In Costa Rica it is very common to register a property in the name of a company, however, before making this decision it is important to take into account some considerations for example, the type of company, its responsibilities and the effects it can generate.
Types of companies in Costa Rica
Article 17 of the Commercial Code typifies 4 types of companies in Costa Rica;
- Sociedades en Nombre Colectivo
- Sociedades en Comandita simple
- Sociedad de Responsabilidad Limitada (LLC)
- Sociedades Anónimas (Corporations)
The last two are most commonly used, however it is necessary to understand the differences between them to see which one fits the needs of registering a property in the name of a company.
Differences between a LLC and a Company
Corporations (S.A) were created with the purpose of being used for large businesses, that is, with many shareholders and capital. In this type of company, shares can be transferred by endorsement, as they are intended to be a “quick trade”. They are also structured with a Board of Directors that is responsible for making decisions for the partners and holding Assemblies to give accountability.
Limited Liability Companies (LLCs) on the other hand, were created with the intention of being family partnerships for small businesses. These instead of having a Board of Directors, have managers since the share capital is divided into quotas that are not transferable by endorsement but the express prior consent of the owners.
Why register a property in the name of a company and which one should be used?
Why register a property in the name of a company and which one should be used?
Companies are legal persons, this means that they have a completely independent patrimony from that of their partners or owners. Registering a property in the name of a company works to protect the property from possible legal problems in its own name.
Although in Costa Rica they are used as the same, the ideal is to do so in the name of an LLC if the company is created only for registering the property.
Advantages and disadvantages of registering a property in the name of a company
Advantages and disadvantages of registering a property in the name of a company
The main benefit of registering a property in the name of a company is that the assets are protected in case of having debts in a personal name. Even for foreigners, it can facilitate the management of properties inside and outside Costa Rica, allowing owners to send powers of attorney for others to act on their behalf.
The main disadvantage is that there are more responsibilities, since each legal entity is subject to duties such as payment of extra taxes. Each time more than 10% of the share capital is transferred, it must be declared to the Treasury, as well as a declaration of assets.
Companies can be held legally liable for malpractices and that can jeopardize the social capital and wealth.
Inactive Companies
Inactive companies are those that are created for the sole purpose of registering a property. These are also subject to taxes and in case of not paying them, by law, they dissolve after 3 years automatically. They must apply for the NITE in the Treasury to be able to declare the assets they have in their name and the value of each one.
The owners must declare the beneficiaries, the reason why the goods were purchased and what they are used for.
