Doing business in a foreign country requires a thorough knowledge of the different environments the venture will be immersed in. Within the legal context, to choose the right vehicle to do business is essential for many issues. Following, we will review the basics on how to choose a legal vehicle from the limitation of liabilities and corporate structure standpoint and on how to set up a company in Argentina.
Choosing the suitable legal vehicle Argentina offers different legal vehicles to set up a business, although foreign investors almost always use branches or subsidiaries to operate in the country.
Branch of a foreign company
Incorporating a branch (sucursal) of a foreign company has some advantages over setting up a domestic company, such as the facts that:
The branch does not need any minimum allocation of capital, except for certain regulated industries; It just requires a legal representative registered with the Public Registry (no board or any other officers are required). However, some disadvantages are:
The foreign parent company is fully liable for the branch's debts; The branch cannot raise capital from third parties. In all cases, a branch is required to keep books separately from those of its foreign parent company and to file its financial statements before the Public Registry.
Subsidiary of a foreign company
As an alternative to branches, foreign companies most commonly set up a subsidiary, either a corporation (Sociedad Anónima with only one or more shareholders) or a limited liability company (Sociedad de Responsabilidad Limitada with two or more partners). To know more on the Sociedad Anónima, please, read our article Doing business in Argentina Sociedad Anónima: Basics on our Legal Blog. Single-shareholder companies have been covered by our article Single-shareholder company in Argentina on our Legal Blog.
The main advantages of a subsidiary over a branch are:
The partners' liability is limited to the capital contributed by them; and A corporation may offer its shares publicly to get financing. Despite the differences in structure and functioning, both corporations and limited liability companies also share certain features to be pointed out:
There are no nationality or residence requirements for partners. Foreign individuals or non-resident individuals or companies may wholly own any company set up in Argentina, with the exception of a few certain regulated activities; The majority of the company's...