Includes steps involved in establishing a local office.

The procedure for establishing an office is usually entrusted to local lawyers. Costs vary depending on the size of the company's capital share. Foreigners may own an Ecuadorian enterprise in most industry sectors.

A step by step process can be found on the World Bank’s “Doing Business Project” (http://www.doingbusiness.org/data/exploreeconomies/ecuador/starting-a-business/).
Foreign investors starting a business in Ecuador most frequently establish local corporations, or local branches of offshore entities. Alternatives include limited liability companies, partnerships, and mixed economy companies (when including government participation). Corporations, branches, limited liability companies, and mixed economy companies are registered with and controlled by the Superintendent of Companies and governed by the Companies Law. The legal representative may be an Ecuadorian citizen or a foreign national with an Ecuadorian resident or commercial visa.
Foreign companies may only be shareholders of Ecuadorian companies if their capital is represented by shares or stocks issued in the name of their partners or shareholders.

Corporations

The corporation is the most flexible form of legal entity, allowing a mixture of foreign and local capital. Private limited liability companies are useful as closed companies, but have disadvantages regarding the sale and transfer of capital, and are usually not advantageous to the foreign investor. The corporation offers the same major advantages to investors as does the corporate form in other countries, including: (1) the limitation of shareholders' liability to the amount of the issued capital, (2) shareholders are free to negotiate their stock without restrictions, (3) corporations are represented by managers who may be discharged at any time, and (4) continuity of the business as an ongoing concern is assured, regardless of changes in management or ownership.

Formation of a Corporation

The formation of corporations and their operations are governed by the Companies Law. The documents that must accompany the deed of incorporation include the company's by-laws, a certificate of the name of the company granted by the Superintendent of Companies, a certificate granted by the bank where the company has opened its capital account, and documents identifying the shareholders. Protection of a trade name is contingent on registration with the Ecuadorian Intellectual Property Institute (IEPI), and the Superintendent of Companies usually does not allow new companies to use names similar to those of existing companies. The Companies Law provides for the following: (a) a certificate of good standing must be issued by the competent authority of the domicile of the foreign shareholder, and a list of the stockholders of the foreign shareholders must accompany the deed of incorporation; (b) the foreign shareholder must appoint an attorney-in-fact to represent it within Ecuador; (c) foreign corporations whose by-laws contemplate the possibility of issuing bearer shares cannot participate as shareholders of Ecuadorian entities (corporations and limited liability companies). The certificate will be issued by the corresponding authority in the country of origin and the list must be signed and certified at a public notary by the secretary, administrator, or attorney legally authorized. The certificate and list must be notarized by an Ecuadorian consulate. 

Capital of a Corporation

A corporation’s capital must be specified in the by-laws, with total value resulting from the multiplication of the number of shares by their par value. Capital may consist of: (1) authorized capital as set forth in the corporation’s by-laws, (2) subscribed capital which the stockholders are required to pay in, or (3) paid-in capital. The minimum capital required for incorporation is $800, and at least 25 percent of the capital must be paid-in at the time of incorporation, and the balance within two years. Companies must file an annual return with the Superintendent of Companies containing financial statements and other relevant information, as well as reports from the legal representative, the corporate controller, and external auditors. Financial institutions and insurance companies regulated by the Superintendent of Banks are obliged to publish their June and December financial statements in a local newspaper.

Branches

To establish a branch in Ecuador, a foreign company must provide (1) proof that the company has been legally established in its country of origin; (2) proof that according to the laws of its country of origin, the company may establish branches and has the right to negotiate abroad; (3) a permanent legal representative in Ecuador; and (4) assigned capital of no less than $2,000.

This documentation should be presented to the Superintendent of Companies, along with a certificate issued by the Ecuadorian consulate nearest the foreign company's headquarters certifying the establishment and legality of the company in its country of origin and that it is authorized to do business abroad.

Limited Liability Companies

This type of corporate form closely resembles a limited partnership and is suitable for that type of operation. A limited liability company is characterized by (1) having two or more members, not to exceed 15; (2) the members have limited liability for company obligations up to the amount of their individual contribution; (3) foreign corporations are excluded from membership; (4) capital cannot be less than $400, and at least 50 percent of the capital must be paid-in at the time of formation and the remainder within one year; and (5) a legal reserve must be funded by the transfer of 5 percent of annual profits until the reserve equals 20 percent of capital.

Each year in January, the legal representative of a limited liability company is responsible for presenting to the Superintendent of Companies a list of the foreign companies that are its partners or shareholders including the name, nationality, and domicile, along with notarized photocopies of the certificate referred to above.

Mixed Economy Company 

A "mixed economy” company is one with both private and public capital. Public sector funds may come from the central, municipal, or provincial governments, or from legal representatives of either public or parastatal entities.

Single-Person Company

The Companies Law allows for the establishment of single-person companies which must be constituted by one individual. Corporations and limited liability companies may convert to a single person company when these are left with only one partner or shareholder.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.