Starting a Business in Guatemala: Key Elements to Consider
Starting a business can be a significant challenge if one is unfamiliar with the legal, economic, and social conditions of the location where the investment or venture is being undertaken. To improve the chances of success when doing business, it is essential to analyze these conditions and understand the related legal aspects. Below are some elements to pay attention to:
1. Understand Commercial Regulations
It is important to know the commercial regulations to define the most suitable legal vehicle for the business operation. In Guatemala, commercial companies are the most commonly used for conducting business. However, commercial law provides various options for starting a business, such as registration as an individual merchant, entering into distribution or representation agreements, and/or signing participation agreements.
For commercial entities, there are several types, some with shares and others without. All commercial companies have their own legal personality, separate from that of their partners. The company agreement must be executed as a public document before a notary and requires at least two participants to establish the company. The most commonly used entity for business development is the corporation (sociedad anónima), which has capital divided and represented by shares.
2. Tax Obligations
Every business is subject to tax obligations. Once the legal vehicle is defined, close attention must be paid to tax obligations. The success of the business will depend on tax planning, which should include an analysis of transfer pricing, double taxation agreements, and compliance with obligations, primarily related to Income Tax (ISR), Value-Added Tax (VAT), and the Solidarity Tax (ISO).
3. Workforce Considerations
It is essential to determine whether labor will be needed. An appropriate human resources strategy begins by considering the number of personnel required, the method of hiring, and labor regulations. This is crucial for regulatory compliance related to employment contract registration, employer obligations, filing workplace regulations (required for businesses with more than 10 employees), and social security affiliation (mandatory for businesses with more than 3 employees).
4. Regulatory Aspects by Industry
The business’s market or industry must be considered to identify the regulatory aspects involved, including the potential need for permits, licenses, and/or registrations. The fastest-growing economic activities in Guatemala include manufacturing, transportation and communications, international trade, energy generation, and agriculture, which are often highly regulated by various authorities.
5. Favorable Conditions for Investment
Guatemala offers favorable conditions for investment and business ventures. It is the leading contributor to the economic performance of the Central American region. Its strategic geography provides logistical access to both oceans and proximity to major logistics hubs. Additionally, its close ties with some of the world’s largest economies, such as the United States and Mexico, play a fundamental role. Guatemala stands out for its macroeconomic stability and solid financial system. Moreover, the government continuously seeks to stimulate and promote local and foreign investment by strengthening the legal framework and commercial activity regulations.
Jorge Luis Rodas
Lawyer and Notary | Founding Partner NexusLegal
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