Company Incorporation in El Salvador, El Salvador Starting Business
In El Salvador, companies can have natural persons or legal persons (companies, entities, NPO) as partners. A minimum of 2 partners is required to establish a Salvadoran company, and the minimum capital for the initial setup is USD 2,000.00.
Requirements for Starting a Business in El Salvador:
- Tax Identification Number - NIT - of the partners (in the case of not having one, we can
help in obtaining one),
- Personal ID Card, Resident Card or Passport of each one of the partners. In the case of being shareholders of other companies, a document of company establishment is required.
- Name with which the company will be denominated; in order to investigate with the El Salvador Commercial Office, if the name is available.
- In the event that the partners are of Salvadoran nationality, or domiciled foreigners, they must present a valid municipal solvency in original or a copy certified by a notary.
- Purpose: The main activity that the Company will be dedicated to. -
- Share Capital: Business Law in El Salvador indicate that for Salvadorans as well as for Foreigners, the Share Capital must be of USD 2,000.00. From this capital, the amount of USD 100.00 must be paid to the order of the new company with a certified check from a Salvadoran Bank. (This is the equivalent of 5% of the minimum required capital). The balance of the Share capital will be paid in a period of two years. -
- The percentage of shareholder participation for each partner; the way in which the stock will be distributed.
- Who will be the Legal Representative and who will be the substitute
- Registration of the companies at the El Salvador Commercial Office takes an average of 5 working days. -
- Companies with a share capital of USD 2,000.00 pay registration taxes of USD 11.40.
NOTE: If the shareholders, or any of them, are/is not able to be present for the signing of the articles of incorporation, another person may do it in his/her/their/its representation through a Power of attorney hich can be signed locally or abroad. Upon request, we will send the format of said Power of Attorney at no additional cost.
NOTE: The expenses of inscription of a company formed with the most minimum capital stock are of USD 184.25, expenses that understand: Commerce Registration inscription, Registration of Initial Balance, and Inscription Rights Payment of the Company
INITIAL PROCEDURES TO START UP NEW COMPANIES IN EL SALVADOR
PROCEDURES OF FORMAL REQUIREMENTS AND LAW REGISTRATIONS FOR COMPANIES IN EL SALVADOR
a) OBTAINING THE INCOME TAX CONTRIBUTION NUMBER (NIT) AND THE
VALUE ADDED TAX CONTRIBUTION NUMBER (IVA), FROM THE
MINISTRY OF FINANCE.
- File a complete Form F210
- File a copy of the Public Deed of Constitution duly authenticated along with a copy of the same.
- File a copy of the Legal Representative’s credential document, duly authenticated along with a copy of the same, or a copy of Power of Attorney granted to the proxy, duly registered.
- File a copy of the Legal Representative’s NIT and ID, duly authenticated.
- Authorization to the person who will carry out the diligences, giving details of the
company and of the legal representative; and also indicating Folio from the Form 210.
- File the NIT Receipt of Payment.
b) REGISTRATION AT THE CITY HALL
Municipality or city where the company will be domiciled.
- File the Form for entrepreneurial processes.
- Copy of the Public Deed of Constitution duly authenticated.
- Copy of the Company’s NIT duly authenticated.
- Copy of the Legal Representative’s or Proxy’s credential document duly
authenticated, along with the Legal Representative’s NIT and ID
- File the Opening Balance Sheet in original, duly sealed and signed by a Public
Accountant duly authorized.
- Tax payment of 0.2% over the initial capital stock. In case that a company is started up with the minimum amount of capital stock (of USD 2,000.00), the amount of USD 4.00 will be paid.
c) REGISTRATION AT THE GENERAL OFFICE OF STATISTICS AND CENSUS
- File the Registration Form.
- File a copy of the Public Deed of Constitution.
- Copy of Company’s NIT.
- Copy of the opening balance sheet when the application is made within the same year.
If the registration is made in a different year, a Balance Sheet as of December 31 of the prior year must be filed.
- Payment of USD 5.00 is made when the Opening Balance or Balance Sheet is prepared with a Capital Stock of USD 11,428.57. When the Capital Stock is more than USD 11,428.58 and less than USD 57,142.86, the amount of USD 8.00 must be paid. When the Capital Stock is more than USD 57,142.87 and less than USD 114,285.71, the amount of USD 10.00 is paid. When the Capital Stock is more than USD 114,285.71 and less than USD 228,571.43, the amount of USD 15.00
is paid. When the Capital Stock is more than USD 228,571 44, the amount of USD 20.00 is paid.
d) REGISTRATION AT THE REGISTRY OF COMMERCE
- File a document for registration, signed by the Legal Representative or Proxy.
- File the payment receipt for USD 125.71 as registration rights.
- File the company’s Registration payment receipt at the City Hall where the company is domiciled.
- File the company’s registration at the Statistics and Census Office.
- File the opening balance sheet, signed and sealed by a Public Accountant duly
- Registration of initial balance sheet which cost is USD 17.14.
PROCESSES TO FOLLOW WHEN EMPLOYEES ARE HIRED
a) REGISTRATION AT THE SALVADORAN INSTITUTE OF SOCIAL
- File a complete registration Form, signed by the Legal Representative or Proxy.
- Copy of the Public Deed of Constitution duly authenticated by a Notary Public.
- Copy of NIT duly authenticated.
- Copy of the Legal Representative’s credential document or Power of Attorney, duly
- Copy of the Legal Representative’s NIT and ID duly authenticated.
- File a payroll, two employees as a minimum.
- File an sketch of location of company’s domicile.
b) REGISTRATION AT THE PENSION FUNDS ADMINISTRATOR OFFICE
- File a document with all company’s details, before the selected AFP.
- Attach copy of the company’s NIT and IVA to the selected AFP.
- If the employees are not affiliated to any AFP, encourage them to do it with the AFP of their preference (AFP CONFIA or AFP CRECER).
ACCOUNTING SECTION TO START UP A COMPANY
- Elaboration of the Accounting System (description of the system, Chart of Accounts, and application manual) which has to be authorized by a certified public accountant duly registered and authorized by the Board of Accounting Profession of El Salvador.
- Legalization of accounting books (journal book, ledger book, financial statements book, minute book, inventory book, balance book, cash book, general shareholders’ and directors’ meeting book, and capital increase/reduction book) which have to be authorized by a certified public accountant duly registered and authorized by the Board of Accounting Profession of El Salvador.
- Legalization of tax books-IVA (Sales Book to Taxpayers, Sales Book to Consumers, and Purchase Book). Which have to be foliated and authorized by a certified public accountant duly registered and authorized by the Board of Accounting Profession of El Salvador.
- Obtain from the Ministry of Finance, the authorization for elaborating the fiscal stationery (tax credit vouchers, final consumer invoices, tax remission notes, credit and debit notes). The Legal Representative or Proxy has to sign the application attaching a copy of company’s Public Deed of Constitution, NIT, IVA, as well as his credential document or Power of Attorney.
- When obtaining the authorization from the Ministry of Finance, the fiscal stationery is printed, against presentation of the mentioned authorization, by one of the printing houses duly authorized by the Ministry of Finance.
IN SHORT, THE FOLLOWING REQUIREMENTS ARE MANDATORY TO A COMPANY FOR LEGAL OPERATIONS IN EL SALVADOR
- To be registered at The Ministry of Finance.
- To be registered at the City Hall of the municipality or city of its domicile.
- To be registered at the General Office of Statistics and Census.
- To be registered at the Registry of Commerce and obtain the Certificate of Registration.
- To be registered at the Ministry which is in charge of regulate the company’s line of business.
- To be registered as employer at the ISSS and AFP.
- The accounting system (Description of the system, Chart of Accounts, and Application Manual).
- Legalization of accounting books (Journal book, ledger book, financial statements book, minute book, inventory book, balance book, cash book, general shareholders’ and directors’ meeting book, and capital increase/reduction book).
- Legalization of tax books-IVA (Sales Book to Taxpayers, Sales Book to Consumers, and Purchase Book).
- To have at disposition the fiscal stationery duly printed (Tax credit vouchers, final consumer invoices, tax remission notes, credit and debit notes).
The variation or range of professional fees depends on some conditions, such as: municipal location where the company is domiciled, the amount of folios for each accounting book to be authorized by the Certified Public Accountant, complexity of the Accounting System and its application manual, the company’s amount of capital stock.
The expenses made for tax payments, buying of books, printing of fiscal stationery, and others, will be filed to the client for reimbursement or for settling his account.