The establishment of Limited liability companies in the country is backed by the Puerto Rico General Corporations Act of 2009, as amended (the “Act”). These types of companies have separate legal personalities and no limit to existence. They can exist for an indefinite period. An LLC is governed by the Articles of Formation quite similar to the Articles of Incorporation, and the Operating Agreement. As its name implies, members have limited liability to the extent of their share capital. The activities of the company can be managed by its members, a hired manager, or a board of directors. LLCs are flexible to run having few imposed requirements. In accordance with the ACT, LLCs have to partake in international restructurings, while specific requirements are imposed. All domestic LLCs are subject to US federal regulations.
If you are interested in setting up an LLC here or simply looking to learn how to, this guide provides information on registering a limited liability company in Puerto Rico.
Features of an LLC
The number of shareholders is at least one member with no residency requirement. Every LLC is required to have at least one director or manager with no residency requirements. The minimum initial share capital can be as little as $0.01. LLCs have no payment requirements. There is no need for incorporators or directors to be present during incorporation. Certain tax implications apply to this entity.
The process of incorporation
The process of incorporating an LLC here consists of the below-highlighted steps:
- Preparing all documents required
- Involving notary, company register, and government officials
- Time of incorporation
- Main costs, covering registration and other fees
Incorporating an LLC
An LLC is incorporated after registering with the Puerto Rico Department of State on its online portal. The Department of State usually issues the Certificate of Organisation and the Articles of Formation. The filing fee for entering the company is $250.00 and the process is not subject to a specific waiting time. The entire procedure can be carried out on the online portal of the department. It is required to prepare an Operating Agreement before application for incorporation, as it will serve as the basic rules for managing the company.
In addition, the nature of the business or purpose must be written in the Articles of Formation. Every LLC has to get an Employer Identification Number from the US Internal Revenue Service as well as register with the Puerto Rico Treasury Department after incorporation. A report is required to be filed annually to keep the LLC legally existing in the country. Filing an annual report carries a filing fee of $150.00, to be paid by April 15th of each year.
Required information to provide
When registering this company, one has to file the Articles of Formation with the Puerto Rico Department of State. The Articles of Formation should contain the following information:
- Entity name
- Office address and telephone number
- Name, phone number, and contact details of registered agents
- Nature of the business
- Term of the existence of the entity, etc.
Costs and taxes
The annual report fee is $150.00. The entity can be addressed as a partnership or corporation. If seen as a corporation, it is subject to a graduated tax rate ranging from 18.5 percent to 37.5 percent in Puerto Rico. Note that, domestic entities do not have to pay federal taxes except if they have US source income. When they are eligible for tax exemption under the Puerto Rico Tax Incentives Code and have obtained a Tax Incentives Grant, they are taxed at a flat rate of 4 percent on taxable income. When they are viewed as partnerships, they are not taxed at an entity level, but all income or loss has to flow through to the owners and is subject to the applicable tax rate.
