Do you have a business idea? Are you thinking of setting up a company and Chile is the place for it? If you’ve been postponing that initial enthusiasm because of doubts about the legal paperwork, it’s time to bust some myths. In this article, we will tell you what the steps are needed to set up a company in Chile.
Before we analyze the specific procedures, and you start any commercial activity, you must be clear about the legal and business framework of your ideas. When starting out, it is key to have a business plan that will help you identify the area or line of business that your company will have.
Requirements to set up a company or business partnership in Chile
- For natural persons – basically, people like you or me -, it is necessary to be over 18 years of age. However, minors who have authorization from a judge can also do it. Men must be over 14 years old and women over 12 years old.
- Adults or minors, everyone must have a RUT (“Chilean Tax ID number”).
- Foreigners who do not have a RUT must request and process a RUT for foreign investor (“Rut de Inversionista Extranjero”) at the Chilean Internal Revenue Service (SII in spanish)
- The company can be incorporated through the online platform your company in one day (“Empresa en un Día”) or may be constituted by means of a public deed which will be granted in any Notary’s Office, registering said deed in the corresponding Registry of Commerce, and publishing an extract of it in the Official Gazette. This last one is normally, the most common path used by entrepreneurs.
Note: You may also be interested in our article on how to set up a company in Chile as a foreigner.
Create a company through a Notary or “Your Company in a Day”
Setting up a company in Chile is not a difficult process. However, along the way you will find many legal technicalities that can hinder the process and make it cumbersome. Therefore, having the advice of an expert lawyer in business law is crucial. Someone who can guide you in the set-up of the company, and accompany you in each of the procedures that must be done.
In Chile, there are two ways to set up a company:
- Through the notarial system, granting a public deed: the procedure is a little longer but has the advantage that allows you to create a company according to the specific needs of your business.
- Through the platform “Your Company in a Day”: the procedure is almost free and very fast. However, you have to fill out an online form that requires you being aware of some legal aspects.
Advantages and disadvantages of creating a company by the traditional method or Public Deed versus “Company in a Day”:
Advantages of the Public Deed
- The deed of incorporation of the company will be custom drafted and based on the needs and interests of the company.
Drafting the deed with the advisory of an expert lawyer in business law will allow it to fully adjust to what the partners want to establish for their business. Instead, when the company is created by the “Company in a Day” platform, the deed is created from a form with model clauses. If those who are creating the company do not know or do not understand certain legal terms, they can add or omit clauses that will be necessary later, which can be detrimental to the business in the future.
- It is easy to modify it once the company is already constituted and operating.
When it is created by Public Deed, it is easier to modify the company than when it is created in the Company in a Day platform. Companies that are created online in the Online Registry of Companies are managed by a rigid system. Any change that you want to make to the statutes could ultimately mean having to migrate the company to the traditional Public Deed system, which means a procedure that had not been planned at the beginning.
Disadvantages of the Public Deed
- The procedure is slightly longer and has higher monetary costs.
To set up a company by Public Deed, several procedures must be carried out. Among them, the granting of the public deed in the notary’s office, the registration in the Commercial Registry and the publication of an extract in the Official Gazette. Each of these procedures has deadlines and associated monetary costs. These will depend on the corporate structure and the size of the business. On the other hand, by doing the company in the “Company in a Day” platform, the process can be faster and at almost no cost.
Next, we will go step by step analyzing the procedures that must be done when setting up a company in Chile.
Steps to set up a company in Chile via Public Deed
#1. Incorporation of a company and define the corporate figure
When setting up a company in Chile, it is essential to properly choose the corporate figure. In Chile, there are several types of company. Deciding on one or the other will depend on the needs and interests of the business.
It is important to keep in mind that the legal structure of the business will determine which regulations the company will observe. In addition, it will define other aspects such as what its form of administration will be, who will make the decisions and how it will be taxed.
In Chile, there are two ways to undertake commercially:
- Natural Person: is an Individual Entrepreneur who develops commercial activities in his own name, with the same RUT or passport used by the natural person. He assumes rights and obligations of the activity he develops, responding for debts if any.
- Legal Person: it is an independent legal entity, with its own assets and distinct from the individual members that form it. It has its own RUT and is subject to rights and obligations that are recognized by the State.
Types of company under the modality of legal person
Commercial Companies:
- Limited Liability Company: It is a society of people in which the system of administration and representation can be freely established. It must be a minimum of two people up to fifty and can be national or foreign, natural or legal persons. The partners respond up to the amount of the contribution they made. Their participation and rights are represented in the membership fee.
- Commercial Collective Societies: They are formed for businesses classified as acts of commerce according to the Commercial Code. Its administration corresponds to the right of each and every one of the managing partners.
- Commercial limited partnerships: There are two types of partners: managing partners and limited partners. The former are those who have the faculty of administration and are jointly and severally liable for social obligations. The second, meanwhile, are the capitalist partners in terms of the social contribution and liabilities in relation to the administration of the company. The latter limit their liability to the amount of their contributions. There are two types of limited partnerships: the simple limited partnership and the limited by shares.
- Stock Company: It is a capital company that may have one or more shareholders. They can be natural or legal persons who make a capital contribution. The capital of the company is divided into shares and the shareholders will be 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 a term is not set, what the law indicates must be observed.
- Corporation: The corporation is a legal person, always of a commercial nature. It is made up of a common fund contributed by the shareholders, who are only liable for the amount of their contribution. There is the figure of the Shareholders’ Meeting, who make the decisions of an organic nature, and on the other hand there is the Board of Directors that makes the management decisions of the company. There are Open Stock Companies, that is, their shares are traded on the Stock Exchange, and Closed Stock Companies that have shares that are not traded on the Stock Exchange.
Civil Legal Entities:
- Civil Collective Societies: In this type of company, the partners respond even with their personal assets. The share of the insolvent is levied on the other partners and the agreements, as a general rule, are 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.
Sole Proprietorships:
- Individual Limited Liability Company (EIRL): It is made up of one person. This type of company is a legal person with its own assets and different from that 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.
#2. Company Constitution Deed
The Deed of Incorporation is the document that establishes the type of Company, the line of business that it will have, the commercial activity, the partners and their personal data. The contributions that each partner will make and how they will participate in the company and the profits will also be established here, and how they will respond in case of losses.
The limits and scope of the commercial responsibilities of the partners will be established in the Deed of Incorporation. At this stage, it is crucial to have legal advice. Specifically, with an expert lawyer in business law who can capture the interests of the business and, at the same time, the organization of the partners around the company.
#3. Granting of the public deed at the notary’s office
Once the corporate figure of the company and other corresponding elements have been defined, you must go to a notary’s office for the granting of the public deed. The cost of this procedure will depend on the type of company and the business capital registered on the deed.
#4. Inscription in the Registry of Commerce at the Real Estate Registrar
Once incorporated, you have 60 days to register the extract of the deed of incorporation of the new company in the Registry of Commerce at the Real Estate Registrar. The registration of the company, once the public deed has been granted, is carried out directly in the Registrar of Real Estate that corresponds to the domicile established by the company in its deed. The process takes between three and seven business days, and the costs vary according to which Real Estate Registrar is and the capital of the company.
#5. Official Gazette Publication
An extract of the articles of incorporation of the company must be sent to the Official Gazette (“Diario Oficial”) for publication. The publication is free when the company has a capital of less than UF 5,000, which is an amount currently equivalent to almost USD 200 thousand dollars.
#6. Report initiation of activities at the Chilean Internal Revenue Service (“SII”)
Once the company is incorporated, you can proceed to request and generate the RUT of the company at the Internal Revenue Service (SII). This procedure can be done through the SII web platform. Once the RUT of the company has been generated, it can be said that you have already traveled a good part of the way. Now, the next step corresponds to the report of initiation of activities at the SII. The tax regime that the company will observe will be indicated, and in general, an announcement will be made of the start of formal activities and subject to compliance with existing tax obligations in Chile. The start of activities must be done within the two months following the start of commercial operations. This procedure has no monetary cost.
The report of initiation of activities is a sworn statement before the Internal Revenue Service on the beginning of any type of business or work likely to produce income taxed in the first or second category of the Income Law.
Internal Revenue Service (SII in spanish)
Why report initiation of activities in the SII?
- It will allow you to issue electronic invoices to charge your customers.
- To make electronic invoices, you will need a digital certificate with which you can sign your electronic invoices digitally.
- In addition, starting activities means that the business is already underway and, with this, you will have to declare all the movements of your company.
#7. Bonus! Obtain the municipal patent of your company
Your company is already incorporated. Congratulations! Now there are some extra procedures that will allow you to comply with all the legal requirements when creating a company in Chile. One of them is to obtain the municipal patent of your company.
Municipal permits and commercial patents are requirements regulated by law. Its objective is to supervise that the companies are operating correctly according to the corresponding and binding regulations. The municipal patent is the definitive authorization for the set-up of your business. This permit will be given to you by the municipality that corresponds to the address of the company.
How to set up a company in Chile through the “Company in a Day” platform?
When setting up a “Company in a Day”, the writing of the Deed is automatic. This is created from a form with standard clauses that can be added or removed depending on the needs of the business. It is important to have the advice of a lawyer in this process, since there may be confusing legal terms that can make the process difficult.
Once the partnership deed is ready the partners must sign. This signature can be made online with the Advanced Electronic Signature (FEA) or at the Notary’s office in case the partners do not have one. Once the partners sign, they immediately obtain the RUT of the company. As in the traditional system by Public Deed, activities must be initiated in the Internal Revenue Service (SII).
Note: If you are setting up a company, you may also be interested in our articles on the Terms and Conditions and the General Data Protection Regulation (Chilean GDPR).
Why working with My Local Partner attorneys?
Setting up a business can be a complete challenge. Making sure that it meets all the legal requirements and that the deed says everything necessary for it to work as a Swiss watch can be difficult if we do not understand legal terms. Therefore, it is crucial to have professionals who have knowledge in the incorporation of companies, as well as in the tax area and company law.
Our My Local Partner attorneys have a wide track record in the set-up of Chilean companies. They focus on creating a society according to the defined business projection and business plan. And this includes all the corresponding administrative, legal and banking procedures.
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