Deciding How to Take Title - Corporation vs Personal

There are a couple of options when taking title or ownership to real estate in Nicaragua.  Some of the most common are through a corporation (either Corporacion Sociedad Anonima or Compania Limitada) or personally using your legal name.
All are legal waysto take title so the decision is up to you. Corporations offer clear advantages, but there are many pro/cons between the three. In this article we look to highlight some of the differences.

Advantages of taking title with a Corporation over Personalally - First, we will look at the differences between the 2 types of corporations vs. taking title personally.  Here are the benefits:

1. Time efficient: The legal requirements for acquiring property through a corporation are simple, facilitating all business transactions and speeding up this otherwise lengthy legal process.  Corporations are ideal for carrying out joint ventures because they provide various options to meet your specific investment needs.  A sociedad anonima allows you to have sole ownership of your property or very well co-own your lot through the distribution of shares at the percentage you and your partner(s) agree upon.
   
2. Cost efficient: Making use of a corporation will save you both time and money as you will not be required to go before a Notary Public in your country of origin to authenticate signatures or grant proxies in order to purchase land. Because the entire process of international authentication and notarization is avoided, you will not be forced to visit the Nicaraguan consulate in your area, and as a result your documentation will not have to be submitted to various Nicaraguan agencies for time consuming certification processes which often translate into significant closing costs.
   
3. Make it simple: Purchasing through a corporation allows us to simplify the legal process of acquiring and selling real estate as sales require only the endorsement of shares. Furthermore, corporations also allow us to speed up various business transactions. If a particular sale calls for additional legal documents, as in the case of issuing proxies, these may be drafted and recorded in the corporate books, thus avoiding traditional legal formalities required under Nicaraguan law when purchasing under your personal name.
4. Resale: The subsequent sale of your property may be done from anywhere in the world and at any time, simply by endorsing the shares of your corporation and in this way bypassing the usual legal formalities and delays related to traditional purchase and sale agreements. Further sales may also be completed in the same manner.
5. Minimize closing costs: When buying through a sociedad anonima property transfer fees are brought to a minimum as taxes paid are based on the transfer of stock certificates as opposed to the transfer of real estate, a tax known in Nicaragua as IR (Impuesto de Retencion). This advantage will also be applicable to future buyers. Should you decide to resell your property you will be creating an additional attraction to prospective clients and thus optimizing your investment.
6. Asset Protection: Like in the US a corporation will help protect you from law suits losing other assets you own.

Now that the differences between taking title with a Corporation  and taking title personally have been outlined, we can take a look at the costs and the tax implications of all 3.

• Advantages/Disadvantages of using an SA (Sociedad Anonima): For around $1,000 you can buy an SA that usually has 100 shares that can be divided as you please.  Shares must be owned by at least 2 different people and at least one share must be owned by a Nicaraguan resident.  It costs around $500 per year to maintain the SA and required RUC number and this includes the mandatory filing of minimal taxes every 2 weeks.  The 100 shares can be divided/sold as you please and the number of shares each owner has determines their voting power.  An SA is not a recognizable entity and any taxes paid in Nicaraguan will not be credited to US taxes.  Capital gains in Nicaragua for an SA are 30%.
• Advantages/Disadvantages of using a Cía Ltda. (Compania Limitada): For around $1,500 you can buy an Cía Ltda. that usually has 100 shares that can be divided as you please.  Shares must be owned by at least 2 different people and at least one share must be owned by a Nicaraguan resident.  It costs around $500 per year to maintain the SA and required RUC number and this includes the mandatory filing of minimal taxes every 2 weeks.  The 100 shares can be divided/sold as you please but the number of shares each owner has does not determine their voting power.  Each owner has an equal amount of voting power as all the rest no matter how many shares thye may own; ie, if there are 4 partners that own different amounts of shares they will still each have 25% of the vote.  A Cía Ltda. is a recognizable entity by the US IRS and any taxes paid in Nicaraguan will be credited to US taxes. Capital gains in Nicaragua for a Cía Ltda. are 30%.
• Advantages/Disadvantages of buying in your own name: Capital gains on property owned in your name are 10%.  To sell the property or a share of the property all new owners must be registered in the Registro and Catastro and this could take between 3 and 14 months.  Any other asset also in your name may be at risk including anything in any other country.