The Andorran commercial law is stipulating that there are several forms of business which can be established by the investors, foreign or local, mostly attracted by the small corporate tax of 10%, the lack of taxes on dividends and interests paid to non-residents and the small rate of 5% applicable on royalties paid to nonresidents.
If the entities have a minimum share capital of 3000 EUR, it can open an Andorra Societat Limitadad (SL). The personality of such business is different from the one of its owners, but only after recording in the Commercial Register. The liability of its members is limited by their contribution to the capital from the moment of registration. The registration must be approved by the Government. The activity from certain fields requires a special trading license. The owners of a SL must pay a Government’s annual tax for the registration and if a “Registre de Comerc” registration is needed, a further amount is due annually. The management is assured by an administrator appointed by the general meeting of the shareholders, the highest instance in the company. The memorandum of association is the company’s main document, stating its characteristics and what procedures must undertake in order to transform or liquidate the business.
The main disadvantage of the Andorra Sociedad Limidad is that the shares can’t be transferred to the public and the capital cannot be increased by the registration of these shares at the Stock Market. In order to perform the above and if has available a higher amount of capital, the investors can open an Andorra Societat Anonima (SA). The minimum share capital required by this business is 60000 EUR, divisible into transferable shares. Just like in the case of the Andorran SL, the liability of its members is limited by their contribution to the capital, after the registration. The annual fee for registering this form of business is higher than the registration fee for the limited liability companies. The general meeting of the shareholders will appoint a board of directors to perform daily activities and present the company situation at every meeting. The directors are also responsible for drafting the company’s balance sheet and other financial statements.
Another form of business in Andorra is the Societat Colectiva, an entity different from the above ones by the fact that the capital is shared between partners who share an unlimited responsibility.
A form of business especially designed for the Andorra citizens is the sole proprietorship. The entrepreneurs must have been residents in Andorra for more than 10 years and must pay a trading license provided by the Registre de Comerc. The foreigners can establish this form of business if an Andorran nominee is appointed in order to keep 100% of the company ownership. After registration, the nominee will sign a Power of Attorney in order to appoint the foreign investor as an executive. For this, the Andorran nominee will receive a fee.
The foreign entities can establish branches, subsidiaries or representative offices in Andorra if desired. The subisdiaries and branches can be extensions of the parent companies in Andorra, or can be established as separated entities, while the representative offices can be incorporated in order to supervise the Andorran market and take all the necessary surveys in order to see if the market is suitable for the foreign business.