FORMING A BUSINESS IN DOMINICAN REPUBLIC

INVESTMENT CLIMATE

FORMING A BUSINESS IN DOMINICAN REPUBLIC

Beyond the constant struggle and hunger for success, that characterizes the visionary entrepreneur, formalizing business activities in the Dominican Republic is the best way to start a business for success.

THE DECISION TO START A BUSINESS CHANGES THE CAREER PATH OF EVERY INDIVIDUAL AND THEIR FAMILY AND SOCIAL INTERACTION. VENTURING INTO ENTREPRENEURSHIP OF A BUSINESS IS A SERIOUS DECISION IN WHICH THE SIMPLE DESIRES AND DREAMS ARE NOT ENOUGH, IT ALWAYS REQUIRES A SERIES OF MANAGEMENT SKILLS, AN ENTREPRENEURIAL VISION BASED ON A TARGET MARKET THAT STRENGTHENS THE COMPETENCES OF THE BUSINESS AND THE OPPORTUNITIES OF THE ENVIRONMENT.

Types of Commercial Companies

A commercial company is the society that aims to achieve one or more acts of trade or, in general, an activity subject to commercial law. Among the benefits it can offer as a SMEs entrepreneur are: protection of their inheritance, growth, financing, limitation of liability; that is that when creating a partnership, each partner will have a limited liability of capital which he has contributed to the company, avoiding putting at risk and safeguarding their personal assets.

The Commercial companies are the following:
1. General Partnership Enterprise (NC): A company making commercial or civil activities under a unified social reason, in which the partners respond to debts that could not be covered by the capital. It is a type of society in which one partner does not provide capital, only work and is named an industrial partner.
 
2. Simple Limited Partnerships (CS): Type of partnership characterized by the coexistence of general partners who have unlimited liability for the debts and participate in the management of the company, and limited partners not involved in the management and whose liability is limited to capital or committed to the partnership.
 
3. Companies Limited by Shares (CA): Are those composed of one or more general partners who have the quality of merchants and respond indefinitely and jointly for the company debts, and limited partners, who will have the quality of shareholders and will only support losses according to the proportion of their contributions.
 
4. Limited Liability Companies (SRL): Refers to a type of corporation in which liability is limited to the capital, and therefore, in the case debts are contracted, the personal assets of the partners are not at risk.
 
5. Public Limited Companies (S.A.): Corporation whose owners are under a participation in the share of capital through securities or shares. There are corporations with either open or close equity capital.
 
6. Simplified Public Limited Companies (S.A.S.): Corporations formed by two or more partners whose liability for losses of the society is limited to their contributions. Its corporate name must contain the words “Sociedad Anonima Simplificada” or “S.A.S.”. The minimum amount of authorized capital required by the Companies Law is DR$ 3,000,000.00, of which ten percent (10%) must be subscribed and paid. This minimum amount may be raised by regulation by the Ministry of Industry and Trade if the index of consumer has varied by more than fifty percent (50%) on the last review performed.
 
The Companies Act also regulates the Individual Company of Limited Liability (E.I.R.L.), which has its origin in the Dominican Republic with the enactment of Law 479-08 on December 11, 2008.
 
The purpose of creating this legal concept is twofold: To promote the development of new business initiatives of small entrepreneurs. End the old national practice of “shell companies” which was a form of company in which one partner had 94% and the other partners, only 1%.
Foreign companies
Foreign investors may establish branches of their companies abroad in the Dominican Republic, which will be recognized with full operation by the law of the country. This is after verification of their legal existence by the appropriate authority, in accordance with the formalities established by the law of the place of its Constitution. Under Article 11 of the Companies Law for foreign companies their existence, capacity, operation and dissolution, shall be governed by the law of the place of incorporation. However, these companies, in their operation and local activities, are subject to the Dominican law.
 
These companies are obliged to make their registration in the Commercial Register provided, that they start a branch or permanent establishment in the Dominican Republic, for the purpose of regularly exercising activities within its corporate purpose or when conducting commercial transactions regularly in the Dominican Republic.
 
Similarly, companies incorporated abroad must register with the National Taxpayers Registry of the Directorate General of Internal Revenue, if because of these activities tax obligations are generated in the country and the registration is required by laws and current tax regulations. Foreign companies are not subject to enroll in the Commercial Register to exercise isolated or occasional activities, stand in trial or investing in stocks and shares.
 
Similarly the Companies Law provides that, foreign companies have the same rights and obligations as domestic companies, with the only exception that may established by the law. Consequently, foreign companies are not required to pay bail if acting as plaintiffs in the courts of the Republic or before any administrative authority.
 
After registering in the Dominican Republic, foreign companies receive the same tax treatment as Dominican companies.
Forming an SRL Business
Limited Liability Company (S.R.L.) is the company formed by a minimum of two and up to 50 members, through contributions by all.
 
The capital cannot be less than RD$ 100,000 or its equivalent in freely convertible currency. This capital is divided into equal and indivisible parts called social quota. The partners are not personally liable for the corporate debts and liability for losses is limited to their contributions. The administration can be carried out by an individual (partner / or not), and it does not require a board of directors. The name of the company selected by the members of the company should be composed of the chosen name, followed by the words “Limited Liability Company” or the initials “S.R.L.” (eg. Industry Decanter La Garza, S.R.L.).
 
A strong sign of modernity when formalizing or constituting an S.R.L company is the Single Window: www.formalizate. gob.do, where users significantly reduce waiting time in obtaining documentation and that means fewer visits to the site during the process of setting up a company and its formalization. Formatizate.gob.do is a joint effort of various organizations; among which we can mention: the Ministry of Industry and Commerce, the National Office of Industrial Property (ONAPI), the Directorate General of Internal Taxes (DGII).
 
Also, the Santiago Chamber of Commerce and Production, the Treasury of the Social Security (TSS ), the Ministry of Labour, Presidential Office of Information Technology and Communication (OPTIC), and the Dominican Federation of Chambers of Commerce (FEDOCAMARAS). This instrument is part of the Dominican government’s strategy to strengthen SMEs and the private sector in general.