Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Legal entities can outlive their founders. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. An additional benefit comes with limited liability companies. These limit the financial liability of company owners to their investments, so personal assets of the owners are not put at risk. Where governments make registration easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and generating more revenue for the government.
Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in El Salvador. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.
| No. | Procedure | Time to Complete | Associated Costs |
|---|---|---|---|
| 1 | Deposit the legally required initial capital in a Salvadoran bank and obtain deposit evidence or certified check. | 1 day (less than an hour) | nominal fee |
| 2 | Check the uniqueness of the company name in the Registry of Commerce | 1 day | no charge |
| 3 | Notarize the articles of association | 2 days | Between $500 and $1000 |
| 4 | Register with the Registry of Commerce and publication and legalization of books | 3 days | $0.57 for every $114.28 + US$ 2.3 (for copies) + 17.14 (Balance Deposit) + US$ 137.14 (business license) + 0.1$*100*3 ( legalization of books) + 34.29 (local registration) |
| 5 | Accounting system | 10 days | USD450 |
| * 6 | Register employees with one of the pension administrator funds (Administradora de Fondos de Pensiones). | 3 days (simultaneous with previous procedure) | no charge |
| * 7 | Register the company for tax at the Mayor’s Office | 1 day (simultaneous with previous procedure) | USD 10 |
| * 8 | Make a company seal | 2 days (simultaneous with previous procedure) | USD 15 |