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If you are about to start a business or you already have it underway and want to regularize it, it is necessary that you have professional advice on the legal forms available to carry it out.

Choosing the legal form of a business is a very important task before starting it up. Fundamental aspects such as constitution costs, taxes to be paid, liabilities on debts, among others, will depend on this.

Here are some considerations to keep in mind:

Incorporation costs

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The incorporation of a company entails stamp, notary and professional fees.

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The sole proprietorship has low incorporation costs, followed by the SAS and the SRL

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The SA is the most expensive legal form to establish, its cost being more than double that of the incorporation of the SRL

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Regarding the opening times of the companies, the sole proprietorship takes 3 days, the SAS 7 days, the SRL 15 days and the SA 90 days.

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Responsibilities

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The responsibility that people have against the debts of the company for taxes, labor, or suppliers, will depend on the type of company adopted.

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The sole proprietorship is the one with the least protection, providers can claim their debts and the individual must respond in an unlimited manner with their personal assets.

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The LLC grants certain protection to the patrimony of the person, the partners being liable only for labor and tax debts (the latter only in the event that it is proven that the partner acted negligently).

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The SAS and the SA have the same risk coverage, being par excellence those recommended for people with medium to high net worth.

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The shareholders of both companies are not liable for the debts of the company, the only one who will respond will be the director or legal representative.

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The director or legal representative will only respond with their assets for tax debts in which it is shown that they acted negligently, except in relation to the IRAE where they always have responsibility.

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Taxes

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A very important aspect to take into account are the taxes that are related to each legal form. Taxation tax regimes vary according to the different types of company.

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Currently there are beneficial regimes in which entrepreneurs can take refuge, such as the regime of companies Literal E of article 52 of Title 4 or monotax (it must be analyzed if the type of business is included in some of these regimes and if they are complied with the remaining conditions).

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The sole proprietorship, the SAS and the SRL offer the option of liquidating the IRAE in a fictitious manner, provided that the annual income of the previous year was lower (approximately USD 425,000), this form of liquidation can result in a much lower IRAE payable if it is purchased with the real liquidation regime of the IRAE.

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Generally they opt for the fictitious IRAE regime, companies that do not have significant expenses to discount.

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The SA must compulsorily liquidate the IRAE in a real way, which is calculated as follows (equation for simplification purposes):

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IRAE rate = 25%

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IRAE = 25% Net tax income

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Net tax income = Income - Tax deductible expenses

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Image before customers

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Finally, it must be taken into account that many clients and suppliers will look at the legal form of the company to determine the greater or lesser permanence of it, and, therefore, the greater or lesser reliability. SAS, SRL and SA give a greater sense of permanence.

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It is important to note that, if the entrepreneur is taxed under the literal E or monotax regime, and has companies as clients, the latter will not be able to discount the expense in their liquidation of IRAE, being a limitation when hiring the welcomed entrepreneurs in the aforementioned regimes.