COMPANIES IN ARGENTINA: WHAT IS THE BEST OPTION FOR MY BUSSINESS

In the business world, choosing an efficient and dynamic company structure can be one of the most strategic and critical decisions for success. Each type of company has its advantages and disadvantages depending on the size, the number of partners, and the business goals. At Estudio Froimovici & Asociados, we offer you a guide to help you think about the best option for your venture.

It is important to begin by dividing companies into "person-based" companies, where the partners are personally responsible for the liabilities of the company (such as general partnerships, limited partnerships, or partnerships with industry capital), and "capital-based" companies, which are more focused on business activities and where the partners are generally limited in their liability. We will focus on the latter, as they are the most common in Argentina.

1. Limited Liability Company (LLC)

The SRL is one of the most common forms for small and medium-sized businesses. In this type of company, the partners limit their liability to the capital they have contributed, except in exceptional cases. This means that, in case of debt, the personal assets of the partners are not at risk.

Who is it ideal for?

• Family businesses or businesses between friends where shared management is desired.

• Small and medium-sized enterprises (SMEs) with a limited number of partners (maximum of 50).

• Businesses that do not plan to make large public capital increases.

Advantages:

• The minimum capital is lower than in a Corporation (SA), and it only needs to be in accordance with the company's purpose.

• Fewer formal requirements than other company types.

• Only SRLs with a capital greater than $2,000,000,000 (two billion pesos) need to submit financial statements. (Amount as of September 2024, may vary).

Disadvantages:

• Limited and delayed transfer of shares.

• Not ideal if you plan to seek public investment or enter the stock market.

  
  

2. Corporation (SA)

The Corporation (SA) is ideal for large companies or those planning expansion. Here, capital is divided into shares, which can be bought and sold freely. Shareholders limit their liability to the value of their shares, protecting their personal assets.

Who is it ideal for?

• Large companies or businesses with massive growth potential.

• Companies where the partners do not want to publicly disclose their identities.

Advantages:

• Easier to attract investments through the issuance of shares.

• Easy and quick integration of new partners.

• The minimum number of partners is one (Unipersonal Corporation).

Disadvantages:

• Stricter requirements in terms of both incorporation and operation.

• Subject to greater scrutiny in many cases.

• Higher administrative costs.

  
  

3. Simplified Joint-stock Company (SAS)

The SAS is the most modern and flexible structure in Argentina, created to facilitate the creation of new businesses. It can be formed by a single partner and offers a fast and simplified registration process.

Who is it ideal for?

• Startups or small businesses that want to grow rapidly.

• Individual entrepreneurs who want to formalize their business without the high costs of a Corporation (SA).

Advantages:

• A simple and quick incorporation process, even 100% online.

• Minimum capital of only 2 Minimum Wage and Working Hours (SMVyM) (https://www.argentina.gob.ar/trabajo/consejodelsalario#:~:text=N%C2%B0%2020.744.-,Resoluci%C3%B3n%202024,%24271.571%2C22,-Resoluciones%20anteriores).

• Flexibility in the company structure and administration.

• The possibility to issue different types of shares.

• It can be a unipersonal company.

Disadvantages:

• It is still a relatively new company type, so some investors or institutions may prefer more traditional structures.

• In recent years, the government has sought to reduce its use (although this year, its use has been encouraged again).

• It does not have as much regulation or scrutiny as a Corporation (SA).

  
  

Conclusion

The choice of company structure will depend on the size of the business, the initial capital, the number of partners, and long-term goals. While SRLs and SASs are flexible and accessible options for SMEs or startups, the SA is suitable for large companies looking to grow and access capital markets. "Person-based" companies, such as Limited Partnerships (S. en C.), are useful in scenarios where different levels of responsibility and participation are required, but they are not commonly used in Argentina and will be discussed in a separate blog post.

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