Colombia is one of the best countries to do business with in Latin América. The combination of a stable government, free trade agreements, and strong economic policies have helped the country to establish itself as an excellent place for investors and entrepreneurs to set up a company.
Advantages of setting up a company in Colombia
The availability of talent, in addition to a favorable business environment and the advantages stated next, are some of the attractions that have positioned Colombia as one of the most fashionable investment destinations in the world.
- Its government commitment to development: Colombia has a National Development Plan directed at the development of the country’s primary needs and designs and implements an action plan to achieve lasting growth and competitiveness.
- Strategic geographic position: being a country in South America with a coastline in the Pacific and Atlantic Oceans, the Caribbean Sea enables it to have a wide window for foreign trade, with easy access to the international market.
- Free trade agreements: Colombia has over 16 trade agreements, allowing preferential access to over 60 countries and nearly 1,500 billion consumers across worldwide markets.
- Free trade zones: Another benefit of investing in Colombia is the ease of settling in the free trade zones, which indicates certain advantages to producing goods or the provision of services.
- Impressive tax benefits: with the goal of being the main investment destination in the region, Colombia has put in the favor of companies a sequence of multiple and attractive tax benefits that vary from the reduction of income tax to several exemptions.
Types of company structures in Colombia
Under Colombian law, there are several types of commercial entities that can be incorporated by entrepreneurs looking to do business in Colombia. These commercial entities include the following:
- General partnership (Sociedad Colectiva): general Partnerships are closed companies where partners must govern the company themselves or authorize a third party to do so, as well as authorize a whole or partial assignment of participation in the company.
- Limited partnership (Sociedad en Comandita Simple y por Acciones): this is a type of company, in which partners can be managing or limited partners. Each type of partner has varied levels of liability, functions, voting rights, and responsibilities in the company.
- Limited liability company (Sociedad de Responsabilidad Limitada): this type of business structure is formed by partners as opposed to shareholders. This is a type of company where partners can limit their responsibility to the number of their contributions, but there are specific exceptions, such as responsibility regarding taxation, labor regulation, or if such extensive responsibility is constituted in the company’s bylaws.
- Corporation (Sociedad Anónima): this type of company structure can be advantageous in situations where there are a large number of shareholders. Under this structure, shareholders have no personal liability. A corporation must have a Shareholder’s General Assembly, a board of directors, a legal representative, and a statutory auditor. A minimum of five shareholders is required.
- Simplified stock company (Sociedad por Acciones Simplificada): this company structure was introduced into Colombian legislation in 2008 to simplify the process of setting up a company. A simplified stock company must have a Shareholder’s General Assembly and a legal representative. A minimum of one shareholder is required.
- Branch Office of a Foreign Company: branch offices are a choice for companies headquartered in foreign countries, and they have been attractive options to foreign investors and entrepreneurs. Colombian law views the branch office of a foreign company and its parent company as the same legal entity.
The procedure involved in setting up a company in Colombia
If you are an entrepreneur and you want to start your company formation process in Colombia, the points to consider and the process involved is stated next.
Identify and select the right type of company
Selecting the right type of company is the first and the most important step in order to open a business in Colombia. To choose one, it is essential to think about the objectives and goals of the company, as well as the requirements.
Choose a name for the company
The company incorporator must search for the availability of the name selected at the RUE. The RUE (Registro Único Empresarial) is the Chamber of Commerce’s public database. This platform allows the founder to search for any other companies with the same name as the one selected. In case the name is already registered in the Chamber of Commerce, the founder must choose a new one that resembles what he/she needs.
Signing power of attorney
If the shareholders of the company are not present in Colombia, a Power of Attorney will be required that allows a legal representative to carry out the company formation process locally.
Prepare and draft the company’s bylaws
The bylaws documents authorize the constitution of the company in Colombia.
This document will become the backbone of business operations and roles, so its content should be assessed by a professional attorney in order to avoid future conflicts.
Obtain a pre RUT
The Pre-RUT is a certificate that enables the founder to apply for and receive the Tax Identification Number, which is used to carry out the registration of taxpayer data in Colombia. To acquire this certificate, it is essential to present the company’s bylaws and identification documents of the legal representatives to the Chamber of Commerce.
Register with the Chamber of Commerce
Once the name of the company and all the required documents is prepared, it’s time to register it with the corresponding Chamber of Commerce. This entity is responsible for the creation and regulation of all companies in Colombia.
Obtain the RUT and NIT
Once the company is officially registered, the official RUT will be assigned by the DIAN (The DIAN – Directorate of National Taxes and Customs, is the government agency in charge of financial regulation and tax collection in Colombia), as well as the NIT (Número de Identificación Tributaria). This number is the official identification number for the company.
This step will enable the company to be verified by the Chamber of Commerce to obtain official status.
Register company books
An important step to conduct once the company is registered in Colombia is to register the company’s statutory books. This is a requirement carried out in the Chamber of Commerce. To ensure the correct management of these documents, the advice of a professional accountant is recommended.
Open a corporate bank account
All companies in Colombia needs a business bank account for smooth and efficient transaction. It is only possible to open a corporate bank account once the company is registered at the Chamber of Commerce and the Tax identification has already been assigned.
Register in the Social Security system
Finally, to start hiring employees in Colombia, it is necessary to register in the Social Security system. This allows the company to guarantee coverage to its personnel against accidents, invalidity, or health issues.
Colombia has several opportunities for any foreigner looking to start a business venture in the region.
Are you ready to register your company and start your business in Colombia? Let’s go ahead and contact your Damalion expert now.
