The S.A. and the S.R.L. Company

Costa Rica offers a number of corporate structures which can be utilized as either local or offshore companies and taxed on a territoriality basis depending on source of income. It is therefore left up to investors to form the type of corporate structure that best suits their business requirements, especially as the decision to incorporate one corporate structure over the other relies on legal framework as it pertains to management, privacy, tax efficiency, restrictions and powers.

Limited liability companies are generally more accepted on a world wide scale for conducting business since as a type of juridical entity, the limited liability company indicates structured management and disassociation from ‘personal interests’ in the sense that the assets of a limited company are separate from those of its owners. By using a limited liability company, therefore, an investor has greater leverage and credibility as a business associate.

Costa Rica offers two main types of limited liability companies, the Sociedad Anónima (S.A.) and Sociedad de Responsabilidad Limitada (SRL), which both present desirable advantages to investors. Translated into English, Sociedad de Responsabilidad Limitada means Limited Liability Company, so some misunderstanding may arise when attempting to cipher the distinct advantages that a Costa Rica SRL may have over an SA, and vice versa, due to the fact that both structures are limited liability companies.

Without going into too much detail, one may simply contend that limited liability should be a basic requirement and standard for companies that are meant for trade, especially where stakeholders are concerned; but, investors should also be provided with diverse corporate structures which offer distinct benefits and cater to specific needs without jeopardizing the company’s image or ability to do business. A clear example of this can be drawn from the International Business Company (IBC) and Limited Liability Company (LLC), which are both companies with limited liability, but cater to different business wishes without taking away or compromising credibility, ability to do business and the advantage of limited liability.

In short, the decision to incorporate either a Costa Rica S.A or SRL rests not only on limited liability, but the advantages that these companies offer based on their respective legal frameworks.

With regard to the Costa Rica SRL, management and ownership are two of the most relevant factors that influence an investor’s decision. One, SRLs can be managed by one person; therefore, decisions can be taken free from the regular protocol of a board of directors. A single individual may also wish to form his company without the involvement of second or third parties and be free from any legal demands to appoint officers or to have more than one shareholder. A benefit of this arrangement is that rather than operating as a sole proprietorship, an individual is capable of owning and managing a corporation that is credible and widely accepted.

If there are other members in the Costa Rica SRL, there is no requirement to mention their names; and this in its own way provides reliable privacy and protection. For Costa Rica SRLs with two or more individuals, the legal framework heavily protects ownership by prohibiting the transfer of shares to persons who are not shareholders without the approval of the other shareholders who legally exercise right to first refusal to purchase. If a Costa Rica SRL has more than one manager but operates with only one, it is mandatory that powers of attorney be issued to each of the other members as formal and legal recognition of their position and capacities.

As a simple note, though the Costa Rica S.A. is often described as the most commonly used corporate structure, because of these features, Costa Rica SRLs are frequently incorporated by individuals to whom they are attractive and beneficial.

Besides other advantages, what the S.A offers is a legal framework that puts in place a strict corporate structure for management while enabling a high degree of freedom and flexibility in ownership and the administration of shares. Contrary

to the Costa Rica SRL, a sociedad anónima must have a Comptroller, a three (or more) member board of directors and three additional individuals to perform the duties of President, Treasurer and Secretary. With regard to share ownership, as long as the necessary amendments are made to the Share Register, contracts signed and certificates endorsed, shares can be freely transferred to individuals who are not shareholders without seeking the approval of the other shareholders. The decision to alter powers of attorneys and a company’s by-laws can be taken at a shareholder’s meeting at which a member can represent himself or delegate a proxy. Any amendments to the powers of attorney and by-laws of a Costa Rica S.A. must be recorded in the books prescribed and authorized by the tax authorities. In all, sociedades anónimas are to maintain a total of six corporate books known as the Libro de Actas. The Libro consists of two separate books for recording the minutes of board and shareholders’ meetings, one stock register and three books for accounts comprising the Inventory and Balances, Accounts Ledger and General Ledger.

A few common features of both the Costa Rica S.A and SRL would include registration with the tax authorities, details of the Articles, the acceptance of members and owners who are citizens of other countries, the registration and use of corporate names. Both the Costa Rica S.A. and an SRL offer distinct benefits and can be used as credible Costa Rican offshore companies.