Costa Rica’s Limited Liability Companies and their Advantages
The incorporation of Limited Liability Companies (LLC) in Costa Rica offers several advantages for entrepreneurs and businessmen who wish to establish a business. Some of the main advantages of incorporating an LLC in Costa Rica are:
Limited liability: one of the most significant advantages is the limitation of liability of the members, this means that the members are not personally liable for the debts and obligations of the company, their liability is limited to the amount of their capital contribution, and this provides protection and security to the members in event the company faces financial difficulties.
Flexibility in structure and management: LLCs offer flexibility in terms of structure and management. The members are free to determine how the corporate capital will be divided, as well as the rights and obligations of each member, and the members may establish specific agreements in the articles of incorporation to regulate the decision-making and the distribution of profits. The L.L.C. has a simpler management body, since it is administered by means of managers, who can be one, two or the number required, and with the limitations that are desired to implement, so that it is possible to have a single manager, which is practical for the undertakings.
Ease of incorporation and management: the incorporation process is relatively simple and fast. It requires the drafting of a corporate contract and its registration in the National Registry. Furthermore, the day-to-day management of this type of company is less complex compared to other legal forms, which facilitates the administration of the business.
Low minimum capital required: unlike other legal status, such as corporations, LLCs do not require a high minimum capital for their incorporation. This allows entrepreneurs to establish a company with a lower capital, which reduces initial costs and facilitates the setting up of the business.
Tax benefits: these companies may enjoy certain tax benefits, such as preferential tax rates for small and medium-sized enterprises, as well as the possibility of using special tax regimes. This can result in significant tax savings and contribute to the profitability of the business.
Continuity and transferability: the incorporation of an LLC allows the continuity of the business even in event of demise or retirement of one or more members, since the transfer of participations or shares in an LLC is simpler compared to other legal status, which facilitates the entry of new members or the transfer of ownership in case of sale or succession. In an L.L.C. the quotas (the name given to the shares in this type of corporation) cannot be transferred to a third party without the consent of the rest of the members. For this reason, it is usually said that the L.L.C.s’ are closed Likewise, in event of sale of the quotas in an L.L.C., the members who do not sell have what is called a preferential acquisition right, that is to say, the possibility of acquiring with preference the shares of the selling member, in order to maintain control of the corporation.
