What is the limited liability corporation? ☎️ The Costa Rica SRL
As stated in previous articles, I can only suggest two types of corporations in Costa Rica, for company registration. If you wish to form a company, you should consider the Standard Corporation, known as an SA in Costa Rica. (Sociedad Anonima.) You can also choose another type of company, which is the Limited Liability Company or LLC. (Sociedad de Responsabilidad Limitada, abbreviated to SRL) These two corporate structures have unique differences regarding company formation and registration in Costa Rica.
These two corporations are excellent for your Costa Rica company formation since they separate the shareholder´s personal liability. This means that you are not personally responsible for the company´s acts. Both company structures have an almost identical company registration process in Costa Rica.
For which legal scenarios do you recommend to form an LLC in Costa Rica?
The Limited Liability Company (LLC) is known in Spanish, as a “Sociedad de Responsabilidad Limitada” or SRL. This is an excellent choice for a Costa Rican company. If you want to open a corporation to hold assets or have a small business structure, then by all means, you should choose the Limited Liability Corporation (LLC). The LLC is more straightforward since it operates with only one manager. Therefore, you will need fewer people to create this corporate entity. Only two persons are necessary to form this corporation, and the company registration is easily done through a notary public. This is why the Costa Rica SRL is usually constituted to act as a holding company for buying property through a corporation.
Can you describe the Limited Liability Corporation? (LLC)
Just like the standard corporation (SA) counterpart, the Costa Rica SRL, offers limited liability to it´s quota shareholders. However, they differ from standard corporations in several positive and negative ways.
First and foremost, an LLC requires fewer people to constitute it. Just two people are needed to incorporate it! Therefore, unlike the S.A., if you don´t foresee a lot of owners in the future, this may be a suitable corporation for you. The LLC, must also be registered in the Costa Rica Corporate Registry. However, stock transmission is not done through endorsement, so quota stock is a bit more complicated to transfer to third parties.
What are the benefits of this company structure?
Only two stockholders are needed:
The LLC is great for small businesses:
Limited Liability
Tax exemptions:
Corporate Mergers:
Stock Control
What are some legal requirements for company formation?
The Quota Shareholders:
Any Costa Rica company formation will require at least two founding partners. requires at least two founding shareholders. Stockholders in the Costa Rica LLC are called “quota share holders”, and must be registered as such, in the Book of Quota Share Holders or “Libro de Registro de Cuotistas.” In case you decide you wish to sell your stock, a right of first refusal must be given to the other stockholders, before selling the quosta shares to any third party.
The LLC Manager:
The Costa Rican SRL or LLC, is an attractive legal entity because it´s a corporation that is very easy to setup. Only one manager is necessary, to represent the corporation, both judicially and extra judicially. The Limited Liability Company, however, can appoint more submanagers, and grant them all types of attributions, through the use of powers of attorney, granted by the Assembly of Quota Shareholders, which governs the Costa Rica LLC.
The company´s name and domicile:
The Costa Rica company formation, will require articles of incorporation. These are drafted by the notary public and are usually very straightforward. Special provisions can be placed in the company´s bylaws. However, some are necessary for the registration of a Costa Rican company. They include the company´s name, which must be original, and the corporate domicile in Costa Rica. The authorized capital, represented by the quota shares, must also be established, as well as the proportion of shares, each partner will have.
What legal books do you receive if you create an LLC company?
The corporate books of quota holder´s meetings:
This book is for the LLC, as the book of shareholder´s acts is for the standard corporation. It has the same purpose. The quota holders hold meetings and write their acts and votes on this book. Changes to the company´s object and changes to the articles of incorporation that add responsibility to the quota holders can only be made by unanimous votes. For any other type of by-laws modifications, votes must be of three-quarters of the capital present.
The quota holder´s ledger:
This book is to the LLC, as the book of shareholders is to the standard corporation. It´s a registry of who the quota holders are, and their ownership percentage of the business.
In conclusion, the Costa Rican Limited Liability Company (LLC) or “Sociedad de Responsabilidad Limitada (SRL)” offers a flexible and efficient legal structure for both local and foreign investors. It is particularly appealing for those looking to engage in property acquisitions and other business activities within Costa Rica. The LLC’s framework allows for limited liability protection, ensuring that personal assets remain separate from corporate liabilities, which is a crucial factor for mitigating risk. Additionally, the relatively straightforward setup and operation, coupled with the country’s favorable tax regulations and political stability, make the Costa Rican LLC an attractive option for entrepreneurs and investors aiming to capitalize on opportunities in this vibrant and growing market.
Dr. Christopher Pirie Gil.
Attorney in Costa Rica.