One of the most important aspects to set up a company in Chile is choosing between different types of business partnerships. Deciding on one or another legal structure will depend on the needs, interests and projections of the business. Among other things, the type of company will determine the regulations that the company will observe. In addition, it will define what its form of administration will be, who will make the decisions and the way in which it will pay taxes.
In this article we will analyze all the types of commercial companies that exist in Chile and their main characteristics. Choosing the type of partnership that a business will have can be a difficult decision to make. Therefore, it is important to have the guidance and advice of an expert lawyer in business law.
Note: Also read our article about how to set up a company in Chile as a foreigner.
Ways to undertake commercially in Chile
In Chile there are two ways to undertake commercially: through the natural person or as a legal person. The first option refers to the development of commercial activities in one's own name, using the same RUT as the natural person. Meanwhile, legal persons operate independently of the individual members that comprise it. This means that the company will have its own RUT and will contract its own obligations and rights recognized by the State.
Natural Person
In Chile there is the figure of the Individual Entrepreneur. This business type corresponds to the natural person who develops commercial activities in his own name. The liability of the individual entrepreneur is unlimited. That is, he could have to respond with his personal assets for the obligations or debts incurred as a result of the activity carried out.
- The natural person assumes rights and obligations of the activity in which the business is developed.
- It does not have legal personality, so it operates with the same name and RUT of the natural person.
- Develops activities whose income is classified in the first category.
- He is personally responsible for the debts and obligations of the company.
- It operates with the same RUT or passport number of the natural person.
- Made up of one person.
Legal Person
It is a legal entity independent and distinct from the individual members that form it. In this way, it has the capacity to contract rights and obligations that are recognized by the State.
- It is constituted as an individuality distinct from those who make it up.
- It gives rise to a patrimony separate from that of partners or shareholders.
- The legal person assumes rights and obligations separately from partners or shareholders, as the case may be. In addition, the rights and obligations are recognized by the State.
- Depending on the type of commercial company that is chosen, it can be formed by one or more people, both natural and legal.
- Chilean law contemplates various types of legal persons.
Note: Also read about the process and advantages and disadvantages of creating a company in one day versus through a notary.
Types of company under the modality of legal person in Chile
Chilean law offers different types of commercial companies. Each one is tailored to each particular business. Next we will mention its main characteristics:
1. Limited Liability Company
It is a society of people in which the administration and representation system can be freely established. In this type of company, the partners:
- Rrespond limitedly for the amount of capital they contribute.
- Can be nationals or foreigners, natural or legal persons, without their number being less than two or more than fifty.
- The rights of the partners are represented by a fee and not by shares.
2. Commercial Collective Societies
They are those that are formed for businesses classified as acts of commerce according to the Commercial Code.
- The administration of this company corresponds by right to each and every one of the managing partners, who can exercise it by themselves or through delegates.
- The partners can designate an administrator in the social deed or in a later act.
- Those who are general partners present in the social deed will be jointly and severally liable for all the obligations legally contracted by the company.
- In addition, the partners may not repeal the joint and several liability in partnerships.
3. Commercial limited partnerships
In this type of company there are two types of partners.
- Managers: They are the only ones who have the faculty of administration, and are jointly and severally liable for social obligations. Their names appear in the company name.
- Limited partners: They are the capitalist partners in terms of the social contribution. They limit their liability to the amount of their contributions, and their names may not appear in the corporate name.
Also, there are two types of commercial limited partnerships:
- Simple limited partnership: It is one that is formed by the meeting of a fund provided in its entirety by one or more limited partners, or by them and the managing partners at the same time.
- Limited by shares: The limited partnership by shares is constituted by the meeting of a capital divided into shares and supplied by partners whose name does not appear in the social deed.
4. Stock Company
A Stock Company (SpA) is a capital company which has one or more shareholders who may be natural or legal persons, who make a capital contribution. You can remain as such with a maximum of 499 shareholders or 99 with 10% of the capital.
Main characteristics of this type of commercial company:
- The capital of the company will be divided into shares, with the shareholders being liable up to the amount of their contribution to the company. The shares must be subscribed and paid within the term indicated in the bylaws, and if nothing is indicated, said requirement must be met within a maximum period of five years from the moment of the incorporation of the company or from the increase in the share capital, as appropriate.
- Various series of shares can be created, with some that only give the right to profits and not to vote, forcing a shareholder to sell their shares to other shareholders or to the company itself if they wish to withdraw, among other situations.
- The sale of the shares can be done simply by means of a public deed, by means of a private instrument signed before a Notary, by means of a private instrument signed by two witnesses, or by means of other formalities established in the company's bylaws.
- A Stock Company allows great flexibility in its administration and in the rights and obligations related to the holding of its shares, which allows it to adapt to each of the needs of each business.
- There must be at least one administrator who acts as a legal representative, but there is no limitation that this legal representation can be exercised by two or more people jointly or separately.
5. Corporation
The corporation is a legal person, always of a commercial nature, which is formed by a common fund consisting of contributions by the shareholders, who are only responsible up to the amount of their respective contributions.
Main characteristics of this type of commercial company:
- Organic and corporate decisions are made by the Shareholders' Meeting, while management decisions are made by a board of directors made up of essentially revocable members.
- The assets of a corporation are made up of tangible and intangible assets. The capital stock is divided into shares that are the representation of the shareholder's right to participate in the funds. These shares are essentially transferable.
- In order for the Corporation to be incorporated, a minimum capital contribution is required, which can be paid within a period of three years, counted from the company's start date. That capital is divided into shares owned by the partners.
- There are two types of Corporations.
- Open: These are corporations whose shares are traded on the Stock Exchange, these share transactions being public.
- Closed: They are closed corporations whose shares are not traded on the Stock Exchange and the negotiation of their shares is carried out in private transactions.
6. Civil Legal Entities
Sociedades Colectivas Civiles
In civil partnerships, the partners respond even with their personal assets, the share of the insolvent burdens the other partners and the agreements are generally taken unanimously.
Civil limited partnerships
In these companies, the managing partners or administrators respond even for their personal assets, and the limited partners for their contribution. Both the constitution and the dissolution of these companies is consensual.
7. Sole Proprietorships
Individual Limited Liability Company (EIRL)
Companies of this type are governed by Law 19.857 introduced in 2003. It is a legal entity with assets other than that of the owner.
Main characteristics of this type of commercial company:
- It is formed by a single person, and only one natural person can constitute this type of company.
- They have their own assets and are different from those of the owner. Thus, the owner of the individual company responds with his assets and only with the contributions made or that he has promised to incorporate. For its part, the company responds with all its assets for its obligations generated in the exercise of its activity. In this way, it keeps personal assets separate from those of the company.
- The company name must include that of its founder or an invented name that refers to the business. It must also include the words “Individual Limited Liability Company” or “EIRL”.
Why contract the services of My Local Partner?
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