IMPORTANT NOTICE

As stated in chapter 15 of Act. No. 164-2009, as amended, “General Corporations Act,” corporations must file an annual report to the Registry of Corporations administered by the Department of State of the Government of Puerto Rico on or before April 15th of each each, exception made for not for profit religious corporations.  The report must be filed electronically accessing the Commonwealth of Puerto Rico portal, www.pr.gov and/or accessing directly the Registry of Corporations at https://prcorpfiling.f1hst.com/default.aspx or through the Department of State page at www.estado.pr.gov.  The annual report must comply the requirements detailed in Regulation Number 8688, “Electronic Registry of Corporations and Juridical Entities.”

Additionally, all limited liability companies must, under chapter 21 of the General Corporations Act, pay an annual due, on or before the 15th of April of each year.  Such payment can be made through the electronic Registry as well, complying with the requirements of the named Regulation.

Not complying with the annual report filing or annual due payment when due will result in the imposition of penalties, and if done for certain consecutive years it will entail the cancellation of the juridical entity or of its authorization to do business in Puerto Rico.

On the other hand, the registration of a limited liability partnership will expire in one (1) year, and it must be renewed before the expiration of this term.  Not renewing this partnership on time will result in the expiration of the partnership, with the legal consequences such cancellation entails.

CIRCULAR LETTERS

2016-11 Annual Reports not required for ICO regulated entitiesDescargar

Circular Letter Description Download
2011-04 Corporate Transactions Costs Download
2013-10 Audited Statement of Financial Situation in the Annual Reports presented by corporations as part of their Annual Report Download
2013-11 Procedures against the Registering of Corporations, their availability through the Internet and Requests for Waivers Download
2013-12 Elimination of Electronic Check as a payment option for services available in the Registration of Corporations by Internet Download
2014-03 “Economic Survey Data” as part of the submission of Annual Reports for Corporations and Payment of Annual Rights for Limited Liability Companies Download
2016-02 Clarification on Limited Liability Companies Fees Download
2016-04 Clarification on Limited Liability Companies Fees Download
OA 2016-04 Waiver of Penalties for Corporations Descargar

Corporations’ Area Forms

Legal Basis

What is a Corporation?

Are there different types of Corporations?

What are Capital Shares?

What is a Close Corporation and what is a Public Corporation?

What is the difference between the terms “Corporation” and “Incorporated”?

What are the regulations or statutes (“By-Laws”)?

What are the advantages and disadvantages of creating a Private Corporation?

What is a Limited Liability Company?

What is an annual report and why is it necessary to file it with the Department of State?

Legal Basis

Act No. 164-2009 as amended (View), General Corporations Act, places Puerto Rico at the forefront in corporate law. This statute is aimed to streamline corporate management and simplify the processes described therein.

The Department of State has the responsibility to maintain a public Electronic Registry for private legal organizations in Puerto Rico, especially those related to trade and business purposes. It also has custody of the main governing documents of domestic juridical entities and the certificate of authorization to do business of the foreign ones (operating in Puerto Rico).\

Currently, the Department of State administers the Registry for the following entities:

  • Domestic for profit corporations (Act No. 164-2009, as amended)
  • Domestic nonprofit corporations (Act No. 164-2009, as amended)
  • Professional corporations (Act No. 164-2009, as amended)
  • Closed corporations (Act No. 164-2009, as amended)
  • Public benefit corporations (Act No. 164-2009, as amended)
  • Special employee-owned corporations (Act No. 164-2009, as amended)
  • Foreign for profit corporations (Act No. 164-2009, as amended)
  • Foreign nonprofit corporations (Act No. 164-2009, as amended)
  • Foreign public benefit corporations (Act No. 164-2009, as amended)
  • Corporations for municipal development (Act No. 81 of August 30, 1991, as amended)
  • Nonprofit corporations sponsored and supported by municipalities (Act No.137, as amended)
  • Municipal enterprises (Act. No. 81 of August 30, 1991, as amended)
  • Limited liability societies (Act No. 150-1996, as amended)
  • Domestic for profit limited liability companies (Act No. 164-2009, as amended)
  • Domestic not for profit limited liability companies (Act No. 164-2009, as amended)
  • Domestic low profit limited liability companies (Act No. 164-2009, as amended).
  • Foreign for profit limited liability companies (Act No. 164-2009, as amended)
  • Foreign not for profit limited liability companies (Act No. 164-2009, as amended)
  • Foreign low profit limited liability companies (Act No. 164-2009, as amended)
  • Banks (Act No. 55 of May 12, 1933)
  • International banking centers (Act No. 52 of August 11, 1989, as amended)
  • International financial centers (Act No. 173-2012, as amended)
  • Insurance companies (Act No. 91 of June 19, 1984,as amended)
  • Trust companies (Act No.40 of April 23, 1928, as amended)
  • Cooperative societies (Act No. 239-2004, as amended)
  • Savings and credit cooperatives (Act No. 255-2002, as amended)
  • Juvenile cooperatives (Act No. 220-2002, as amended)

What is a Corporation?

The General Corporation Law states that a corporation may be created by one (1) person. Unlike government owned corporations, which are created by law, domestic or foreign corporations, for or not for profit, or for public benefit, can only operates according to the purposes were organized and incorporated for. The Act allows them to only indicate as purpose that they will engage in any lawful business without specifying a particular business.

The Constitution of Puerto Rico (Article 6, Section 14) provides, however, that:

  • A corporation may not engage in the Buying-Selling of Real Estate business.
  • Land tenure for juridical entities dedicated to the agricultural business shall not exceed five hundred (500) acres.

A juridical entity must not register either with the primary purpose of providing any professional licenses services, unless it enrolls under the provisions of professional corporations. However, if the professional is not going to offer their services through the juridical entity, but will provide project kind of services, such as construction, it must include the following:

“Managing construction services. The corporation will hire professional staff licensed to provide these services”.

Are there different types of Corporations?

Yes. Corporations are classified into domestic or foreign corporations and into for profit, nonprofit or public benefit corporations.

  • Domestic Corporations – Are those created under the General Corporations Act of Puerto Rico. That is, these are corporations of Puerto Rico.
  • Foreign Corporations – Are those created under the laws of other countries and states of the United States. For a foreign corporation to operate and do business in Puerto Rico it must obtain authorization from the Department of State of the Commonwealth of Puerto Rico submitting the following documents to the Registry of Corporations:
    • Certificate of existence or its equivalent (recent, not more than three months of issued) from its home jurisdiction
    • The name and address of the authorized agent in Puerto Rico
    • Statement of the assets and liabilities of the foreign corporation
    • The business purpose of the corporation in Puerto Rico
    • Names and business addresses of its current directors; and
    • Any other document of data that the corporation desires to publish
  • For Profit Corporations – Are domestic or foreign corporations where owners derive economic benefit of it operation based on their participation in the business.
  • Nonprofit Corporations – Are domestic or foreign corporations in which the proceeds of its operation, if any, are used to promote the purposes of the corporation itself and not to benefit financially the members of that entity through profit distribution.
  • Public Benefit Corporation – Are domestic or foreign corporation with a primary public benefit purpose, in other words, their main purpose is not to generate net profits, but if there are, it could be distributed to its owners.

What are Capital Shares?

The capital shares can be described as a proprietary participation that each owner has in the corporation. These only exist in for profit corporations. Thus, when the dividends or profits are distributed, it is done based on the total participation of each owner, named shareholder.

What is a Close Corporation and what is a Public Corporation?

A Close Corporation is one in which the number of shareholders or owners does not exceed seventy-five (75). This corporate class has the same rights and obligations as any other corporation and can operate without a Board of Directors and be led by a single shareholder. A Public Corporation is one that issues shares for sale to the general public.

What is the difference between the terms “Corporation” and “Incorporated”?

None. Both terms mean the same. The incorporators always use one of these terms as it is required by law that a corporate name possesses one of the two words or abbreviations (Corp./Inc.).

What are the regulations or statutes (“By-Laws”)?

The regulation or “By-Laws” are the provisions to which any natural or legal person who owns or is a member of the corporation is subject. These provisions are contained in the constitutional document of the corporation and presents detailed standards or rules that allow the inner workings of the organization. The regulation is not filed with the Department of State because it is internal to the corporation.

What are the advantages and disadvantages of creating a Private Corporation?

Advantages:

  • The corporation has its own legal personality, that is, it is a “person” with rights and obligations. In cases of dispute arising on its corporate activities, the corporation would be sued, and not its owners in their individual capacity.
  • In tax terms, corporations are entitled to deduct expenses and payments for its management and depreciation of tangible property. They can also get tax breaks if they meet the requirements of applicable laws.
  • Corporations have a larger loan margin according to the composition of the shareholders or the number of issued shares.

Disadvantages:

  • A corporation cannot claim constitutional rights possessed by individuals: the right to defend himself in court; entitlement to claim protection on privileges and immunities, rights against self-incrimination.
  • On tax purposes, corporations will pay for their profits derived from its operations, and the owners will pay, in their individual capacity, for dividends received arising from the corporate business.

What is a Limited Liability Company?

A Limited Liability Company can be created by one (1) or more persons through the filing of a certificate of organization, which, except for the authorized capital shares, will have all the components of a certificate of incorporation.

The Act also provides for them to only indicate that they engage in any lawful business without specifying a particular objective.  The constitutional limitations to corporations, as well as the requirements for professional licensed services, domestic, foreign, for profit, not for profit and public benefit, all applies for this type of entity.

What is an annual report and why is it necessary to file it with the Department of State?

All corporations must file on or before April 15th of each year to the Registry administered by the Department of State, an annual report containing the following information:

  • Name and incorporation registration number;
  • Physical and postal address of the designated office;
  • Name and physical address of the resident agent;
  • Name and postal address of at least two (2) officers of the corporation who are in office at the date of the filing of the report, including the officer signing the report, and expiration dates of their respective positions;
  • The report must contain a balance sheet of the financial condition of the corporation at the close of business;
    • If the volume of business of the Corporation exceeds three million ($3,000,000), the report should be audited by a Certified Public Accountant (CPA), licensed by the Commonwealth of Puerto Rico;
  • The report must be signed by an authorized officer, director or incorporator.

Important: Limited Liability Companies (LLC) will not have to file an annual report with the Department of State, they will pay annual fees in the amount of $150.00 on or before April 15th of each year.

Not filing this report or not paying the annual fees would result in the imposition of fines and/or the cancellation of the juridical entity or its authorization to do business in Puerto Rico.

Note: The General Corporations Act establishes requirements that must be complied by local or foreign corporations doing business in Puerto Rico. The Comptroller of Puerto Rico had pointed out that some governmental agencies have had entered into agreements with foreign juridical entities without verifying whether they are in compliance with the Law.

Circular Letter No. 1300-09-00, issued on December 13, 1999, reminds governmental agencies that before entering into an agreement with a juridical entity they shall request, in addition to the documentation required in Circular Letter No. 1300 -25 to 98 of May 29, 1999, the following documents:

  • Certificate of registration or authorization to do business in Puerto Rico.
  • Certificate of Good Standing to ensure that the juridical entity is in compliance with the General Corporations Act.
Aprobado por la Comisión Estatal de Elecciones - CEE-SA-16-3903