How to Incorporate a Company in Paraguay

This article is intended for companies considering entering the Paraguayan market and individuals looking to start a new business in Paraguay. It primarily summarizes the process of establishing incorporating company in Paraguay

【Table of Contents】

• Paraguay Corporate Structures

• National ID (commonly known as CEDR) is required to become a corporate representative or officer

• Schedule for Company Formation

• Services and Pricing

• Options

• Other

【Structures of company incorporation Paraguay】

In Paraguay, there are primarily three types of company structures: SA, SRL, and EAS.

Until now, the main company structures in Paraguay have been SA and SRL.

Overview and Differences Between SA and SRL

Both SA and SRL correspond to what is known in Japan as a joint-stock company, meaning limited liability based on the percentage of shares held, or the possession of voting rights and dividend claims.

• Two or more shareholders (foreigners are possible)

• One or more directors (foreigners are possible, but limited to those holding a Paraguayan residence permit = CEDRA, or Radicación)

The difference between SA and SRL is that in an SA, the company's decision-making function is determined by the

• a group consisting of the shareholders' meeting, the board of directors, and the supervisory board (Sindicatura) overseen by the auditors (Asamblea de Accionistas, Directorio y Sindicatura).

In contrast, an SRL involves only

• decision-making among the shareholders themselves.

Additionally, an SA is obligated to publish a newspaper notice when convening a shareholders' meeting.

However, an SRL only requires communication among the shareholders themselves (no newspaper notice is required).

Other differences include:

• Both SA and SRL require a minimum of two founders. The representative must be a holder of a Paraguayan national ID card, commonly known as a Cedula. Shareholders may be non-Cedula holders.

• SRLs have a maximum of 25 shareholders, while there is no limit on the number of shareholders for an SA.

• SRLs require a 50% capital contribution during incorporation, whereas SAs do not require this.

• An SRL requires a majority vote of members for new shareholders or share transfers, while an SA has no such obligation.

• An SA must hold an annual shareholders' and directors' meeting and appoint a person to serve as the auditor (Syndico) from the time of incorporation. An SRL, however, has no such mandatory meeting requirement (as explained above).

The incorporation period for both an SA and an SRL is 2-3 months.

【Overview of EAS】

I will explain EAS. EAS is a simplified version of the procedures for SA and SRL mentioned above, representing a new company form established in recent years. The major differences between EAS and SA/SRL are:

• Establishment time: 1 week to 15 days

• Establishment by one or more promoters (SA and SRL require two or more)

• No obligation to publish newspaper notices for shareholder meetings like an SA; decisions can be made via Zoom or similar communication among shareholders

• No obligation for annual shareholder meetings like an SA

• Ability to issue non-voting shares

• Acquisition of EAS legal entity status involves neither the Ministry of Finance's Legal Affairs Bureau nor the Registry General; it is centralized through the Ministry of Economy, Trade and Industry's Unified Business Registration System, resulting in lower fees for each procedure

【Obtaining CEDR certification is mandatory to become a corporate representative or officer】

Below is a summary of the corporate differences between obtaining CEDRO in Paraguay and not obtaining it.

• Even without CEDRO, you can become a shareholder of a Paraguayan corporation.

• Without CEDRO, you cannot become a corporate representative or officer of the corporation.

• If someone without a CEDRA wishes to establish a corporation in Paraguay, they must have a temporary representative lend their name. Since obtaining a CEDRA takes 90 to 150 days to issue, if you wish to establish a company immediately after arrival, you can set up the company using a temporary representative and then replace them once the CEDRA is successfully obtained. (※See Option 1 below)

【Schedule and Services】

Regardless of the company type mentioned above, the standard procedure typically begins after obtaining a 2-year CEDRO.

Obtaining CEDRO usually takes 3 to 4 months. (To apply for CEDRO, you must bring to Paraguay a police clearance certificate from Japan and an apostilled family register (including birth and marriage certificates).) Therefore, the time required for various incorporation procedures is as follows:

• For SA or SRL establishment procedures, the total time from CEDRA application to completion is 5-6 months.

• For EAS establishment procedures, the time from CEDRA application is approximately 3-4 months.

After obtaining the 2-year CEDRA, the following steps are taken: preparing shareholder meeting minutes and articles of incorporation, obtaining the tax identification number (RUC), opening a corporate bank account, registering for the employment insurance system, and filing with the local city hall. This is essentially a one-stop service, so we handle all matters necessary for company establishment.

【Service Price】

Company Formation Service Fees

• SA Corporation: ¥375,000 (US$2,500)

• SRL Limited Liability Company: ¥300,000 (US$2,000)

• EAS Simplified Corporation: ¥82,500 (US$550) ※EAS is recommended for those wanting a low-cost start or to begin business alone. Can later convert to SA or SRL as business expands.

Permanent Residency + Company Formation Service Fees at Paraguay Ministry of Industry and Commerce

• SA: ¥375,000 (US$5,200)

• SRL: ¥300,000 (US$4,700)

• EAS: ¥82,500 (US$3,250)

【Paraguay Incorporation Options】

We offer several options to expedite your company formation schedule.

Option 1

We begin the company incorporation process by appointing an interim director during the three-month period while you obtain your CEDRO. This ensures the company is fully established by the time you receive your CEDRO. A contract notarized before a notary public stipulates that the interim director will step down upon your CEDRO acquisition, enabling a smooth transition of representation.

Option 2

Typically, it takes two years to obtain permanent residency (cedula) after acquiring a temporary residence visa. However, by processing the investor application through the Paraguay Ministry of Industry and Commerce, it is possible to obtain a permanent residency visa and a 10-year valid cedula within three months. This option can be combined with establishing an SA or SRL company, or setting up an EAS.

Option 3

License acquisition is possible for import/export businesses or industries requiring various permits. Additional fees apply in this case. Please consult us based on the business you wish to develop.

Option 4

We also assist with obtaining driver's licenses.

Option 5

We will work with you to develop viable business plans for Paraguay, including market research and new business planning, and provide full support!

【Other Special Notes】

When the Japanese parent company holds shares in the Paraguayan corporation, it is necessary to submit various documents from the Japanese parent company (such as Articles of Incorporation, full history certificates, etc.) bearing an apostille at the stage of drafting the company's Articles of Incorporation or when reporting the ultimate beneficial owner to the bank.

Corporate bank accounts can typically be opened about one month after obtaining the RUC, except for specific industries. (However, the review process may take longer depending on the industry.)