Operating a Business in Ecuador on a Temporary Residency Visa: An Expert Legal Guide

Ecuadorian law, primarily the Ley Orgánica de Movilidad Humana (LOMH), clearly distinguishes between the right to reside in the country and the authorization to conduct economic activities. Your temporary residency visa grants the former. Engaging in commerce requires additional, specific legal steps.

It is crucial to understand that the visa categories changed significantly with the LOMH. The old "9-I Investor Visa" is obsolete. Today, the most relevant temporary residency visas for entrepreneurs include:

Visa de Residencia Temporal de Inversionista: Designed for those making a substantial investment, such as in real estate or a certificate of deposit. This visa explicitly allows for administering one's investment.
Visa de Residencia Temporal de Profesional: For individuals with a university degree recognized by SENESCYT. This visa permits work in the holder's professional field.
Visa de Residencia Temporal de Rentista: For individuals with stable, passive income from abroad. While intended for those not working, it is possible to be a business owner (e.g., a shareholder), but actively managing the business requires careful legal structuring to avoid violating the visa's conditions.

Per Artículo 60 of the LOMH, each temporary residency category has specific conditions. Engaging in economic activities not explicitly permitted by your visa type is a violation that can jeopardize your immigration status.

The Crucial Distinction: Being a Resident vs. Being a Business Operator

Your residency visa and cédula (national ID card) are your keys to living legally in Ecuador. However, to operate a business, you must formalize your economic activity with the state. This means registering with the Servicio de Rentas Internas (SRI), Ecuador's internal revenue service, and obtaining a Registro Único de Contribuyentes (RUC) number. The RUC is your unique taxpayer ID and is non-negotiable for any formal business.

Steps to Legally Operate a Business on a Temporary Residency Visa

Follow these steps precisely to ensure your business is established on a solid legal foundation.

Confirm Your Visa Allows Economic Activity: Before anything else, review the specific terms of your visa. If your visa is restrictive (like a Rentista visa), you must consult an attorney to structure your business involvement legally, perhaps as a shareholder rather than a salaried manager.
Obtain Your RUC from the SRI: With your cédula in hand, visit your nearest SRI office. This is a mandatory step.
- Required Documents: Your original cédula, your visa order, and a recent utility bill to prove your address.
- Hyper-Specific Tip: During registration, you must declare your specific economic activities using the official Clasificación Industrial Internacional Uniforme (CIU) codes. Choosing the wrong code can lead to incorrect tax obligations. For example, a marketing consultant (M7310.03) has different tax implications than a software developer (J6201.01). Research your codes beforehand.
- Firma Electrónica: For issuing electronic invoices (facturas electrónicas), which are now mandatory for nearly all businesses, you must acquire an electronic signature (firma electrónica). This is obtained from a certified provider like Security Data or the Banco Central del Ecuador for a fee of approximately $30-$50 per year.
Determine Your Business Structure: You have several options, each with distinct legal and financial implications.
- Persona Natural (Sole Proprietor): The simplest structure, where you and the business are the same legal entity. Your personal RUC is your business RUC. This offers no liability protection.
- Sociedad por Acciones Simplificada (S.A.S.): This is the most significant recent development for entrepreneurs. Established by the Ley Orgánica de Emprendimiento e Innovación (2020), the S.A.S. is a flexible, modern corporate structure that can be established by a single person with a minimum capital of just $1. It offers limited liability and can be constituted entirely online through the Superintendencia de Compañías, Valores y Seguros (Supercias). It has largely replaced the more rigid Cía. Ltda. and S.A. for new small businesses.
- Compañía de Responsabilidad Limitada (Cía. Ltda.) / Sociedad Anónima (S.A.): These are traditional corporate structures requiring more complex formation processes, notarized statutes, and minimum capital requirements ($400 for a Cía. Ltda., $800 for an S.A.).
Obtain Municipal Operating Permits: In Cuenca, you don't just get a single permit. You must apply for the Licencia Única de Actividades Económicas (LUAE).
- Hyper-Specific Detail: The LUAE is a consolidated license that integrates multiple municipal requirements, including the Permiso del Cuerpo de Bomberos (fire department permit), Uso de Suelo (zoning verification), and others depending on your business type. The process is managed through the municipality's Dirección de Control Municipal. Expect inspections. Starting this process early is critical as it can take several weeks.
Comply with Sector-Specific Regulations: Certain businesses require additional national-level permits. For example, a cafe or food product business must obtain a sanitary registration or notification from ARCSA (Agencia Nacional de Regulación, Control y Vigilancia Sanitaria). A tourism business needs to register with the Ministry of Tourism.

Common Expat Pitfalls to Avoid

Operating "Under the Table": Conducting business without a RUC is illegal. The SRI conducts audits and can impose heavy fines and force the closure of your business.
Misunderstanding the Representante Legal Role: If you form a company (like an S.A.S.) and appoint yourself as the Legal Representative (Representante Legal), you are legally obligated to affiliate with the IESS (Ecuadorian Institute of Social Security) and make monthly contributions. This applies even if you do not draw a salary. Failure to do so results in accumulating debt with the IESS, which can prevent you from leaving the country.
Assuming a Rentista Visa Allows Active Management: A Rentista lives on foreign passive income. Actively working behind the counter of your cafe every day could be interpreted by immigration authorities as a violation of your visa status. It's crucial to structure your role as an owner/director, not a day-to-day employee.
Ignoring the LUAE Process in Cuenca: Many expats mistakenly open their doors after getting a RUC, thinking they are done. Operating without a valid LUAE will lead to municipal fines and closure notices.

Legal Checklist for Cuenca Expats

[ ] Confirm my temporary residency visa category permits my intended business activities.
[ ] Secure my Cédula de Identidad.
[ ] Register with the SRI, select the correct CIU code(s), and obtain my RUC.
[ ] Purchase a firma electrónica for electronic invoicing.
[ ] Choose and legally establish my business structure (S.A.S. is highly recommended for most).
[ ] Begin the LUAE application process with the Municipality of Cuenca.
[ ] If applicable, register as Representante Legal with the IESS and begin contributions.
[ ] Secure any necessary ARCSA or other sector-specific permits.
[ ] Engage a local accountant to manage SRI declarations (IVA and Income Tax).

⚠️ Legal Alert: When to Consult an Attorney Immediately

You absolutely must seek professional legal counsel if:

You are on a restrictive visa (e.g., Rentista, Jubilado) and wish to start a business.
You are structuring a business with partners, requiring a shareholder agreement.
You receive any official notification (notificación) from the SRI, IESS, or the Municipality of Cuenca.
You need to appoint yourself or someone else as Representante Legal and need to understand the full scope of responsibilities and IESS obligations.
Your business involves regulated activities like food production, tourism, or professional services requiring local licensing.

Navigating these procedures correctly from the outset is the single most important investment you can make in your business's long-term success and your legal security in Ecuador.