Written by León Lanis V., Paralegal
Chile is one of the best options in Latin America for establishing a company, mostly because of its vast amount of opportunities, varying from natural resources to technology and innovation, as well as friendly government and tax policies that apply to new companies, and specifically for foreign enterprises seeking to expand to Chile.
The process to establish your company is fairly easy, but it may be confusing due to the steps to follow. In this post, we’ll highlight the process of establishing your company in Chile.
Options for setting up a company
The first thing to consider is which type of company you want to establish. The two main type of companies are:
- Limited Companies (Sociedades Anonimas or SA): companies formed by the pooling of capital by shareholders, which are liable to the amount of their respective contributions, managed by a Board of Directors which can be changed at any time. SAs can be public or closed, depending on their offer of Shares to the public or to a certain closed number of shareholders.
- Joint Stock Companies (Sociedades por Acciones or SpA): this is the most common option for companies in Chile. Shareholders have their liability limited to the amount of their respective contributions, but SpAs are a more flexible option than Limited Companies. For example, companies may participate in more than one activity, and adding additional shareholders is simplified (up to 499 shareholders), among other factors.
Options for setting-up the corporate vehicle
After deciding the type of company you want to establish, you must decide which path to follow in regards to setting up the corporate vehicle itself:
- “Company in a Day”: this is a fairly new system where any investor with Chilean ID number can create a company in a few minutes through a simple online application. Although this is a fast system, it has many setbacks, such as not being able to incorporate estate or not being able to establish advanced electronic signatures (which means you would need to assist the notary every time to sign papers). Due to these drawbacks, this method is not recommended, and it also complicates the process to initiate tax activities and switching to traditional company incorporation.
- Traditional method: although it may take more time than the “Company in a Day” method, this is a more secure option for your investment in Chile. In particular, there are no specific issues with the Internal Revenue Service for this option. This process usually takes up to 4 weeks (this number may change if your company is dedicated to markets that have special regulations, such as banks).
Steps in the traditional path
- Constitution of the company: to start, you must redact a Constitution of the Company, where you will establish, among other things: the type of company, its duration, the rules of the board, etc. This step is crucial and must be done through a public deed in a notary. A document called an extract is also required, which is a brief summary of the contents of the constitution.
- Inscription in the Commerce Registry: once the public deed is issued, you must inscribe it in the Commerce Registry and pay a fee. The Commerce Registry may simply accept the Constitution or ask for some changes.
- Publication in the Official Gazette: in order to be publicly recognized, the authorized extract of the Constitution of the Company must be published in the Official Gazette of Chile. This extract will be published in the following edition, which is online and certifies the creation of your company. Once published, your company is officially established in Chile.
- ID and Initiation of Tax Activities: this last step is very important for paying taxes and avoiding possible prosecutions by the Internal Revenue Service (SII). The initiation of tax activities in Chile is subject for a different article, for its the longest and most difficult part of the process, but basically it starts by obtaining a Tax ID (RUT), then, the SII will ask you to prove your address and prove your economic activity/ies. The Tax Service will ask you for as many documents as possible to prove the aforementioned and will deliberate if your company is fit to start activities or not.
Chile is a great place to expand your business, but in order to do so correctly, it is important to know what you are doing and not take shortcuts. Due to the friendly policies around business establishment in Chile, the process is not long, but it may be confusing due to the technical and legal complexities of the system – particularly as some aspects are still not as simple as they are in jurisdictions like Australia. If you are interested in setting-up in Chile or the rest of Latin America, get in touch with our experienced team today to discuss the process.
Harris Gomez Group opened its doors in 1997 as an Australian legal and commercial firm. In 2001, we expanded our practice to the international market with the establishment of our office in Santiago, Chile. This international expansion meant we could provide an essential bridge for Australian companies with interests and activities in Latin America, and in so doing, became the first Australian law firm with an office in Latin America.
We provide innovative technology and resources businesses with legal and commercial expertise to realise their global potential. Our goal is to see innovative businesses establish and thrive in the global market. We are proud members of Austmine.
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