Doing business in a foreign country requires a thorough knowledge of the different environments the venture will be immersed in. Within the legal context, to choose the right vehicle to do business is essential for many issues. Following, we will review the basics on how to choose a legal vehicle from the limitation of liabilities and corporate structure standpoint and on how to set up a company in Argentina.
- Choosing the suitable legal vehicle
Argentina offers different legal vehicles to set up a business, although foreign investors almost always use branches or subsidiaries to operate in the country.
a. Branch of a foreign company
Incorporating a branch (sucursal) of a foreign company has some advantages over setting up a domestic company, such as the facts that:
- The branch does not need any minimum allocation of capital, except for certain regulated industries;
- It just requires a legal representative registered with the Public Registry (no board or any other officers are required).
However, some disadvantages are:
- The foreign parent company is fully liable for the branch´s debts;
- The branch cannot raise capital from third parties.
In all cases, a branch is required to keep books separately from those of its foreign parent company and to file its financial statements before the Public Registry.
b. Subsidiary of a foreign company
As an alternative to branches, foreign companies most commonly set up a subsidiary, either a corporation (Sociedad Anónima with only one or more shareholders) or a limited liability company (Sociedad de Responsabilidad Limitada with two or more partners). To know more on the Sociedad Anónima, please, read our article Doing business in Argentina Sociedad Anónima: Basics on our Legal Blog. Single-shareholder companies have been covered by our article Single-shareholder company in Argentina on our Legal Blog.
The main advantages of a subsidiary over a branch are:
- The partners' liability is limited to the capital contributed by them; and
- A corporation may offer its shares publicly to get financing.
Despite the differences in structure and functioning, both corporations and limited liability companies also share certain features to be pointed out:
- There are no nationality or residence requirements for partners. Foreign individuals or non-resident individuals or companies may wholly own any company set up in Argentina, with the exception of a few certain regulated activities;
- The majority of the company´s administrators must reside in Argentina;
- Both corporations and limited liability companies must have a capital allocation. Corporations are to have at least a minimum stock capital of AR$ 100,000. There is no minimum capital requirement for limited liability companies;
- Those corporations and limited liability companies with a capital higher than AR$ 10,000,000 must mandatorily appoint statutory auditors;
- Foreign companies must be previously registered with the Public Registry to be able to have an interest in corporations or limited liability companies incorporated in Argentina. On this issue, please, review our article Doing Business in Argentina Foreign Companies Previous Registration on our Legal Blog.
- Setting up a company in Argentina: steps to follow
Regardless the business field of the investment, there are certain general steps to set up a company in Argentina.
As a guideline, the following steps must be followed to set up a company:
- To register before the Public Registry the foreign companies – if any – that will be the partners of the future locally incorporated company;
- To reserve the intended company name before the Public Registry;
- To sign the social contract or grant the deed containing the articles of incorporation or by-laws before a national certified public notary;
- To deposit at least 25% of the subscribed capital in the National Bank of Argentina;
- To publish a notice of the formation of the company in the legal Official Gazette;
- To get a caution insurance policy to comply with the administrators' guarantee regime;
- To pay the Public Registry´s incorporation charges and file for incorporation;
- Once registered, to buy specific books and get them rubricated by the Public Registry;
- To obtain a tax identification number from the Federal Administration of Public Revenues;
- To get a turnover tax identification at the local jurisdiction;
- To register with the social security agency;
- To get an insurance for employees with a labor risks insurance company;
- To rubricate the books of wages with the relevant labor agencies.
After completion of the incorporation process, there are also certain corporate requirements the company has to comply with on a regular basis to keep its good standing.
- Proposed legislation to simplify how to set up a company in Argentina
A draft bill has been recently submitted to the Federal Congress to create a new type of legal vehicle for entrepreneurs and small and medium-sized companies: a simplified company by shares (Sociedad por Acciones Simplificada or SAS).
The draft bill establishes the following main features for SASs:
- An SAS could be electronically set up within 24 hours;
- It might be incorporated by one or more shareholders, either individuals or legal entities, in this latter case with certain restrictions;
- Simplified procedures to obtain the company's tax identification number and open bank accounts will be provided for;
- SASs might enjoy certain tax benefits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.