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Forming a Costa Rica Corporation – S. A. or S. R. L.? Differences

    There are many kind of legal entities, but for business in Costa Rica, there are two that are used the most. The S. A. or SA. (which stands for Sociedad Annima, something like  Anonymous society) and the S. R. L. or SRL (which stands for Sociedad de Responsabilidad Limitada, something like  Limited Liability Society).

    They both are limited liability corporations, so regarding this matter there is no difference.

    Basically, the S. A. is a kind of corporation that is supposed to be used when there are many shareholders and/or  when the idea is to negotiate and sell shares in the stock market. (Of course, an S. A.  requires some additional authorizations to participate in stock market, but if you want to negotiate in such market, it must be an S. A.)

    Because it is suppose to have so many shareholders, this kind of Corporation must have a Board of Directors with a minimum of 3 members and a Fiscal, which is kind of Auditor that represent the shareholders. This means that if you want an S. A., you must appoint at least 4 officers. (3 in the board and one Fiscal). In your case, you will be only 2 partners, so, you will have to ask some friends or relatives to serve as a officers and explain them the risks it means and so on. So, it becomes sometimes a non comfortable situation.

    Some people use this corporation also because it can make easier to hide the names of the real partners. I mean, for the public, it is almost impossible to know who are the partners.

    There will be a private record that shows who are the partners. If a Judge requires information, it may be possible to know in the process who is the partner according to such record. However, because the shares may be negotiated without registering the transfer in such book, at the end is not sure that what such records show is the truth. (This is not suppose to happen with the S. R. L. in which the shares are a different kind of shares). (A Judge can only require such information in some special cases, not at any moment).

    The S. R. L. is a kind of corporation that is supposed to have only a few partners and its shares are not to be negotiated in the stock market. Therefore, there is not need for a Board of Directors and there is no need for an Auditor. (Fiscal). The Corporation will have only one or more Managers, with the Powers of Attorney and representation that the partners decided. The administration of this corporation is supposed to be easier that in a S. A. (but when you only have a couple of partner, virtually there is not too much difference in regards such administration).

    Again, the names of the shareholders are not in a public record, so, for the public, is  almost impossible to know who are the partners. However, there will be a private record that shows who are the partners, so, if a Judge requires information, it may be possible to know in the process who is the partner.

    For tax purposes in Costa Rica is exactly the same. (You must ask your accountant about if it makes a difference in your case in the United States. I mean, I understand that sometimes it is possible for a U. S. citizen to use a S. R. L. as a kind of a pass through corporation in the United States, meaning that you may report some expenses of the corporation as if they were your personal expenses. However, this is something that you must consult with your U. S. Accountant.

    Because there is a lot of confusion about this, a lot of people (even attorneys), use only S. A., but the true is that in most of the cases there is no need of an S. A. In fact, it is supposed that the law must require a big number of partners to create an S. A.. However, because of a mistake in the Costa Rican Law, it is allowed to create a corporation of this kind by only 2 partners.

    Copyright E&T ESCROW & TRUST SOLUTIONS S. R. L. Costa Rica.  ( www.escrowtrustsolutions.com )

    Please Note: This material is for personal use only and is protected by Copyright Law. It is provided as general information only and does not constitute and is not a substitute for legal or other professional advice. Reliance on this material is solely at your own risk. Always consult your own legal or other professional advisors and discuss the facts and circumstances that apply to your specific case.

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