SAS vs. Cía. Ltda.: A Legal Comparison for Expat Entrepreneurs in Ecuador

Understanding the Fundamentals: SAS and Cía. Ltda.

The Sociedad por Acciones Simplificada (SAS)

The SAS is a modern, flexible corporate vehicle introduced by the Ley Orgánica de Emprendimiento e Innovación, published in the Official Registry Supplement No. 151 on February 28, 2020. It was specifically designed to streamline the incorporation process and empower startups and SMEs.

Key Legal Characteristics of an SAS:

Structural Autonomy: The SAS offers unparalleled autonomy. The founding shareholders can draft a highly customized estatuto social (bylaws) to govern everything from management structure to profit distribution, far beyond what traditional structures permit.
Simplified Incorporation: The entire process is executed online via the portal of the Superintendencia de Compañías, Valores y Seguros (SUPERCIAS), typically through a "private document" rather than a public deed, eliminating the need for a notary unless assets like real estate are contributed as capital.
Single Shareholder Permitted: A key advantage under Article 2 of its governing law, an SAS can be formed by a single person or entity (sociedad unipersonal), making it ideal for sole proprietors.
Flexible Capital Structure: The capital is divided into shares. The bylaws can establish different classes of shares with varying voting and economic rights, a feature crucial for structuring sophisticated investor agreements. The concept of authorized, subscribed, and paid-in capital allows for gradual capital injection over a period of up to 24 months.

The Compañía de Responsabilidad Limitada (Cía. Ltda.)

Governed by the traditional Ley de Compañías, the Cía. Ltda. is a long-standing and respected business structure, often favored for its perceived stability and formal framework.

Key Legal Characteristics of a Cía. Ltda.:

Limited Liability: Partners' (socios) liability is strictly limited to the amount of their capital contributions, protecting their personal assets.
Partner Requirements: A Cía. Ltda. requires a minimum of two partners and is legally capped at a maximum of fifteen, as stipulated in Artículo 92 of the Ley de Compañías.
Fixed Capital: The capital is divided into participaciones sociales (social participations), which are not securities and cannot be freely traded.
Formal Management: Management is executed by one or more managers (gerentes) whose powers are defined in the bylaws and law. The structure is inherently more rigid.
Formal Incorporation: The process is more bureaucratic, requiring a public deed executed before a notary, which must then be approved and registered by SUPERCIAS.

A Detailed Legal Comparison: SAS vs. Cía. Ltda.

1. Incorporation: Speed, Cost, and Process

SAS: The process is entirely digital and exceptionally fast—often completed in a matter of days. It is constituted via a private document with electronic signatures. Hyper-Specific Detail 1: The cost of a required electronic signature (firma electrónica) from an authorized entity like Security Data or the Banco Central del Ecuador is approximately $30-$50 USD per year. The process is governed by administrative resolutions like Resolución No. SCVS-INC-DNCDN-2022-0012, which outlines the specific online procedures.
Cía. Ltda.: Incorporation is a multi-step, in-person process involving a notary, which adds time and cost (notary fees can range from $250 to $500+). The process easily takes several weeks. It requires a public deed (escritura pública), which is less flexible to amend later.

2. Capital Structure & Transferability

SAS: Capital is represented by shares, which are freely negotiable as established in the bylaws. This makes it simple to bring in new investors, create employee stock option plans, or plan an exit strategy.
Cía. Ltda.: Transferring participaciones is a cumbersome legal act. It requires the unanimous consent of the other partners and must be executed via a public deed, making the structure ill-suited for businesses seeking venture capital or rapid scaling.

3. Governance and Flexibility

SAS: Offers almost complete contractual freedom. The shareholders can create the rules. For example, you can establish a board of directors or a single administrator, create special voting quorums, and define complex profit-sharing arrangements directly in the bylaws.
Cía. Ltda.: The governance structure is largely predetermined by the Ley de Compañías. Partner meetings (Junta General de Socios) have legally mandated functions and procedures that offer little room for customization.

4. Suitability for Solo Entrepreneurs

SAS: The clear winner. Its unipersonal capability allows a single founder to establish a formal company with limited liability protection without needing to find a "token" partner.
Cía. Ltda.: Not an option for a solo founder due to the strict two-partner minimum.

5. Ongoing Administration

SAS: Reporting requirements are generally more streamlined, designed to reduce the administrative burden. For example, shareholder meetings can be held via teleconference without the stringent formalities required for a Cía. Ltda.
Cía. Ltda.: Subject to more rigid annual compliance, including mandatory profit sharing distributions (utilidades) and formal procedures for holding and documenting partner meetings.

Common Expat Pitfalls to Avoid

The Flawed Power of Attorney: Hyper-Specific Detail 2: Many expats arrive with a general Power of Attorney (POA) from their home country. This is almost always rejected. For company incorporation, you need a Poder Especial (Special Power of Attorney) notarized and apostilled abroad, with extremely specific clauses authorizing your representative to perform acts like "suscribir el capital social" (subscribe the share capital), "aprobar el estatuto social" (approve the bylaws), and "nombrar administradores" (appoint administrators). A generic POA will bring your process to a halt at the notary or SUPERCIAS.
The "Automatic" RUC Myth: Hyper-Specific Detail 3: In theory, once SUPERCIAS approves your company, the SRI (Ecuador's IRS) automatically generates your tax ID (Registro Único de Contribuyentes - RUC). In practice, this digital handshake often fails. A seasoned professional knows to proactively visit an SRI office—like the main one in Cuenca on Avenida Remigio Crespo Toral—with the freshly printed company documents (nombramiento del representante legal and registration certificate) to activate the RUC manually. Waiting for the "automatic" system can cause weeks of delay.
Ignoring Municipal Obligations: Your SUPERCIAS registration and SRI RUC are just the beginning. You must still obtain your municipal operating permit, known as the LUAE (Licencia Única de Actividades Económicas) in Quito or simply patente municipal in Cuenca and other cities. This involves inspections from the fire department (bomberos) and other local entities.

Step-by-Step Incorporation Process (Simplified Overview)

Incorporating an SAS:

Reserve Company Name: Online via SUPERCIAS. The fee is approximately $22 USD.
Obtain Electronic Signatures: For all founding shareholders.
Draft the Estatuto Social (Bylaws): This is the most crucial document.
Complete Online Forms: Upload the bylaws and shareholder information to the SUPERCIAS portal.
Online Registration & Approval: SUPERCIAS reviews and registers the company electronically.
Activate RUC: Obtain your tax ID from the SRI (see Pitfall #2).
Open Corporate Bank Account.
Obtain Municipal Licenses (Patente).

Incorporating a Cía. Ltda.:

Reserve Company Name: Same as SAS.
Draft Public Deed: Your attorney drafts the articles of incorporation.
Open an "Integration Capital" Bank Account: Pre-incorporation account to deposit initial capital.
Execute Public Deed before a Notary: All partners must sign.
SUPERCIAS Approval: The notary submits the deed to SUPERCIAS for review and approval.
Mercantile Registry Inscription: The approved deed is registered.
Activate RUC & Obtain Licenses: Same final steps as SAS.

⚠️ Legal Alert: When to Stop and Consult an Attorney

Before Drafting the Bylaws (Estatuto Social): This document is your company's constitution. Using a generic template can severely limit your future options regarding investors, governance, and dispute resolution. This is not a DIY step.
If You Have Multiple Partners: A shareholder agreement (convenio de accionistas) is highly recommended for both SAS and Cía. Ltda. to govern relationships, exit clauses, and deadlocks. This is separate from the bylaws.
If Your Business is in a Regulated Industry: Activities like tourism, food production, finance, or resource extraction have additional layers of permitting from ministries like MINTUR or ARCSA.
When Using a Power of Attorney: Ensure the document is drafted or reviewed by an Ecuadorian attorney before it is signed and apostilled abroad to prevent rejection.

Conclusion: The Strategic Choice for the Modern Entrepreneur

For the vast majority of expat entrepreneurs, particularly solo founders, tech startups, and consultants, the SAS is the unequivocally superior choice. Its flexibility, speed, and lower cost align perfectly with the needs of a modern business. It allows you to build a corporate structure that serves your vision, rather than forcing your vision to fit into a rigid, outdated legal box.

The Cía. Ltda. remains a viable, trusted structure for small, closely-held family businesses or traditional partnerships where there is no intention of seeking outside capital or requiring a flexible governance model.

Ultimately, this decision lays the legal foundation for your entire Ecuadorian enterprise. Investing in expert counsel at this stage is not an expense; it is the most critical investment you can make in your future success.