Are you looking at opening a new company in Uruguay ?
There are only three legal options for operating a foreign business to operate in Uruguay, they are:
- the Sociedad Anonima or “SA”, a partnership limited by shares (a corporation)
- the Sociedad de Responsabilidad Limitada or “SRL” or “Ltda.”, a limited liability company.
- the Unipersonal, a sole proprietorship.
This article describes some of the basic characteristics of these business structures, as well as the options available to open them.
What type of business structure is right for you?
If your enterprise will have partners, employees, and suppliers, either a Sociedad Anonima (SA) or a Sociedad de Responsabilidad Limitada, a (SRL) will likely be most suitable.
One advantage of an SA is that shareholders can sell their shares freely. This can be controlled by having a separate agreement signed by the shareholders to give first right of purchase to the other shareholders.
For an SLR, selling the equivalent of shares (cuotas sociales) is more complicated, requiring the approval of other SLR members, or the authorization of a judge.
If you’re a freelancer, a unipersonal usually makes the most sense.
Or if your business is of the type where you work on line. ie an internet company, you could work informally which is illegal until you have enough confidence to formalize the situation. We see many foreigners doing this. The reason is the accountancy costs in Uruguay are very high and if you decide to close your company the costs and time involved could make your eyes water.
Characteristics of an Uruguayan Sociedad Anonima, SA–a partnership limited by shares
- A sociedad anonima in Uruguay requires at least two partners called founders. They can be individuals or legal entities. Once the SA is created, it may have one or more shareholders.
- The capital of an SA is represented with shares, which can be bearer shares, registered shares, or book-entry shares, which can be sold or inherited.
- The SA’s board is responsible for any tax and salary debts.
- For some business activities the shares must be registered.
- Registration may be required for: companies owning or operating radio broadcasting stations, long-distance domestic and international bus lines, aviation companies, companies engaged in sports activities and competitions, companies participating in certain privatizations of Uruguayan government corporations, insurance or reinsurance companies, investment fund administrators and trustees, and companies owning rural real property. (Note: Farmland in Uruguay must be owned by individuals, unless the government authorizes an exception.)
- For bearer shares, the SA must provide the names and information about the shareholders to the Central Bank of Uruguay.
- The SA can be managed by a board. The board members may work without pay or receive salaries.
- The SA owners may be board members and can also be employees.
- The SA’s capital must be expressed in Uruguayan pesos.
- The are no restrictions about the nationality or domicile of the shareholders or directors.
- Except for radio broadcasting and long-distance bus lines, which must be exclusively owned by Uruguayans.
- For aviation companies the majority of capital must be Uruguayan.
Starting a new Sociedad Anonima
There are three common ways to get started with a Sociedad Anonima (SA) in Uruguay:
- Create a new corporation from scratch
- Buy an off-the-shelf corporation
- Create a new company using a process called “Company in a Day”
1. Create a Sociedad Anonima from scratch:
Advantages of starting a SA from scratch:
- The founders can choose the name of the corporation.
- The founding documents are tailored to your specific business activities and share types.
- Corporations can start operations one to two days after signing the paperwork. However, you must add “in formation” at the end of the SA’s name until the SA is fully inscribed.
Drawbacks of starting a SA from scratch:
- Starting a new SA from scratch can take two to three months to complete.
- At least two shareholders/founders (individuals or legal entities), who sign the founding documents, are personally responsible for business debts until the corporation is completed.
2. Buy a new off-the-shelf Socieded Anonima:
It’s possible to purchase an existing SA with no business activity. Once purchased, the names of the shareholders and the board of Directors can be changed. This option makes sense if the name of the company is not important to you, and a standard operating agreement is sufficient for your needs.
Advantages of buying a ready-made SA:
- You get an SA really fast.
- The operating agreement allows for broad corporate purposes.
Drawbacks of buying a ready-made SA:
- The cost of amending the SA, either to change the name of the SA or the SA’s operating agreement, can cost as much as creating a new SA.
- The SA does not yet have a company bank account.
3. Create a new Sociedad Anonima using “Company in a Day”
Advantages of starting a S.A. with “Company in a Day”
- The cost is a bit lower than starting an SA from scratch or buying an off-the-shelf SA.
- The SA is complete in 10 days.
Drawbacks of starting a SA with “Company in a Day”
- The name of the SA must be selected from a list. (Most of the names are from Latin or Indigenous origin.)
- The operating agreement is standard and cannot be modified until it’s finished. The cost of amending the name or operating agreement can cost as much as creating or buying a new SA.
- The shares are not registered.
Companies operating in Uruguay free-trade zones
Uruguay has several free trade zones. Businesses that carry out their activities in (or from) one of Uruguay’s free trade zones get tax benefits. While you can operate a sociedad de responsabilidad limitada in a free trade zone, most businesses in free trade zones are Sociedad Anonimas.
The cost of a Ssociedad Anonima for a business operating in a free trade zone cost less.
Characteristics of an Uruguayan Sociedad de Responsabilidad limitada, SRL or Ltda.– a limited liability company
- The entity’s capital must be expressed in Uruguayan pesos.
- An SRL can have from 2 to 50 members. Members can be individuals or legal entities, including corporations.
- The names of the SLR members are public information.
- The social capital is represented in cuotas sociales, which can be sold or inherited.
- An SRL must be managed by one or more administrators.
- SRLs cannot issue negotiable capital instruments.
- The SRL contract must be filed with the National Trade Registry and published in the Official Gazette and one other newspaper.
- For a member to sell his or her cuotas sociales, approval by other members in the SLR is required
- For an SRL with five or less members, all the members must provide approval.
- For an SRL with more than five members, acceptance of enough of the other partners to represent ¾ of the SRL’s capital.
- If the denial of other members does not seem reasonable, the transfer can be authorized by a judge.
Starting a new Limited Liability Company
There are two common ways to get started with a Limited Liabilty Company (SRL) in Uruguay:
- Create a new Limited Liability Company
- Create a Limited Liability Company using “Company in a Day”
1. Create a new Limited Liability company
Advantages of starting a new SRL:
- The members can choose any name that is not already taken.
- The operating contract can be drafted to specifically apply to your planned business activities.
Drawbacks of starting a new SRL:
This procedure can take 1-2 months to be completed.
2. Create a Limited Liability company using “Company in a Day“
Advantages of opening an SRL with Company in a Day:
- The cost is a little lower.
- The SRL can be created in 3 business days.
Drawbacks of opening an SRL with Company in a Day:
- The name must be chosen from a list. (Most of the names come for Latin or Indigenous origin.)
- The contract is standard and cannot be modified until later, after the company is formed.
- The cost of adding amendments later is similar to buying or creating a new SRL.
Characteristics of a Uruguayan Unipersonal–a sole proprietorship
A “unipersonal” is similar to a sole proprietorship or a sole trader.
- A unipersonal has only one owner.
- It’s often a suitable business structure for a freelancer or a consultant.
A unipersonal must be set up for each individual choosing this business structure.
Advantages of a unipersonal
- It’s easy to create and easy to close.
- Healthcare coverage for the owner is included in the taxes paid.
- It can have no employees or many employees
Drawbacks of a unipersonal
- It cannot be sold.
- The owner is fully responsible for all business debts.
Note: Our own experience is it all depends on the type of business you are looking to set up and why. If it is going to work in an area of high commercial risk then you better get a formal structure set up at the start. If it is involved in ownership of land or a valuable asset, copyrights etc one might want to set up one company holding the hard assets and another for the business itself. This way if the business is every closed or fails you are not left an intertwined situation. Commercial litigation by some lawyers is a sport so watch out if you have employees.
Often the smaller accountancy practices are a better choice for a start up. Our experiences with large international accountancy firms have not been that positive in terms of costs and services.
The information provided in this post is intended for general information purposes only. It’s important to consult with a qualified professional regarding any specific plans you may have to open a business in Uruguay.