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Costa Rica: Types of Company

Sole Proprietorship

In Costa Rica the sole proprietorship ("empresa individual de responsabilidad limitada") is a far cry from the sole proprietorship of a common law jurisdiction. It could be said to have the characteristics of both a limited liability company and a limited partnership.

The concept originated in Liechtenstein but has been adopted by very few countries.

Under the Commercial Code of Costa Rican law a sole proprietorship is an enterprise with one owner whose liability is limited to the value of his share capital in the business. By way of exception where the sole proprietorship has been involved in fraud the personal assets of the owner can be seized to satisfy any judgment entered against the business where the assets of the latter are not sufficient to meet the creditors' claims.

The profits of a sole proprietorship can only be distributed by way of dividend where a trading profit has been made in that year. A sole proprietorship is run by a manager who has been granted broad powers of attorney and so is much simpler and cheaper than the running of a company. The owner of a sole proprietorship must be an individual and cannot be a legal entity such as a limited company.



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