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Doing Business in Nicaragua
 
 
 

Forms of Business Organisation

Nicaraguan law recognises a wide variety of organisations, including corporations (sociedad anónima or SA), general or limited liability partnerships (sociedad colectiva or LLP) and limited partnerships (sociedad en comandita), foundations, civil associations and cooperatives.

Although Nicaraguan law does not include any entity similar to the LLC, its limited liability partnerships provide for limited liability for all partners. Foreign companies may operate legally in Nicaragua through local branches, joint-ventures, wholly-owned subsidiaries and other variations of the standard organisations.

Regardless of the method of operation, an enterprise doing business requiring a legal representative domiciled in Nicaragua must register with the Commercial Section of the state Public Registry, along with tax and relevant municipal authorities, thus becoming a national enterprise and taxpayer for Nicaraguan purposes, regardless of the nationality of its owners or officers. Foreigners may (i) act as officers, directors, partners or trustees in local companies, (ii) make use of negotiable commercial documents and (iii) execute any kind of legal contract.

The corporation is by far the most common form of business entity in Nicaragua. In recent years, however, US and European tax advantages have made the limited liability partnership more desirable for some businesses. Corporations and LLP’s are relatively easy to manage, especially with respect to powers of representation, decision-making issues and other day-to-day business administration activities. They both limit the financial exposure and liabilities of shareholders vis-à-vis third parties.

Foreign companies may register branch offices, which are only liable for income tax on Nicaraguan source income. Although branch offices are not separate legal entities and therefore do not limit the potential liabilities of the foreign company in Nicaragua, foreign companies may in effect achieve limitation of liability by forming a special purpose subsidiary in their own or a third jurisdiction and registering a branch office of the special purpose company in Nicaragua, thus limiting liability in Nicaragua to the capital of the special purpose company.

Corporation

Formation

A Nicaraguan corporation may be established either by private capital (closely held) or by public subscription. The organisers must execute a deed of incorporation before a Nicaraguan notary public and register the deed of incorporation in the Commercial Section of the state Public Registry. The corporation must establish a street address domicile in Nicaragua.


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