A guide to establishing a small business in Ecuador.

Establishing a business in Ecuador is not only tricky for expats, but virtually impossible if you do not know which steps to take. And using a lawyer will virtually bankrupt you before you have even started.  Below is an account of the steps that I followed in order to establish a small startup in Guayaquil over a period of around 2 weeks without making use of expensive lawyers.

First a rant: Why is it so complicated to start a business? Surely the legal minds can all come together and find an easier way to make money off us startups without us having to go through the mind numbing boredom and pain of running around from one office to another having to sign and resign documents that makes zero sense to those of us with little or no legal background? They are already charging us an arm and two legs only for us to have to do their admin for them as well!  Ok, rant over, now where was I? Oh yes, the rather tricky business of starting a business in Ecuador.

Our time at the notary involved watching Mr Bean reruns on TV while waiting an eternity to be helped

Our time at the notary involved watching Mr Bean reruns on TV while waiting an eternity to be helped

It all started off swimmingly well when, after making the necessary enquiries at the Superintendencia de Compañias in Guayaquil, my partner was given the rather reassuring news that the entire system of registering a business was now done online.  This could be done by visiting the Superintendencia website at http://www.supercias.gob.ec/ Armed with this information we set about registering the company by first establishing whether the name was available.  This we did by checking on the website in order to verify that we were not infringing on any other copyrights with our chosen name. After being given the all clear, we then started the process of formally registering ‘Pacific Shuttles’ in the online portal. When registering, you have to be a natural citizen (Ecuadorian) or be eligible to work in Ecuador, so make sure that you have the requisite Visa before starting the process to avoid any disappointment later. My specific Visa is a 9IV which I obtained as a result of having an Ecuadorian child. This makes me eligible under Ecuadorian law to enter and work indefinitely.

Without giving too much details, the company we intended registering needed at least two partners.  Once the one partner registers, they are asked to give the details of the other partners who are then sent an email with the specific link to the website. Once you have set up your profile you are then able to enter the site and add all your personal details.

After completing most of the necessary details in the online portal, we suddenly hit a few snags. One of which was the system informing me that I was deceased. After lots of head scratching we decided to try and access the site by using another laptop, which seemed to work since now I was able to include my personal details. The elation at not being dead soon gave way to frustration after the system simply refused to move on to the next page regardless of how many times we changed the data that was required. Eventually we decided to forego the ‘more convenient’ internet portal and use the rather outdated method of physically going to the office in Pichincha road, near the Malecon 2000.  Once we arrived at the offices we were told by a rather pleasant woman at enquiries that they were currently experiencing difficulties with the online registration portal and that it could take up to one week to fix. Anyway, even if the portal had been operating as it should, it was simply a way of collating the information that would then be printed out which would then have to be submitted to a lawyer or notary. Good to know, now if only they tell you this before starting this process!

Anyway, after being told what steps to follow, we made our way down to an internet cafè in order to print the requisite documents. These included a copy of each partners cedula, my passport as well as the letter that we received from the Superintendencia informing us of the availability of the name we had chosen. As an Ecuadorian citizen, my partner also had to present a proof of address by means of a utility bill as well as proof that she had voted.  This we then took to a notary who we hoped would be able to assist in finalizing the registration process at a cost of around $11 per partner. This prices varies according to the size of the company and it is based on a percentage of the capital that is in the businesses bank account. After being given the runaround at two notaries who seemed to be really busy, we eventually ended up at a lawyer who happened to be in the same building up the road from the Superintendencia. He was good enough to give us the information that we needed but at a price of $400 per partner we naturally balked at the exorbitant fee and fled his office like that of a criminal fleeing the scene of a crime, which is what we felt he was trying to perpetrate on us!

Our very helpful, and expensive, lawyer.

Our very helpful, and expensive, lawyer.

We made our way back to the original notary where we were informed that the same service could be performed by them for a fee of $50 which we happily handed over. We were told that the process would take a couple of days and that we should return with a further $60 that would go towards the notary fees. This still seemed reasonable when compared to the lawyers fees, therefore, two days later we returned and signed off on the requisite forms with me signing as director and my partner as president. Note that under Ecuadorian law, spouses may NOT be partners in business, so if you do decide to get married at a later stage, one of you will have to sell your shares in the company. Also note that the roles are not fixed and that you need to switch roles every 2 to 3 years. You also need to complete a registration form online for the Registro Mercantil at their website: http://registromercantil.gob.ec/guayaquil.html which needs to be printed out, in which you accept the legal responsibilities as director.  You have to do the same for the position as President.  The president of the company is more of an administrative function while the director, or ‘General Manager’ in this case carries the legal responsibilities of the business.

Be prepared for the endless bureaucracy and make sure you have all your documents at hand.

Be prepared for the endless bureaucracy and make sure you have all your documents at hand.

After having all the documents (in triplicate) legalized at the notary, we then moved off to the north of the city, near the Mol del Sol to Registro Mercantil who shares an office with the Dirección Nacional de Datos Publics, in order to drop off the copies of the cedulas, passports, proof of address and the three copies of the ‘articles of association’ of the new company.  It transpired that the cost of $11 which we assumed would go to the notary, was in fact payable to the Registro Mercantil as part of their admin fee. The verification process takes around three working days, if there are no hiccups, but beware, even the smallest mistake could lead to unnecessary delays.  In our case the notary had written the companies name as Pacificshuttles (one word) whereas we had written it as Pacific Shuttles. This resulted in an email asking us to please return and clarify the name before it could be registered.

After this step, the company is then officially entered as a legal entity and you are then able to move on to the next steps that includes setting up a bank account, acquiring the requisite permits from various government departments and a tax clearance certificate. Only once all of these steps are completed then you may formally and legally operate.

And voila!!!!! A business is born!!

I will be writing about these steps in later blogs over the course of the next couple of weeks so feel free to return if this has been helpful.

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