Types of Corporations in Costa Rica
There are several types of corporations in Costa Rica. However, as corporate counsel, I only recommend two types of corporations because of the limited liability. This means that legal responsibility befalls the corporation only, and not the shareholders. A corporate attorney and a Notary Public must be hired to create the legal entity and register it in the Public Registry. The shareholders create the corporation via a notary public in Costa Rica. The articles of incorporation are established in a public deed or “scripture” that the shareholders sign. It’s important to note that all notary publics in Costa Rica are lawyers. But it turns out that not all lawyers are notary publics. It’s also important to know that not every lawyer is a corporate attorney in Costa Rica. Many practice other areas of the law.
1. The Standard Corporation (Sociedad Anónima or S.A.)
As a corporate legal counsel in Costa Rica, this is one of the two types of corporations I can recommend as legal services. It´s almost identical to the standard corporations you will find in the United States. However, there are a few things to keep in mind when you ask your corporate attorney to help you constitute it:
Opening the S.A requires at least two people. They will act as shareholders. The act of constitution must be signed by the shareholders and members of the board of directors to constitute the company.
Thy founding shareholders get common shares with voting rights. These votes are cast in every shareholder assembly that must occur at least once a year. The shares can be easily transmitted through endorsement. The endorsement is done in the shares themselves. New shareholders must then be registered in the book of shareholders.
The Board of Directors:
At least three members of the board of directors are necessary. They are the president, the treasurer, and the secretary. Shareholders can be named to the board of directors as well. A fiscal must also be prescribed. Powers of attorney can be given to anyone, but by law, the president is the person who represents the company. The company gets represented by the attorney, in fact, to whom the power is given, and (or) by the board of directors president.
The Articles of Incorporation:
Articles of incorporation may include unique concepts, such as priority purchase rights. These rights prioritize other shareholders before endorsing shares to a third party. Changes in the articles of incorporation may be done with a simple majority vote of the shareholders. This is also true for structural changes the shareholders may want. As with the constitution, a corporate attorney that is a notary public is needed to register the changes. If the company will be used for holding a marital asset, it´s essential to clarify this in case of a future divorce.
2. The Limited Liability Company or LLC. (Sociedad de Responsabilidad Limitada)
The other type of corporation in Costa Rica is the Limited Liability Company, or “Sociedad de Responsabilidad Limitada. I recommend their use as a corporate lawyer. They also limit responsibility but have several aspects that make them different. First, they do not require as many people as the standard corporations do. Just two are necessary to constitute them.
The Quota Holders and the Manager:
The LLC does not have shares but “quotas”; thus, there are no shareholders but quota holders. Quota holders are required to name at least one General Manager to operate the company, as the attorney, in fact. The general manager can be a quota holder as well.
Amendments to the corporation:
Any amendments require 75% percent of the votes of the quota shareholders. The priority right of sale of the quotas is a must in an LLC. Quotas in an LLC can´t be transferred via endorsement. They can only be shared by a transfer agreement, which must be approved by the qualified majority of the other quota holders, which have a right of first refusal. As with the standard corporation, the quota holder´s assembly is the foremost authority in an LLC. A corporate lawyer in Costa Rica must be consulted to draft the incorporation articles. Most attorneys in Costa Rica are notary publics, making the incorporation easier. I can take care of everything as your corporate attorney.
Company incorporations are an important aspect of corporate law:
Companies in Costa Rica must be registered in the Public Registry by your corporate counsel. As a notary public and corporate attorney, I ensure that no other company has the name you plan to give to your corporation. To set it up, a minimum of two persons are required.
In a standard corporation or SA, you require four members on the board of directors, who may or may not be shareholders. With an LLC, however, you only need one general manager. The corporation in Costa Rica must have a domicile in the country, this is usually the office of the corporate attorney that you hire, but it can be set up anywhere in the country. If the people you set up to represent the corporation do not have a domicile in the country, a resident agent must be named. The resident agent must be a corporate attorney in Costa Rica, and his duty will be to receive any judicial communications and notifications in the company’s name.
Why does corporate counsel recommend incorporation?
You may wish to set up a corporation in Costa Rica to make a real estate purchase in the country. It is better to set up a corporation, to buy property in Costa Rica. The corporation separates your liability from corporate liability. This means that the corporation does not carry your obligations in case of litigation. If you wish to buy property in Costa Rica, as a family, you can give the other family members some shares and even place them on the board of directors of the company.
It’s easier to open a bank account with a corporation since the legal entity is a costa Rican person. Probate is more straightforward with a corporation, as you can leave the shares endorsed to the person you wish to give them to. If you own an LLC, have your corporate attorney help you.
There are setbacks:
Suppose you wish to buy the property in Costa Rica; as a marital asset. In that case, it’s best to have a legal consultation to know about certain aspects of corporate law. Due diligence is always necessary. Suppose you want the purchase owned by a marital corporation; it’s best to take precautions. This can become an issue in case of a divorce. Always consult a corporate lawyer in Costa Rica before any incorporation and purchase of a property. Also, it’s important to note that yearly taxes must be paid for the corporation in Costa Rica. Contact my corporate law firm in Costa Rica for assistance.