Best type of Corporation to form in the Dominican Republic
Best type of Corporation to form in the Dominican Republic

Best type of Corporation to form in the Dominican Republic

What are the best types of business organizations to establish in the Dominican Republic?

Is a question that foreign nationals and Dominican citizens usually ask us, with intent to:

  • Investing in the Dominican Republic.
  • Establishing a business in the Dominican Republic.
  • Establishing a branch or subsidiary of a foreign company in the Dominican Republic.
  • Among others.

Some of the questions we are asked often are:  

  1.  What type of business organization should you establish in the Dominican Republic?
  2. How do I determine the type of corporation, company, or business I should create or establish in the Dominican Republic?
  3. How much capital should I invest in my corporation, company, or business?
  4. Do I have to deposit the capital of the corporation, company, or business in a bank account?
  5. What are the ways in which the capital of a business organization can be established?
  6. Can I establish or create a Public Limited Company (PLC) or Limited Liability Company (LLC)?
  7. What is the difference between a Public Limited Company (PLC) and a Limited Liability Company (LLC)?
  8. Do I need to establish a business organization in order to conduct business or commercial activities in the Dominican Republic?
  9. Can I be the only partner or shareholder in a business organization in the Dominican Republic?

We will provide the answer to all of these questions below.

How do I determine the corporation, company, or business I should create or establish in the Dominican Republic?

This is determined by the following criteria:

A) The type of business you would like to establish.

B) The share capital that you wish to establish in this company.

Why?

A) There are corporate purposes or commercial activities that require a specific type of company. One example is Financial Intermediation entities (Banks); its regulations establish that it must be a Public Limited Company (PLC).

B) You are free to determine the capital amount, considering the minimum amount required by law; however, both LLCs and the PLCs, have a maximum capital limit. If you are planning on using a very high capital amount, you should consider a PLC. Conversely, if you are interested in a low capital amount, the other business organization types would be an option.

A law firm or office in Santo Domingo could help you determine what is the type of business organization that would best fit your needs, according to your business purpose.

How much capital should I provide to establish the Company?

The minimum capital amount for each business organization type is established by the law. The minimum capital for the most common classifications are:

1- Public Limited Companies: RD$ 30,000,000.00

2- Simplified Public Limited Companies: RD$ 3,000,000.00 

3- Limited liability companies: RD$ 100,000.00

4- Foreign Companies: The same capital amount established by your country of origin.

5- Individual Limited liability companies: They do not have a minimum; it can even be RD$ 500.00.

Essential examples in which the capital of a company is fundamental:

  • For a company, that is dedicated to the commercialization and sale of vehicles, to be associated with the corresponding associations, they are required to have a minimum capital of RD$ 1,000,000.00.

 

  • A company that will have customs agents as its purpose is required to have a minimum capital of RD$ 1,000,000.00.

 

Financial Intermediaries

  • Type of entity
    Value in millions
    of RD$
    Banking institutions specialized in credit intermediation 275,000,000.00
    Savings and Credit Banks 55,000,000.00
    Credit Corporations 15,000,000.00
    Savings Associations and 17,000,000.00
    Loans

Important notes:

  • Capital is an asset of the company, which is why an annual tax needs to be paid to the General Directorate of Internal Taxes (known in Spanish as DGII).
  • Capital is YOUR RESPONSIBILITY. Through capital, you may access credits and determine the solvency of the company.

Should the capital provided for the company be deposited in a bank account?

You would only need to open a bank account for Individual Limited Liability Companies. Conversely, for other business organization types, the capital should be established but does not need to be deposited in an account.

What are the ways in which capital is contemplated?

There are two possible ways:

  1. In Nature.
  2. Numeric.

Can I establish or create a Public Limited Company (PLC) or Limited Liability Company (LLC)?

Yes, you may. However, it will be your corporate purpose, and the scope of the company will determine which approach would be the most appropriate.

What is the difference between them?

There are many. Some of them are:

Its capital and its administration, among other things.

Public Limited Companies are contemplated for economic groups.

Am I required to establish a business organization in order to conduct business in the Dominican Republic?

This is one of the most important questions regarding this topic, and the answer is yes. You would need to form a company or corporation if you are interested in performing commercial activities. There are many reasons behind this; however, the most important one is that if you carry out a commercial activity without being under a company, ALL of its PATRIMONY falls within this activity. As a result, it is all compromised in the event of any judicial or legal situation that may arise.

Can I be the only partner or shareholder in a business organization in the Dominican Republic?

No, all corporations require at least two (2) members or shareholders.

These can be individuals or businesses (legal persons).

Only Individual Limited Liability Companies allow a single owner.

The law that specifies company types is the General Law of Commercial Companies and Individual Companies of Limited Liability, number 479-08, and its amendments.

The type of companies we have are:

Type of corporations:

  • Limited liability companies.
  • Public limited corporations.
  • Simplified public limited corporations.
  • Collective Name Corporations
  • Simplified limited partnerships.
  • Partnerships limited by shares.
  • Joint Venture or Partnership.
  • Foreign Companies. 

There is also a new denomination: Individual Limited Liability Companies, which are companies with a sole owner.

In case you would like more information about each commercial organization type in the Dominican Republic, we will be listing their key features below.

  1. Limited liability companies:
Features Limited Liability Company (LLC)
Corporate name The corporate name must be preceded or followed by the words “Limited Liability Company or the initials LLC”.
Total number of Partners Number of Partners: Minimum 2 and maximum 50.
Share capital: Minimum capital: RD$ 100,000.00, which must be fully subscribed and paid. The minimum value of each share of RD$ 100.00. (The tax by constitution is the equivalent to 1% of the authorized share capital value, in this case the tax to be paid would be RD$ 1,000.00).
Partnership contributions Minimum value RD$ 100.00
Administration of the company Limited Liability Corporations will be managed by one or more managers. They must be natural persons, partners or otherwise.
Feature Limited Liability Company (LLC)
Assignment of Membership Interests Regime Partnership contributions are not freely transferable to third parties.

They are freely transferable between partners and through succession or liquidation of community of property between spouses.

 

  1. Public limited corporations.
Features
Public Limited Corporations (PLC):
Corporate name The corporate name must be preceded or followed by the words “Public Limited Corporation” or its abbreviation “PLC”.
 

Capital

Minimum capital of RD$ 30,000,000.00. The capital must be subscribed in 1/10, i.e., RD$ 3,000,000.00. The Ministry of Industry and Commerce (known in Spanish as MIC) is able to adjust it every 3 years by regulation.

(The tax by constitution is the equivalent to 1% of the authorized share capital value, in this case, the tax amount to be paid would be RD$ 300,000.00).

Number of Shareholders Number of Shareholders: There is a minimum of 2 but there is no maximum limit.
Administration of the company Public limited companies are managed by a Board of Directors comprised of a minimum of three (3) members. Its president must be a natural person.
Account Commissioner The appointment of an Account Commissioner is mandatory.The Account Commissioner must have a bachelor’s degree in accounting, business administration, finance or economics, with no less than 3 years of experience in his profession.
Shares: Essentially negotiable. There is no legal restriction for the transfer of shares in Public Limited Companies.

Minimum value: RD$ 1.00 each.

 

  1. Simplified public limited corporations – 2011:
Features
Simplified Public Limited Company
Corporate name The corporate name must include “Simplified Public Limited Company” or “SPLC” 
 

Capital

Minimum capital of RD$ 30,000,000.00. The capital must be subscribed in 1/10, i.e., RD$ 3,000,000.00.

The constitution tax is equivalent to 1% of the value of the authorized share capital. 

Number of Shareholders Number of Shareholders: There is a minimum of 2 but there is no maximum limit.
Administration of the company Simplified Public Limited Companies will be administered by a president or administrator, a council, or by the administrative body established in its bylaws. According to the corporate bylaws of Simplified Public Limited Companies, the organic structure of the company and other regulations governing its operation within the framework of contractual freedom will be freely determined.
Account Commissioner The appointment of an Account Commissioner is mandatory.
Shares: Shares must be registered

Essentially negotiable. There is no legal restriction for the transfer of shares in Simplified Public Limited Companies.

Common arrangements The rules that regulate Public Limited Companies are also applicable to Simplified Public Limited Companies. This is especially true for regulations related to the protection of minority partners, the safeguarding of the right to equality of shareholders, preservation of the rights of creditors and criminal provisions.

4. Foreign Corporations:

    • Full-fledged corporations are explicitly recognized by the Law, in accordance with their jurisdiction of origin. Their legal existence will be verified based on the requirements of their jurisdiction of origin. Equal rights and obligations with national corporations.
    • To conduct business in the Dominican Republic, they would need to be registered in the Commercial Registry and the National Taxpayers Registry, in order to establish a permanent establishment or branch. They are not required to register in order to perform isolated or occasional acts.
    • They are governed by their existence, capacity, operation, and dissolution, according to the law in their jurisdiction.
    • When it comes to their local activities and operations, they are governed by Dominican law.
    • Equal tax treatment to locals.

5. Individual Limited Liability Company:

It is not a commercial corporation; it is a legal entity created by law as an independent patrimony with a drive to do business.

Its features are:

  • Sole owner.
  • Liability is limited to contributions.
  • The contributions made by the owner constitute the capital.
  • The amount of capital in cash must be deposited in a bank account during the constitution process (article 455-c).
  • They are transferable as a business unit.
  • They are a separate patrimony from that of their owner.
  • Managed by a director, who may be the owner.
  • The accounting must be organized in accordance with business standards.

Upon the passing of the owner, the company can be kept in co-ownership, sold, liquidated, or transferred to one of its successors.

Other corporate organization types:

General Partnership It operates under a corporate name in which all the partners are considered merchants and meet their social obligations in a subsidiary, unlimited, and socially responsible manner. The company name comprises the name of one or more associates, followed by the words “and company” or its abbreviation if the names of all partners are not included in the company name. Corporate shares or interests may not be represented by negotiable securities, nor may they be assigned without the unanimous consent of all partners. Unless otherwise specified, the company will be dissolved by the passing of one of the partners.
Partnership limited by shares It consists of one or several limited partners who will be considered merchants, and who respond to corporate debts indefinitely and jointly. It will also comprise limited partners, who will have the quality of shareholders and will only bear losses in the proportion of their respective contributions. The number of limited partners may not be less than 3. The capital is divided into shares and managed by one or several managers.
Limited partnership It exists under a company name, composed of one or more limited partners who respond to social obligations in a subsidiary, unlimited and joint way. Additionally, one or several limited partners only respond up to the amount of their contributions. Only limited partners can be managers. They cannot assign social parts without the consent of all the partners.

If, as is happened commonly during the recession, property developers fold, file for bankruptcy or flee the country, the duties of the broker to the buyer will come under close inspection.

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