Corporations

Many foreign investors starting a business in or merely purchasing real estate for investment purposes decide to use a corporate entity as the owner of such. This decision is a wise one. Ownership through a corporation allows one to have flexibility in areas ranging from estate planning (if share ownership is properly structured the investor can avoid his heirs a painful and lengthy probate procedure), tax management (as an example, roles on corporate expenses are more flexible than the ones on personal ones), asset protection and representation (shareholders meetings can facilitate granting special powers of attorney or other types of authorizations for many actions thus not requiring local presence in the country). The first question often asked by investors is whether to use (or form) a local corporate entity or use one already existing and controlled by such individuals abroad. Our advice is, in most cases, the use of a local entity. Although foreign corporate entities can own land and engage in business activities in the country, registration procedures (both at the Public Register and with government entities) as well as negotiation of contracts with private parties can get complicated, delayed and/or find obstacles when thev are involved. In any event, if a foreign entity will be used, note should be taken that we normally recommend registering the foreign entity in the Register as a branch or, at least, to register specific powers of attornev for such also in the Register. Both cases require a special and formal procedure that may take several weeks. As mentioned before, in the great majority of cases, the use of a local corporate entity is preferred. Although, commercial law contemplates many types of corporate forms, only two of them offer the investor the comfort of having structures similar to the limited liability companies to which he or she may be used to in their countries of origin. Such corporate forms are the “Sociedad de Responsabilidad Limitada” and the “Sociedad Anónima”. In both cases, the investors (shareholders) are only responsible for their participation on the company's authorized capital and their own personal assets are fully protected and out of reach from any potential creditor the shareholder may have. The S.A. has many features, of which the most important are: No restrictions on nationality No requirements to disclose ownership No restrictions on foreign owned investments (with few exceoptions) No restrictions concerning ownership of shares No residence requirements for Directors/Officers No paid-in capital requirements No income tax, if income is produced outside Total tax exemption on all and any business activity or transaction carried on outside the jurisdiction No exchange controls No restrictions on Mergers, Acquisitions or Joint Ventures No requirements to file annual Financial Statements No requirement to hold annual General Meetings of Shareholders or Directors Total Secrecy and Anonymity Reasonable Annual Registration Tax and Resident Agent Fees Articles of Incorporation may be done in any part of the world in any language The accounting books for the corporation could be kept in any part of the world and in any language The legal representatives (which could be our lawyers) holding powers of attorney to act on behalf of the company are able for any actions taken against the interest of the company and/or its shareholders Political stability due to constitutional elected government. Companies doing business in must additionally register before the Tax Authorities. In the event, the company is not involved in business activities in the country for the specific fiscal year (for example, when it is solely used for holding assets), formal tax registration is not required. Page 2