Saturday, November 17, 2012

                     Legal Update

My interest in real estate was recently reawakened as I pondered how to remove more of my shrinking next egg from the devaluing US dollar. “Quantitive easing- unlimited” means the dollar will continue to lose value, robbing savers of their life’s work and retirement income. A 600 square foot terrace with unobstructed views lured us toward the purchase of an investment condo near the historic district.

Legal questions raced through my mind on topics ranging from LLC’s and taxes to domestic help. So, I’ll add to my previous musings with an update.

LLC’s here are much like in the US. Only instead of forming one on line in an hour, several complexities arise. The advantages of avoidance of reporting to the US Treasury as a financial instrument and transferring shares rather than real estate were offset by rules for Ecuadoran taxes and reporting.

An annual tax return prepared by an accountant is minor compared to the 25% tax rate on the first dollar earned!  An LLC must also report property at full value on real estate purchases and sales, causing tax problems for private sellers and capital gains on most properties.

The law requires unanimous consent by all shareholders to sell shares, raise capital or close the company. Gotta catch everyone in a simultaneous good mood!       Or write side agreements.

Domestic help is considered an employee, requiring full benefits, unless one of the following contract requirements is not met:

1.       Payment for services
2.       Supervision by employer
3.       Dependence (setting days for work)

So, you may want to allow your maid or other help to set their own day(s) for work. And since a judge is required to rule in the favor of labor in any ambiguity, write a simple contract stating the person chooses their own day of work. Be businesslike initially…then be generous at your discretion later.

What are the required benefits?  Social security (health insurance, etc) at 20.55% (employer pays 11.15%), 13th month of pay, 14th month of pay, 15 days of vacation, and 8.5% reserve fund after 12 months. They add up to nearly 40% of base pay. Minimum wage is now $280 per month. And not paying benefits is now a felony!      Yes, jail is a possibility!

Most employees and independent contractor s assume you will pay bus fare and lunch.

See my previous postings on legal issues. The prior post on labor law/ maids is now inaccurate.

As always, get multiple opinions on these issues. They are a moving target. And I am always fallible!

                 Still learning,     Gary