How to choose the ideal business entity for Doing Business in the Dominican Republic

In the Dominican Republic, various business entities are available for establishing companies, each with its own characteristics, specific advantages, and particular limitations.

The choice of the type of commercial entity will depend on multiple factors that must be carefully evaluated. Key aspects to consider include the required number of partners, the desired level of liability, flexibility in management structure and share transfers, the initial capital required, and the business growth plans.

Limited Liability Company (SRL)

The Limited Liability Company (SRL) is one of the most commonly used structures in the Dominican Republic, especially by small and medium-sized enterprises (SMEs). Its main characteristics include:

• Limited liability: Partners limit their liability to the capital contributed and are not personally liable for the company’s obligations.
• Number of partners: Must have a minimum of two and a maximum of fifty partners.
• Share capital: There is no minimum capital requirement, but it must be divided into equity shares.
• Management: Can be managed by one or multiple managers, who must be natural persons and can be partners or designated third parties.
• Transfer of shares: Generally, shares are not freely transferable to third parties without the consent of the other partners.

The SRL is particularly suitable for SMEs or family businesses where partners seek to protect their personal assets by limiting liability strictly to their capital contributions. It is also recommended for those who prefer some flexibility in business management while avoiding excessive formalities in decision-making.

Corporation (SA)

The Corporation (SA) is a more structured and regulated entity, primarily used by larger companies. Its main features include:

• Limited liability: Shareholders’ liability is strictly limited to the amount of their contributions.
• Number of shareholders: Must have at least two shareholders, with no maximum limit.
• Share capital: A minimum mandatory capital of RD$30,000,000 is required, divided into nominative shares, with at least 10% fully subscribed and paid. The company can issue different types of shares, including common, preferred, and shares with differentiated rights as stipulated in the bylaws.
• Management: Must have a board of directors with at least three members. A statutory auditor must be appointed to oversee and audit financial and administrative operations.
• Transfer of shares: Shares can be freely transferred unless specific restrictions are set in the bylaws.
• Regulation: Subject to strict financial regulations and continuous accounting oversight.

The SA is ideal for companies planning to attract investors through share issuance and requiring a solid, regulated corporate structure. It is also the best option for businesses intending to go public or pursue significant expansion plans, necessitating a formal and regulated corporate governance framework.

Simplified Joint-Stock Company (SAS)

The Simplified Joint-Stock Company (SAS) offers a middle ground between the SRL and SA, providing greater flexibility with fewer formalities. Its key features include:

• Limited liability: Shareholders are only liable up to the amount contributed to the company.
• Number of shareholders: Requires a minimum of two shareholders, with no maximum limit.
• Share capital: The minimum required share capital is RD$3,000,000, divided into nominative shares, with at least 10% fully subscribed and paid.
• Management: The management structure can be freely defined in the bylaws, allowing for a sole administrator, multiple administrators, or a board of directors.
• Transfer of shares: More flexible than the SRL, although certain restrictions may be imposed through the bylaws. The SAS cannot publicly offer its shares but can issue debt securities in private placements.
• Regulation: Less stringent than an SA, as appointing a statutory auditor is not mandatory.

The SAS is particularly useful for startups or growing businesses that require flexibility in modifying their bylaws and issuing shares easily. It is a good option for attracting external investors without the complexity and strict formal requirements of an SA.

Sole Proprietorship with Limited Liability (EIRL)

The EIRL is an option for individual entrepreneurs who want to operate with limited liability. Its characteristics include:

• Limited liability: The owner has limited liability, clearly separating business assets from personal assets.
• Number of owners: Established by a single individual.
• Share capital: No minimum capital requirement.
• Management: The owner has full control over business management and operations.
• Transferability: Does not allow for additional partners, maintaining a strictly individual structure.

The EIRL is recommended for solo entrepreneurs who want to separate their personal finances from their business assets while benefiting from limited liability. This structure is ideal when there is no intention to add future partners.

General partnerships and limited partnerships

These business structures are less common today but may still be useful in certain cases:

• General Partnership: All partners have unlimited and joint liability for the company’s obligations.
• Limited Partnership: Divided between general partners, who have unlimited liability, and limited partners, whose liability is limited to their contributions.

These structures are advisable when partners want to establish a business based on a high degree of mutual trust and cooperation. They are also useful when a business model requires a clear distinction between general partners, who assume unlimited liability, and limited partners, whose liability is restricted.

Summary Table

Main Business Entities in the Dominican Republic	SRL	SA	SAS	EIRL
Liability	Limited to capital contribution	Limited to capital contribution	Limited to capital contribution	Limited to capital contribution
Number of partners	2-50 partners	Minimum 2 (no maximum)	Minimum 2 (no maximum)	1 sole owner
Minimum capital	Not required	RD$30,000,000	RD$3,000,000	Not required
Management	One or more managers (must be natural persons, may or may not be partners)	Board of directors (min. 3 members)	Flexible (Sole Administrator or Board)	Sole owner has full control
Transfer of shares	Requires partner approval	Free, unless restricted in bylaws	Flexible, but may have restrictions	Not applicable (single owner)
Mandatory supervision (Statutory Auditor)	Not required	Mandatory	Not required	Not required
Regulation and formalities	Moderate, less formal	High, strict formalities	Moderate, flexible	Low, minimal regulation

Note: This table does not include General Partnerships or Limited Partnerships, as they do not offer limited liability to their partners and are less commonly used today.

Which is the best choice?

The choice of the ideal business entity in the Dominican Republic depends on the specific needs and objectives of each investor.

• SRLs and EIRLs are ideal for entrepreneurs and SMEs seeking administrative simplicity and asset protection.
• SAS structures offer flexibility for emerging businesses that want to attract investors and grow rapidly without excessive complexity.
• SAs are best for large companies with ambitious expansion plans, requiring a formal structure and aiming to attract external capital.

In any case, obtaining specialized legal advice is essential to ensure an informed decision and full compliance with regulatory requirements.