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Doing Business in Puerto Rico
 
 
 

Forms of Business Organisation

You can operate a business activity in Puerto Rico as a proprietorship, a partnership, LLC or a corporation.

1. Corporation

The use of a corporation permits investors to limit their liability for acts of the corporation. This limitation of liability has a price: taxes are imposed at the corporation level on the earnings of the corporation and at the investor level on the dividends paid to stockholders. Also, failure to observe the statutory formalities as to formation and operation of a corporation could expose a stockholder to personal liability for acts of the corporation. The Puerto Rico General Corporation Law is modelled after the Delaware Corporation Law. Special laws apply to banks and insurance companies.

Supervision
Corporations are supervised by the Corporate Division of the Secretary of State’s Office.

Incorporation

Any person or entity, whether or not resident in Puerto Rico, may form a corporation. A Puerto Rico corporation is formed by filing Articles of Incorporation with the Corporate Division.

The articles must be signed by the incorporator or incorporators and must include:

• the corporate name;
• the street address;
• the nature or purpose of the business, provided that it is sufficient to state that the corporation will dedicate itself “to any legitimate matter for which a corporation may be created under the General Law of Corporations of the Commonwealth of Puerto Rico”;
• the class or classes of stock, including total number of shares for each class, par values or a declaration that stock will have no par value, and statement of the powers, preferences and rights of each class of stock; and
• the name and address of any person acting as a director as of the date of incorporation, if the rights and the powers of incorporators end with the filing of the articles.

In addition, the articles may include any other information permissible under the corporation law. The initial Board of Directors of the Corporation may be named in the articles or appointed at a later date by the incorporator. The filing must be accompanied by a fee based on the number of authorised shares of capital stock. The minimum fee is $100. Incorporation is effective as of the date of filing with the Corporate Division.

Articles may be amended by filing a certificate of amendment with the Corporate Division and payment of a fee. An amendment is initiated by resolution of the directors, followed by a vote of shareholders.

By-laws
By-laws may be adopted or amended by the incorporators or by the board of directors, and after stock is issued by the stockholders, or by the directors if so authorised by the articles of incorporation.

Stock

Capital stock of a corporation may be common, preferred or special, with or without par value. Restrictions on transfer of stock are enforceable if noted conspicuously on the stock certificate or in a notice sent to the holders of uncertificated shares.

Shares of stock are personal property and may be issued only for cash, labour performed, personal property or real property.

Meetings of Shareholders
The Corporation law provides for a required annual meeting and also for special meetings of shareholders. Meetings are not required for shareholder action if the requisite number of shareholders approves a particular action in writing.

Directors and Officers
The regular business of a corporation is overseen by a board of directors. The board of directors may consist of one or more members. Directors must carry out their duties in good faith and without conflict of interest. Directors may be indemnified by the Corporation. Directors are protected when they rely in good faith upon the books of the Corporation or upon representations of officers or employees. Officers of a corporation shall be provided for in the by-laws or by resolution of the board of directors and may be indemnified by the corporation, provided they act reasonably and in good faith.


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