When first establishing a business, it is quintessential to define the limits of the liability of your business, and to separate your personal assets from your business assets. Furthermore, a business structure allows to bring in partners and to set the share of each partner participation in the business. Last but not least, various business structures allows for more beneficial tax treatments. Current regulations provide various business structures depending on your needs. Some of them are:
- Corporations (Sociedad Anónima or SA)
- Limited Liability Company (Sociedad de Responsabilidad Limitada or SRL)
- Limited Liability Partnership (Sociedad de Servicios Profesionales or SSP)
- Individual Liability Company (Empresa Individual de Responsabilidad Limitada or EIRL)
- Coops (Cooperativas)
Purchasing a business
Furthermore, in a business transaction several contracts are needed to specify the rights and obligations of both the seller and buyer of said transaction. For instance, the following contracts may be signed when purchasing a business:
- Offer of Purchase Agreement: Under this agreement the price, length of the due diligence, payment method and any other specific conditions of the purchase are agreed by the seller and the buyer.
- Purchase of Business Agreement: This is a contract used to transfer the ownership of the business from the seller to the buyer.
- Power of Attorney: This contract is often times signed by the buyer, who sometimes is not available to sign the Purchase Agreement and therefore authorizes a third party (often times his/her attorney) to sign the Purchase Agreement on his/her behalf.
- Escrow Agreement: An agreement also signed by the buyer and the seller to appoint and escrow agent, who will hold the payment or a portion of the payment of the purchase agreement until all the conditions of the sale are satisfied, at which time the escrow agent will transfer the payment to the seller.
- The financial aspect of the due diligence completed on this type of purchase is very important to determine the profitability of the business.
We will draft or revise and advise on any necessary contracts as required to complete the required transaction with the minimum risks, as well as to help you set up your business.
Licenses & Permits
Depending on the business owned a number of permits must be obtained to be compliant under the local regulations.
For instance, if you are in the business of selling food, then you would need a Health Department Permit which would allow you to operate without any problems, or if you have a school you would need a permit from the Ministry of Education to operate.
Some usually required permits are the following:
- Patente de Municipal: which is a business license from your local municipality.
- Permiso de Salud: which is a license from the department of health. You will be required to obtain additional licenses from the DoH depending on your business.
- SETENA permits: In some instances, it will be required to obtain a permit from the Environmental Agency. It will depend on the type of activity. It is generally applicable for manufacturing, production, farming, and hotel industries, among others.
- ICT permits. This will be applicable to some tourist services.
- Registration with the Revenue Service. Although it is not a license, your business is required to be registered with the Revenue Service. Of course, you will need to pay taxes.
We will advise on the permit or permits your business needs to function without any problems, and we will help you obtain the required permits as efficiently and fast as possible.