Open a corporation in Costa Rica: Corporate law firm attorneys.
I can help you open a corporation in Costa Rica. Whether you wish to open a business or create a holding company, you will find that creating a corporation is easy with us. This article will cover the differences and benefits of the ones I recommend: the SA and the LLC. They are the only two I recommend because of their limited liability. First, you should know that a legal entity is born when you create a corporation. Corporations are reputed as persons by law. We call them “moral persons” or “legal persons.” These legal entities, or corporations, are regulated by corporate law. Most specifically, the Costa Rican Commerce Code.
Corporations are persons?
Yes. Under the law, there are two types of persons: physical persons like you and me and legal or “moral” persons. Legal entities are moral persons. Just as we are born out of our mother´s womb, so are these “moral” persons born when you create a corporation. The corporation is even given an identification number, just like we have an identification number in our passports.
When you open a corporation in Costa Rica, you first give it a name and a domicile. They can hire workers and obligate themselves through contracts during their legal lifetime. They can sue, or be sued, buy assets or sell them. Corporations can do anything you and I can legally do, unless restricted. However, they require physical persons to maneuver. This is why there are corporate “organs”, which are internal structures with people running them. In a standard corporation, internal organs are the Board of Directors, and the Shareholders Assembly.
I want to open a corporation in Costa Rica. Which types do you recommend?
There are several types of legal entities in Costa Rica that you can form. Many are interesting from a historical viewpoint. However, if you wish to open a corporation, I can only recommend two of them. On the one hand, you have the Standard Corporation (S.A., or Sociedad Anónima). On the other hand, I recommend the Limited Liability Corporation (S.R.L or Sociedad de Responsabilidad Limitada). I can recommend both of them because they confer a limited liability. There are, however, other types of legal entities available. However, I can´t recommend them because of their unlimited liability. Because of this, they are seldom used and have become antiquities of corporate law.
What are the basic requirements to open a corporation in Costa Rica?
At least two people must incorporate as founding partners. The Act of Incorporation is notarized. Therefore, this is done in my protocol, where I act as a notary public. In this act, both of you establish the articles of incorporation as founding shareholders. Then, just as it happens with a physical person, you must give the entity a name and a domicile in Costa Rica. Accordingly, you can set the corporation´s domicile in my law firm.
Since the company is a legal entity, it needs a physical person to represent it, with a power of attorney. Next, both of you must stipulate who will be the board of directors members and who will be the company’s representatives. Then, finally, you will need to establish the company’s object. But it would be best not to worry; this is all very generic, and we will draft everything for you.
What if I can´t come to Costa Rica to create a corporation personally?
We can also make this easy for you. If you can´t come down to sign personally, we can create a corporation for you. You will be named as the sole representative. You will have to accept this by email. Immediately after the corporation´s constitution, the founding shareholders will transfer their shares to you. This way, you end up owning the company without the hassle of having to fly down to Costa Rica. We can then send you the corporate law books and shares via courier. Alternatively, we can also keep them in my law office for safekeeping.
Once I open a corporation, is it registered somewhere?
Yes. As previously stated, the articles of incorporation, the formal act of the constitution, are done in front of me as a notary public. This is done in my notary´s ledger, called a protocol. The protocol is the set of public documents I issue as a Notary Public during my entire career. When both of you sign the act of incorporation, the legal entity “is born,” I will then proceed t register the corporation in the Public Registry. First, you will need to pay some taxes. Once registered, the Public Registry can provide certifications of the company. This certification is called a “personería.” It includes the corporate name, representatives, domicile, and the corporation´s identification number.
Can you describe the Standard Corporation? (Sociedad Anónima)
Most certainly. The Standard Corporation, or “Sociedad Anónima,” is widely used to incorporate. I dare say it´s the most used legal entity in corporate law. This is the first type of corporation I can recommend. The S.A. is very similar to the standard corporations in the United States. It´s a good choice if you wish for many shareholders in the future. A good aspect it has is how shares are easily transmitted. You only have to endorse them.
The Shareholders:
Creating the standard corporation in Costa Rica (Sociedad Anonima) requires at least two founding shareholders. Each of you receives common shares with voting rights. These votes are cast in every shareholder assembly that must occur at least once a year. The shareholder´s assembly is the most important organ of the corporation.
The Board of Directors:
At least three people are necessary to be on the board of directors. The seats include the company’s president, treasurer, and secretary. Unquestionably, the shareholders can be members of the board of directors. A “Fiscal” must also be named in the articles of incorporation.
The Articles of Incorporation:
When you open a corporation in Costa Rica, you need to set the ground rules under which it will operate. These are called “articles of incorporation.” Ussually they are quite generic. However, you can include special dispositions, and innovative concepts, such as priority purchase rights.
These rights prioritize other shareholders before endorsing shares to a third party. With exceptions, most changes in the articles of incorporation may be done with a simple majority vote by the shareholders.
Can you describe the Limited Liability Corporation? (LLC)
The LLC, in Spanish is called a “Sociedad de Responsabilidad Limitada”. This is the other type of legal entity I can recommend if you wish to open a corporation in Costa Rica. As a corporate attorney, I recommend them for small personal endeavors and buisnesses. Like the previous one, the Limited Liability Corporation conveys limited liability. However, they differ from standard corporations in several positive and negative ways. First and foremost, an LLC requires fewer people to constitute it. Just two people are needed to incorporate it! Therefore, unlike the S.A., if you don´t foresee a lot of owners in the future, this may be a suitable corporation for you.
The quota holders and the Manager:
The LLC does not have shares but “quotas”; thus, there are no shareholders. Quota holders are required to name at least one General Manager to represent the company. The general manager can also be a quota holder, so only two people must incorporate the LLC.
Unlike their counterpart, quotas can´t be transferred via endorsement. It´s not as easy as an S.A. Quotas can only be transferred through a transfer agreement. This must first be approved by the qualified majority of the other quota holders, who have a right of first refusal.
The quota holders assembly:
Like the standard corporation, the quota holder´s assembly is the foremost authority of the LLC. However, a simple majority is insufficient to make decisions, unlike its counterpart. Therefore, a qualified majority of quota holders´ votes are necessary (75%). Another thing to remember is that amendments require 75% percent of the votes.
Other things to consider when you create a corporation in Costa Rica:
Who represents the corporation in Costa Rica?
When you create a corporation in Costa Rica, you give birth to a legal entity. A corporation is a legal fiction; it does not have a material body. A physical person, or persons, must therefore represent it. Powers of attorney achieve this. In an SA, the president has the judicial and extrajudicial representation of the company. In an LLC, it´s the manager who represents it. As a corporate legal service, we can help you organize a proper corporate structure. There can be unlimited powers of attorney given to other people to represent the corporation in physical reality.
How are corporations modified? Is this done by a corporate attorney?
Modifications such as these are corporate legal services we provide. Just like the constitution, a notary public is involved. All corporate structure modifications must first be accepted by the corresponding shareholders or quota holder´s assembly. The modifications are voted on during the assembly and recorded in the company´s books. The notary public later protocolizes this, and the modifications are registered in the Public Registry of Costa Rica, per corporate law.
What reasons may I have to create a corporation in Costa Rica?
You can form a corporation in Costa Rica to initiate a business. Or make real estate purchases in the country. A lot of corporate law attorneys recommend this. It´s believed an excellent idea to place the asset in the name of the legal entity. And why not? The corporation separates your liability. It also helps with estate planning and avoids probate procedures entirely. Remember, however, that corporations in Costa Rica require an annual tax to exist! Thus, creating a corporation in Costa Rica depends on the situation.
They can be a complication if you place a marital asset in them. I have dedicated an entire section informing why this can be hazardous. You may have no control over the asset, which may involve litigation. There is no cure-all recipe, so my corporate legal services are carefully planned. They must be custom-fit for your specific requirements.
Dr. Christopher Pirie Gil.
Corporate attorney in Costa Rica.
** Our corporate law firm is located in San José, Costa Rica, and we also have law offices in Guanacaste. **