.R.L. is all they need. For example, a tour guide with no partners and very specific and limited business activities. A situation where in most countries they could simply operate as sole proprietor.

Regardless of the type of company, the articles of incorporation will need to specify in great detail the exact activities the company will engage in, and the level to which those are spelled out in great detail in the articles of incorporation in Chile surprises many foreigners (especially from common law tradition). For example, it is common for articles of incorporation in Chile to explicitly state such things like, “the legal representative is authorized to open bank accounts, close bank accounts, take checks from the bank, sign checks, mail checks, cancel checks, ….”.

That level of detail is required because in dealing with day to day activities, third parties will look to those articles of incorporation and if not explicitly stated as a power given to a representative of the company they will often refuse permit that activity. For example, do you really want to have to go through the expense of modifying the articles of incorporation, should some bank teller decide they are not going to allow a representative of the company to sign a check. So, careful consideration must be given to the full range and scope of the activities of the company at the time the articles of incorporation are drafted in Chile.