Corporate Law at Puerto Rico (US)
Sure! Here's an overview of Corporate Law in Puerto Rico, which follows U.S. corporate law principles but also has some unique local elements because Puerto Rico is a U.S. territory:
Corporate Law in Puerto Rico (U.S. Territory)
1. Legal Framework
Corporate law in Puerto Rico is primarily governed by:
Puerto Rico General Corporation Act (Law No. 164 of 2009), which aligns closely with the Delaware General Corporation Law.
Puerto Rico Revised Statutes
Federal laws applicable to U.S. territories (e.g., IRS tax regulations).
Puerto Rico is subject to U.S. federal laws in many areas, but has its own local corporate regulations and tax rules.
2. Types of Business Entities
Corporations (Corporaciones) — the most common business structure.
Limited Liability Companies (LLCs)
Partnerships
Sole Proprietorships
Puerto Rico allows Professional Corporations for licensed professions.
3. Incorporation Process
Choose a unique corporate name and file Articles of Incorporation with the Puerto Rico Department of State.
Draft corporate bylaws (internal governance rules).
Appoint directors and officers.
Obtain a Federal Employer Identification Number (EIN) from the IRS.
Register for local taxes with the Puerto Rico Department of Treasury (Hacienda).
Obtain any necessary licenses and permits.
Puerto Rico offers online registration services to simplify the process.
4. Corporate Governance
Governed by Articles of Incorporation and corporate bylaws.
Corporations require at least one director and one officer.
Shareholders hold annual meetings, but can waive them if allowed by bylaws.
Directors have fiduciary duties of care and loyalty similar to U.S. corporate law standards.
5. Taxation
Corporate Income Tax: Puerto Rico has its own corporate income tax system, separate from the U.S. federal system.
Corporate tax rates vary, with a general top rate around 37.5% (including surtaxes).
Puerto Rico offers various tax incentives and exemptions, especially for export services, manufacturing, and technology industries under Acts 60 and others.
Puerto Rico residents and companies pay local taxes but often have reduced or exempt U.S. federal income taxes due to territorial status.
Sales and Use Tax (IVU): Standard rate is 11.5%.
6. Foreign Investment
Foreign investors can freely establish corporations in Puerto Rico.
Many U.S. mainland companies create Puerto Rican subsidiaries to benefit from local tax incentives.
No restrictions on foreign ownership or repatriation of profits.
7. Compliance & Reporting
Annual reports must be filed with the Department of State.
Financial statements and tax filings are required annually.
Puerto Rico enforces compliance with U.S. SEC regulations for publicly traded companies.
Summary Table
| Feature | Puerto Rico (U.S. Territory) |
|---|---|
| Governing Law | Puerto Rico General Corporation Act |
| Business Entities | Corporation, LLC, Partnership, Sole Proprietor |
| Incorporation Authority | Puerto Rico Department of State |
| Tax System | Separate from U.S. federal; local corporate tax and incentives |
| Corporate Governance | Similar to U.S. standards (directors, officers, shareholders) |
| Foreign Ownership | Allowed, no restrictions |
| Reporting Requirements | Annual reports, tax filings |
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