"Strengthening Entrepreneurship Law introduces a new class of company to the Guatemalan mercantile legislation... "

On October 29th, 2018, Decree Number 202018, Strengthening Entrepreneurship Law, was published in the Official Gazette. The purpose of this law is to encourage and strengthen the development of entrepreneurship in Guatemala by establishing technical and financial support for the entrepreneur as well as facilitate the process of formalization of the entrepreneurs, creating a new legal figure to reduce the time and costs of their registration.

An entrepreneur, in accordance with this law, is "any individual or legal entity that has an innovative vision of business, products and services and that can turn an idea into reality through dynamic processes". For the support of entrepreneurship, the Ministry of Economy, through the Vice Ministry of Development of Microenterprise, Small and Medium Enterprises, will create the "Unit for Strengthening Entrepreneurship", which will promote the right conditions to attract investors and promote the competitiveness and quality of the enterprises in Guatemala.

Strengthening Entrepreneurship Law introduces a new class of company to the Guatemalan mercantile legislation, the Entrepreneurship Company. This new class of mercantile company may be constituted with one or more natural persons who are only obliged to pay their contributions represented in shares, forming a legal entity different from that of its shareholders.

n accordance with the Strengthening Entrepreneurship Law, Entrepreneurship Companies are characterized by the fact that:

  • They are constituted by means of an electronic system before the Mercantile Registry, being exempted from its constitution by means of a public deed.
  • They can only receive monetary contributions; their total annual income cannot exceed five million quetzales (Q.5,000,000.00) (otherwise, they must be transformed into another corporate regime or mercantile figure).
  • They are not subject to the obligation to separate any percentage of their profits to form the legal reserve.
  • The contributions they receive are deductible from Income Tax.

Decree Number 20-2018 will come into force on the twenty-eighth of January of two thousand and nineteen.