If you or someone you know intends to create a business in Guatemala from the United States, it is important for both foreigners and locals to know the basic legal framework for starting a business in the country.
Guatemala ranks 5th out of 54 countries in the Global Entrepreneurship Monitor, the cost to start a business is approximately 780 USD and 4.5 million people perceive opportunities to create one.
These data are encouraging both for Guatemalans and for those who reside in the United States, either because they have relatives in the country or because they are looking for the best business ideas to invest in the country.
Lisa Juan José Gutiérrez Mayorga explains the steps to establish operations in Guatemala, and affirms that foreigners do not have significant restrictions.
Start a business in Guatemala from the US
An important aspect that the businessman points out is that the person who is in the United States locates a Guatemalan as a partner or as a legal representative in Guatemala. Institutions such as banks and the commercial registry require that some of the partners have Guatemalan residence with the aim that the company is not left without a legal representative during the time it is operating.
To have a registered signature in the banks, one of the partners must have a local address. The recommendation is to seek advice not only to see legal issues to establish the business, but also operational ones such as procedures in the Mercantile Registry, banking entities or in the Superintendency of Tax Administration (SAT).
These are the steps that a foreign person interested in investing in a business in Guatemala should follow:
Operate as an individual person
To operate as an individual, foreigners can travel to Guatemala to carry out their activity or they can grant a general mandate or special in favor of an individual person or a Guatemalan company to represent them in the business.
Any document issued abroad and that has to take effect in Guatemala must have the entire chain of legalizations to be valid in the country.
Incorporate a branch, subsidiary or agency of the foreign company:
In order for a company legally constituted under foreign law to establish itself in the country or have branches or agencies there, it must meet the following requirements:
- Verify that it is duly constituted in accordance with the laws of the country in which it was organized.
- Submit a certified copy of its articles of incorporation and its bylaws, if any, as well as any modifications.
- Verify that a resolution has been duly adopted by its competent body, for these purposes.
- Constitute in the Republic a representative with representation, with broad powers to carry out all legal acts and business of its line of business and to legally represent the company, in court and outside of it.
- Constitute an assigned capital for its operations in the Republic and a bond in favor of third parties for an amount not less than the equivalent in quetzales of fifty thousand dollars of the United States of America, (US$50,000.00), which will be established by the Mercantile Registry, which must remain in force for as long as said company operates in the country, as well as being expressly obliged to respond, not only with the assets that it possesses in the territory of the Republic, but also with those that it has abroad, for all acts and business carried out in the country.
- Submit to the jurisdiction of the courts of the country, as well as to the laws of the Republic, for the acts and businesses of private law that are carried out in the territory or that have their effects in it.
- Submit a declaration that neither the company nor its representatives or employees may invoke foreign rights, since they will only enjoy the rights, and the means to exercise them, that the laws of the country grant to Guatemalans.
- Declare that before leaving the country, you will meet the legal requirements.
- Submit a certified copy of your latest balance sheet and profit and loss statement.
All the documents described above must be submitted to the Mercantile Registry so that they can issue the authorization to operate the branch or agency in Guatemala. The documents must comply with the corresponding legalization chain and in the event that they are in a language other than Spanish, they must be translated into Spanish.
Likewise, Guatemalan legislation allows a company incorporated abroad to carry out certain activities, without the need for government authorization. Among these activities we find the following:
- Open bank accounts in a bank of the Guatemalan system. Despite not needing a government authorization to open a bank account, it is important to mention that banks have internal policies and requirements that can complicate the opening of a bank account in a certain way, for example, most banks require that the person who has a signature registered with the Bank is Guatemalan or resides in the country.
- Be part of any management or trial that is aired in the courts of the republic or in the administrative process.
- Make sales or purchases only to an independent commercial agent, legally established in the country.
- Manage orders through legally established agents in the country, provided that the orders are subject to confirmation or acceptance outside the territory of the republic.
- Grant loans or open credits in favor of entrepreneurs established in the Republic.
- Free, endorsement or protest in the Republic, titles of credit or holder of these.
- Rent personal property, real rights or real estate, provided that these are not part of a company or regularly negotiate with them.
Incorporate a Guatemalan company:
The foreign investor can also organize with another individual and establish a Guatemalan company to operate.
The Guatemalan Commercial Code allows organizing in 5 types of companies:
- Collective Partnership: Collective (similar to the “US General Partnership”): It is a personal partnership, since it emphasizes the members that comprise it.
Among its characteristics are the following:
All members are subsidiarily, unlimitedly and jointly liable for the social obligations of the company.
The denomination is formed with the name and surname of one of the partners or with the surnames of two or more partners.
The participation is not represented in shares. The different types of companies differ mainly in terms of the responsibility that each partner has within the company.
- Simple Limited Partnership: It is a personal partnership, since it emphasizes the members that comprise it and where only part of the partners have liability to third parties. Among its characteristics are the following:
There are two types of partners, the general partners, who are subsidiarily, unlimitedly and severally liable for the social obligations of the company; and the limited partners, who respond only for the amount of their contributions.
The denomination is formed with the name and surname of one of the limited partners or with the surnames of two or more limited partners.
The participation is not represented in shares.
- Limited Partnership by Shares (similar to the “US Limited Partnership”): It is a partnership, since it emphasizes the members that comprise it and where only part of the partners have liability to third parties. Among its characteristics are the following:
The capital is divided and represented in shares.
There are two types of partners, the general partners, who are subsidiarily, unlimitedly and severally liable for the social obligations of the company; and the limited partners, who respond only for the amount of their contributions.
The general partners are responsible for the administration of the company and legal representation.
- Limited Liability Company (similar to the “US Limited Liability Company”): It is a personal and capitalist company, since it emphasizes the members that comprise it, but they only respond to third parties for the obligations of the company up to the amount of their contributions. Among its characteristics are the following:
The participation is not represented in shares.
Maximum of 20 partners.
The name of the company must refer to the main social activity.
- Limited Company (similar to the “US Business Corporation”): It is the most effective and recommended form of organization to operate in Guatemala, since it is a company that emphasizes capital and not the members that comprise it. Among its characteristics are the following:
Capital divided and represented by shares
Shareholders are liable up to the amount they have paid for the shares.
Initial paid capital must be at least Q.200 (approximately US$28)
There must be a minimum of 2 shareholders, and meetings can be held electronically. As long as it has been established from the beginning, with their respective contact evidence to support that it was the shareholder who was at the meeting.
The shares must be nominative and registered in the Shares Registry Book to be valid.
