Establishing a Limited Liability Company in Latin America - 2023 Guide

If you're looking to increase your business and improve profit, Latin America is the land of countless opportunities waiting to be explored. The rhythm of the samba, the aroma of rich coffee, and the colorful markets beckon. But amidst the cultural splendor lies the practical side of setting up shop: enter the Limited Liability Company (LLC). In this blog, we'll take you on a journey through the creation of an LLC in Latin America, backed by official data, expert opinions, and insider insights. Buckle up for a ride into the world of cross-border corporate excellence!

Table of Contents

1. Why an LLC?

2. Choosing the Right Jurisdiction

3. Crafting your LLC

4. Taxation

5. Cultural Savvy and Bureaucracy

6. Which Market is the Ideal one to Establish my LLC? Mexico or Colombia?

Why an LLC? When venturing into Latin America, an LLC is often the best choice for foreign companies. It combines the limited liability benefits of a corporation with the tax efficiency and flexibility of a partnership. This structure safeguards your personal assets while fostering an environment conducive to growth.

1. The Landscape of Latin American Business: Latin America, a region pulsating with diversity, boasts economies that range from powerhouses like Brazil and Mexico to emerging markets in Colombia and Peru. According to the World Bank, Latin America has been experiencing steady economic growth, attracting foreign investment and nurturing a burgeoning middle class.

2. Navigating Legal Requirements: Before donning your adventurer's hat, familiarize yourself with each country's specific legal requirements. Consulting legal experts well-versed in local regulations is the key to a seamless entry. Juan Camilo Patiño, our law specialist with years of experience in the region, advises, "Latin America is a tapestry of legal intricacies. Enlist experts to guide you through the maze."

3. Choosing the Right Jurisdiction: Colombia and Mexico are standout choices for setting up your LLC. These two countries are among the most attractive destinations for Canadian and US companies interested in Latin America hiring services or corporate ones, thanks to their stable economies, large markets, and favorable business environments.

4. Crafting Your LLC: Crafting an LLC in Latin America involves a dance of documentation. You'll need to register your company name, provide identification documents, and outline your business scope. Some countries require a local partner, while others allow 100% foreign ownership. Javier Morales, a business consultant based in Bogota, advises, "Understand the local nuances; they can make or break your venture."

5. Taxation Tango: Ah, taxes—the eternal dance partners of the business. Tax regimes in Latin America vary greatly. Taxes will always be a pain in the neck or if they must be present in the activities of our business. When investing in Latin America, you should evaluate different options, in the case of Colombia and Mexico, the government promotes investment, with tax reductions for businesses that meet certain characteristics. Our experts analyze case by case in detail to suggest the best option to implement. 

6. Cultural Savvy: Latin America's vibrant culture extends to the business realm. Building relationships and embracing local customs can be a dealmaker. Ana Cortez, a market analyst, emphasizes, "Don't underestimate the power of personal connections. Sharing a cup of mate in Argentina can seal a partnership."

7. Navigating Bureaucracy: Patience is your ally when dealing with bureaucracy. The World Bank's "Ease of Doing Business" report highlights variations in bureaucratic efficiency across countries.

Now, where to start this venture with the creation of LLC's?

Let's Explore: Understanding Legal Processes in Mexican and Colombian Markets for Informed Consultation. Ready to Begin?

Colombia

Colombia is a country of 50 million people, with a GDP of $282 billion and a growth rate of 4.8% in 2023. It ranks 67th out of 190 countries in the World Bank’s Ease of Doing Business index, and it offers various incentives and benefits for foreign investors. One of the most common types of business entities in Colombia is the Limited Liability Company (LLC), which is also known as Sociedad de Responsabilidad Limitada (SRL) or Sociedad Limitada (Ltda).

An LLC in Colombia must have at least two partners and no more than 25. The total amount of the contributions shall be paid when the company is incorporated. Unless otherwise agreed at the time of incorporation, all partners carry out the representation of the company. The minimum capital required to form an LLC in Colombia is 2 minimum wages, which is equivalent to $516 USD in 20234.

The steps to create an LLC in Colombia are:

• Choose a unique company name and obtain approval from the Department of Trade.
• Draft the articles of incorporation and the bylaws of the company, and have them notarized by a public notary.
• Register the company with the Chamber of Commerce and obtain a tax identification number (NIT).
• Open a bank account for the company and deposit the initial capital.
• Register the company with the social security system and other authorities.
• The whole process can take up to 15 days, depending on the complexity of the company structure and the availability of documents.

Mexico

Mexico is a country of 130 million people, with a GDP of $1.3 trillion and a growth rate of 2.5% in 2023. It ranks 60th out of 190 countries in the World Bank’s Ease of Doing Business index, and it has signed free trade agreements with 46 countries, including Canada and the US. One of the most common types of business entities in Mexico is the Limited Liability Company (LLC), which is also known as Sociedad de Responsabilidad Limitada (SRL).

An LLC in Mexico can have from two to 50 partners, who are only liable for their contributions to the company’s capital. The minimum capital required to form an LLC in Mexico is $50 USD, which must be paid at least 50% at the time of incorporation.

The steps to create an LLC in Mexico are:

• Choose a unique company name and obtain permission from the Department of Trade.
• Draft the articles of incorporation and the bylaws of the company, and have them notarized by a public notary.
• Register the company with the Public Registry of Commerce and obtain a tax identification number (RFC).
• Open a bank account for the company and deposit the initial capital.
• Register the company with the social security system and other authorities.
• The whole process can take up to 10 days, depending on the complexity of the company structure and the availability of documents.

Conclusion:  The Limited Liability Company is your vessel through the legal waters, as you navigate landscapes of opportunity and challenges. So, dear Canadian and American visionaries, gear up for a thrilling journey, where passion, patience, and expert guidance are your compass to flourishing in Latin America.

Creating an LLC in Colombia and Mexico in 2023 is a great option for international but especially for Canadian and US companies who want to expand their business in Latin America. Both countries offer attractive opportunities, incentives, and benefits for foreign investors, as well as a simple and fast process of incorporation. However, each country has its own legal requirements and procedures that must be followed carefully. That’s why it is recommended that you consult real corporate services expert in Latin America as Ongresso, we are here to assist you every step of the way. 

Ready to set sail on your LLC adventure? Let's establish your Limited liability company in Latin America together.