• Creimerman Product Team

Uruguay: Types of Companies that provide Tax Residency



In order to open or create a company in Uruguay, it is necessary to keep in mind choose the right type of company, since it is significantly more complex and expensive to change the type of company after having established it.


Types of Companies in the Uruguayan legal system

1.- Sole proprietorship

2.- Limited Liability Company (SRL)

3.- Capital and Industry Society

4.- Limited Partnership for Shares

5.- Simple Limited Partnership

6.- Corporation (SA)

7.- Collective Society

8.- Commercial Company


The most used companies are the Unipersonal, Sociedad de Responsabilidad Limitada (SRL) or Sociedad Anónima (SA).


Sole proprietorship


Advantage

Administrative paperwork is minimal. Compared to other commercial companies, such as the Corporation (S.A.) or the LLC (SRL), to open a sole proprietorship the legal procedures are minimal and very easy to carry out. The same applies to close the company.

The company is personally administered.

The legal restrictions are very few. You can hire staff if the owner wishes, but it is not essential for its operation.

The company's earnings are presented in the owner's personal income tax returns.

It can be dedicated to several items, as long as these have been detailed at the time of opening the company before the DGI.

No minimum capital is required for its constitution.


Disadvantages

The owner is personally liable for all financial and legal obligations that arise. The personal responsibility of the self-employed in Uruguay is unlimited against the debts and obligations of the company.

A sole proprietorship in Uruguay cannot be sold nor can its property be transferred to another natural or legal person, unlike other commercial companies.

Capital raising is limited.


Requirements

The requirements that the DGI requires to open one are the following:

Being over 18 years.

Have a legally valid identity document in Uruguay. It can be a certificate or if it is a foreigner, a passport.

Some document that proves the fiscal direction of the venture. The DGI accepts receipts from UTE (electricity), OSE (water) or Antel (telephone), as long as they are in the name of the owner of the company. If you do not have any of these documents, then you will have to provide a notarized certification detailing the address where it is located.


Procedures

A)

Registration with the DGI

Registration in the BPS (Social Security Bank)

Registration in the MTSS (Ministry of Labor and Social Security)

The first thing we have to do when creating a sole proprietorship is to register the company in the Tax Registry.

B)

After registering this new company in the DGI, the registration in the BPS corresponds, a process for which it has ten business days. If this period expires, a penalty must be paid. However, in Montevideo this procedure is carried out simultaneously with the registration in the DGI.

C)

This last stage corresponds to registration with the Ministry of Labor and Social Security. You must buy a Work Folder for the company, present it in the offices of the Ministry authorized for it, along with the documentation that the BPS and the DGI have given you.

Although it is not a necessary procedure for the operation of the sole proprietorship, after registering with the BPS you can join a mutual company (private healthcare). Holders of sole proprietorships have the obligation and the right to join Social Security.


Limited Liability Company (SRL)


The decision to open a company is accompanied by the definition of the type of commercial company of the undertaking. This is a strategic decision that will open - and limit - different possibilities to conduct the business. LLC's in Uruguay are the most frequent commercial companies when the venture requires a certain capital and several partners. An important characteristic of SRLs is that quotas cannot be represented in negotiable instruments and the liability of the partners is limited to the integration of shares.

Entrepreneurs do not always know precisely the differences between a Corporation and a LLc in Uruguay. The steps to create a LLC are different from those of a Limited Company, just as it has its own pros and cons.


Tax obligations will also depend in each case on the activity to be carried out by the company. Regarding benefits, there is an important limitation to the liability of the partners, with the benefit that at the business level the knowledge of the person of the partners matters.


Advantage

The constitution of a SRL in Uruguay requires a lower capital, compared to corporations. The share capital must be between a minimum and a maximum.

Protects partners in the event of a lawsuit against the partnership and company assets when there is a lawsuit against any partner.

An SRL requires a minimum of 2 partners and a maximum of 50.

Partners can designate another entity to manage the company on their behalf.

The SRL has a perpetual duration, unless the articles of incorporation indicate otherwise.


Disadvantages

At the time of the constitution of a SRL in Uruguay, the partners have to contribute at least 50% of their participation in the share capital. The rest of the shares must be completed in less than 2 years.

The admission of new partners or the sale of the shares requires the consent of the others.

The business capital cannot increase, unless it is effectively paid, which limits the expansion of the company.


Requirements

Members must be over 18 years of age

Photocopy of the partners' identity document (Uruguayan identity card or passport, in case of being a foreigner)

The number of partners may not be greater than 50.


Formalities

Registration in the General Tax Office.

Registration in the Social Security Bank.

Social Security for Illness - Mutual Affiliation.

Registration in the Ministry of Labor and Social Security.

Public Registry of Commerce.

Registration in the State Insurance Bank.


Corporation (SA)


A corporation is a commercial company in which the capital is divided into shares, which can be presented in negotiable securities and the liability of the shareholders is limited to the shares that they subscribe to the capital contributed to the company. Incorporating a corporation is the appropriate alternative when you have a large capital to start a business.


Advantage

The liability of the partners is limited. This is limited only to the capital that you have contributed to the company, so they are not obliged to respond with their assets to pay off the debts of the company. The partners are exempt from responsibility for the operations of the company, incorporation and capital increase.

The founding partners can open the company with 50% of the share capital and will have to reach 100% in less than 2 years.

Benefits in the tax on capital transfers and in the tax on documented legal acts.

In the case of public limited companies, the partners of the company can sell their shares to another investor.

Members can be Uruguayan citizens or foreigners. It is not taken into account if the partner resides in the country or abroad.


Disadvantages

The cost of opening a corporation in Uruguay is high. To constitute itself, a minimum capital of 18 million Uruguayan pesos is required.

In addition, a corporation in Uruguay requires a greater number of legal procedures for its constitution. For this reason, this commercial company is usually reserved for large enterprises.

A corporation requires a more complex form of organization. A meeting of shareholders is also required at least every year.


Requirements

Members must be over 18 years of age

Have a valid identity document for the Uruguayan State (Uruguayan identity card or passport)

That there are at least 2 shareholders

That the share capital is over 18 million Uruguayan pesos.

The founding partners must contribute a minimum of 25% of the share capital and a maximum of 50%. They must make this capital contribution within the term established by the company to exercise their rights and duties as shareholder partners.


Formalities

To set up a corporation, it is necessary to satisfy mandatory requirements, in the presence of a Notary Public:

Carry out the constitutive assembly between the partners. The name of the company, the share capital, the address, the contributions of the partners and how the profits will be distributed and the losses will be supported will be defined in the assembly.

Carry out a legal study, which requires the intervention of a notary public. The official must confirm the veracity of all the information presented at the constituent assembly.

Review of the statutes of the company in the Internal Audit of the Nation.

Registration of the company in the DGI and in the BPS.

Contract occupational accident insurance at the BSE for employees of the society.

Register the company in the Document Division of the General Labor Inspection, dependency of the Ministry of Labor and Social Security.

Register the corporation in the Public Registry of Commerce

Publish an advertisement in the Official Gazette and in another newspaper with national circulation.

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