Incorporating in Chile starts with making some serious decisions about what the overall business goals are will be in Chile, and what activities your new company will engage in now and as far in the future as possible. These decisions should be made carefully now, as the articles of incorporation in Chile can be expensive and time consuming to modify after formation of the company. We will take a brief look at a few things you need to consider in order for your attorney in Chile to draft articles of incorporation in Chile that are flexible.
Things to consider when incorporating in Chile:
Things to consider when incorporating in Chile:
Bank Accounts 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 with coordinating with the bank requirements.
Corporate Taxes in Chile, and outside Chile
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 international 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 they may need to deal with. For clients that have such international tax issues, we often coordinate with tax experts both inside Chile and with their tax experts outside Chile, before drafting the articles of incorporation for the new company in Chile.
The type of company structure to choose
You will also need to consider the type of structure to use, depending on the type of operations you will engage in. A private individual or foreign corporate instigators, even relatively large foreign companies, tend to want to jump in to forming a full Sociedad Anónima (S.A.) from the start. Sometimes, even for large international companies, that is much more than is required such as in the case of opening a simple sales office in Chile to represent a product. A full S.A. type company in Chile simply brings greater regulatory and record keeping costs, when something like a standard Chilean Limited Liability Company or the newer SPA would be just fine. For a single foreign private investors in Chile, often the E.I.R.L. is all they need. However, in many case the one person company, the E.I.R.L. can be too small a structure. 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.
If no one structure fits, it is common practice in Chile to split the company in to several related entities. For example, one company for handling hiring employees, one company to hold assets of the company, another company to handle sales and product liability.
Who is going to be the legal representative of the company?
Every company in Chile must have a “legal representative”. They must be a Chilean citizen or full permanent resident of Chile.
Scope of activities of the company in Chile
Scope of the articles of incorporation is another area to consider carefully. 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 those from a country with a common law tradition. For example, it is typical 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, ….”.
This level of detail is required in the articles of incorporation 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 to permit that activity or recognize your representatives authority. For example, do you really want to have to go through the expense of modifying the articles of incorporation, should some bank executive decide they are not going to allow a representative of the company to sign a check, open an account, or so on? 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.
There are many more considerations, many specific to your circumstances and goals, when incorporating in Chile. With some careful planning and advice from the start, most problems can be avoided.