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Money Matters
Starting a Business in Peru - I
By Carlos Vega Cumberland

So, you have decided to open a company in Peru. Whether you are going to be exporting to China, offering consulting services, going into the food industry or diving into some other profitable business, there are a few things you need to know before you get started.

First, let's look at the options on how you can legally organize your company. The most common form of business in Peru is the corporation or joint stock company (Sociedad Anónima or S.A.). Several other business organizations are permitted under Peruvian law, including the limited liability company (Sociedad de Responsabilidad Limitada or S.R.L.), the individual proprietorship (Empresa Individual de Responsabilidad Limitada or E.I.R.L.), and the branch of a larger company.

Corporation or Joint Stock Company:

This is the most commonly used form of business organization in Peru. It has similarities to a U.S. corporation and also to a partnership, but for the sake of simplicity, we will use the term “corporation” here. The owners (there must be at least 2) are safeguarded against liability for company debts up to the amount of the capital invested. Their capital is converted into shares (acciones) that make the partners legal shareholders of the company.

The corporation may adopt any name, but it must conclude with “Sociedad Anónima” or its abbreviations "S.A."

The closed corporation has many of the attributes as a regular joint stock company, although the board of directors is optional. In Spanish, it is called a “Sociedad Anónima Cerrada” or its abbreviation “S.A.C.”

The open corporation, on the other hand, is used for companies with 20 or more shareholders. It is known as a “Sociedad Anónima Abierta” or its abbreviation “S.A.A.” The Telefónica in Peru is an example of an S.A.A.

Remember that shares may be acquired with capital (monetary currency), but can also be acquired with tangible or intangible good such as real state, or by means of technological contributions that are presented under the form of physical goods. These shall be evaluated and reviewed by the Board of Directors.

Limited Liability Companies:

The Limited Liability Company or “Sociedad de Responsabilidad Limitada” is also commonly referred to as a hybrid of a corporation and a partnership. The partners' capital is not converted into shares, however, but into a percentage of participation in the company. Profits are also distributed according to the percentage of the capital each has invested; the number of partners can be as few as 2 or as many as 20. The partners have limited liability, and the name of the company must be accompanied by “Sociedad de Responsabilidad Limitada” or its abbreviation “S.R.L.”

Individual Proprietorship Company:

The individual proprietorship company or “Empresa Individual” is, as the name suggests, a company formed by one individual. It is therefore less complex and less expensive to organize, due to the simplicity of the organizational structure. There are distinct legal implications, however, for married persons.

The name of the company must be followed by “Empresa Individual de Responsabilidad Limitada” or its abbreviation “E.I.R.L.”

All of the above structures are required to be legally incorporated and registered in the Public Registry.

Next month, we'll conclude our discussion of starting a business in Peru by looking at opening a branch office, then offer important tips on registration with the Peruvian tax and local government authorities. See you next month!