Key Steps To Company Formation in Peru

For entrepreneurs looking to establish a presence in Peru, understanding the key steps of company formation is essential to ensure a smooth and successful process. Additionally, the complexities of its legal and administrative frameworks requires careful planning and adherence to local regulations, that is why this guide will help you understand the necessary steps to establish your business in Peru, providing clarity and confidence to achieve your entrepreneurial goals. 

Why Set Up a Company in Peru?

Investing in Peru presents a compelling opportunity for businesses seeking growth and expansion in Latin America. With its robust economic performance, strategic location, and favorable investment climate, Peru stands out as a prime destination for foreign direct investment (FDI).

• Robust Economic Growth
  Peru has shown remarkable economic stability with an average annual GDP growth rate of around 4% over the past decade. Low inflation rates and a stable currency create a reliable environment for long-term investments..

• Strategic Location and Trade Agreements
  Located on the western coast of South America, Peru is a key trade hub between Asia and Latin America. The country’s modern infrastructure, including ports, highways, and airports, ensures efficient logistics. In addition, membership in trade agreements like the CPTPP and the Pacific Alliance provides businesses with preferential access to international markets.

• Favorable Investment Climate
  The Peruvian government has enacted policies to attract and protect foreign investments, ensuring equal treatment for foreign and domestic investors. Incentives such as tax benefits and simplified administrative procedures enhance the business environment, reducing bureaucratic obstacles.

Choosing the Right Legal Entity: The 3 Most Common Company Types in Peru

When establishing a business in Peru, selecting the appropriate legal entity is crucial to ensure compliance with local regulations and to optimize the company’s operations. The choice of legal entity impacts various aspects of the business, including liability, taxation, and administrative requirements. In Peru, the three most common types of legal entities are Limited Liability Companies (Sociedad de Responsabilidad Limitada, SRL), Joint Stock Companies (Sociedad Anónima, SA), and Branch Offices (Sucursal). 

1. Limited Liability Company (Sociedad de Responsabilidad Limitada, SRL)

Characteristics:

• Structure: An SRL is a popular choice for small to medium-sized businesses. It requires a minimum of two and a maximum of twenty partners.
• Liability: The liability of the partners is limited to their capital contributions, protecting personal assets from business liabilities.
• Management: The management structure is flexible, allowing partners to appoint one or more managers who may or may not be partners.

Advantages:

• Limited Liability: Partners are only liable up to the amount of their contributions, providing a level of personal asset protection.
• Simplified Administration: SRLs are subject to less stringent regulatory requirements compared to larger entities, making them easier to manage.
• Privacy: SRLs do not require public disclosure of financial statements, which can be advantageous for businesses that prefer to keep financial details private.

Disadvantages:

• Capital Limitation: The maximum number of partners is capped at twenty, which may limit the potential for raising capital compared to other types of entities.

2. Joint Stock Company (Sociedad Anónima, SA)

Characteristics:

• Structure: An SA is suited for larger businesses and requires at least two shareholders. There is no upper limit on the number of shareholders.
• Liability: Shareholders' liability is limited to the value of their shares.
• Management: An SA must have a board of directors and a general manager, providing a clear separation between ownership and management.

Advantages:

• Unlimited Shareholders: The ability to have an unlimited number of shareholders makes it easier to raise capital through the issuance of shares.
• Public Listing: SAs can be listed on the stock exchange, providing opportunities for public investment and liquidity.
• Credibility: Being a more formal structure, SAs often enjoy greater credibility with investors, partners, and clients.

Disadvantages:

• Complex Administration: SAs are subject to more rigorous regulatory and reporting requirements, which can increase administrative burden and costs.
• Disclosure: Financial statements must be publicly disclosed, which might not be desirable for all businesses.

3. Branch Office (Sucursal)

Characteristics:

• Structure: A branch office is an extension of a foreign parent company and operates under the same legal identity.
• Liability: The parent company is fully liable for the activities and obligations of the branch office.
• Management: The branch office is managed by a representative appointed by the parent company.

Advantages:

• Integration: The branch office can seamlessly integrate with the parent company’s operations, facilitating coordination and control.
• Simplified Setup: Establishing a branch office can be simpler and quicker compared to creating a new legal entity.

Disadvantages:

• Full Liability: The parent company assumes full liability for the branch office's obligations, which can pose significant risk.
• Limited Autonomy: Branch offices often have limited operational autonomy compared to locally incorporated entities.

Key Steps to Company Formation in Peru

1. Choose the Type of Legal Entity: As mentioned, in Peru, the most common types of legal entities are Limited Liability Companies (SRL), Joint Stock Companies (SA), and Branch Offices. Selecting the right legal structure depends on your business goals, the nature of your operations, and the level of liability protection needed.
   
   
2. Reserve a Company Name: The next step is to choose and reserve a unique company name. This can be done through the National Public Registry (SUNARP) to ensure that the name is not already in use and meets the necessary legal criteria.
   
   
3. Draft and Notarize the Company’s Bylaws: The company’s bylaws, which outline the company’s structure, governance, and operating procedures, must be drafted and notarized. Working with a legal expert can ensure that the bylaws comply with Peruvian law and protect the interests of the stakeholders.
   
   
4. Obtain a Tax Identification Number (RUC): All companies in Peru must register with the National Superintendence of Tax Administration (SUNAT) to obtain a tax identification number (Registro Único de Contribuyentes, RUC). The RUC is necessary for all tax-related activities and transactions.
   
   
5. Open a Bank Account: Companies need to open a corporate bank account in Peru to manage their financial transactions. You will need the notarized bylaws, the RUC, and other relevant documentation to the bank.
   
   
6. Establish a Physical Address: A registered office address in Peru is mandatory for company formation. The address is used for official correspondence and must be maintained throughout the company’s operation.
   
   
7. Register with the Public Registry (SUNARP): The company must be registered with the Public Registry to be legally recognized. Registration with SUNARP provides legal security and public recognition of the company’s existence and operations.
   
   
8. Obtain Special Permits and Licenses: Depending on the nature of the business, additional permits or licenses may be required. such as health permits, environmental permits, or specific industry-related licenses.
   
   
9. Hire Employees and Register with Social Security (ESSALUD): If the company plans to hire employees, it must register with the Peruvian social security system (ESSALUD) and comply with labor laws.