A limited liability company is composed of partners whose liability is limited to their capital contributions. The limited liability company's legal structure may be equivalent to the United States concept of "Partnership," and thus, may qualify as such for US tax purposes. Its incorporation procedures and costs are very similar to those of Corporations and the more significant differences when compared to a corporation, are the following:
Share Capital: limited liability companies divide their share capital into what local regulations called “quotas” as opposed to shares. Unless specifically provided otherwise in the articles of incorporation, transfer of “quotas” requires unanimous consent of all partners.
Management: they are run by one or more managers or assistant managers who hold power of attorney as provided for in the articles of incorporation.
In regards to Limited Partherships and Gerenal Partnerships, these are seldom used in Costa Rica, mainly because of the direct personal liability and exposure to which its partners are legally subject to. Its incorporation procedures are basically the same as for corporations.
The selection of the most appropriate business form usually relies on:
- the advantages of the shareholders in regards to the selected business form;
- tax considerations regarding its shareholders and specific of the pursued business venture;
- operating and management complexities and expenses.
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