How to create a corporation in Costa Rica. ☎️ FAQS - Legal Guide.
The first step to start a business in Costa Rica is to open a corporation, which is a corporate entity. This is done through a notary public who will notarize and register the company. Look no further; our corporate law firm will create your corporation in Costa Rica. We begin by drafting the articles of incorporation, and then we will register the company in the Costa Rican Corporate Registry. Your corporation will be set up in no time, whether you wish to open a business or create a holding company. You should know the differences and benefits of the two types of corporations I recommend. These are The Limited Liability Corporation (LLC), or “Sociedad de Responsabilidad Limitada, and The Standard Corporation, or “Sociedad Anónima”.
I only recommend these two company structures under Costa Rican corporate law. This is because of their limited liability, which is separate from the shareholders. So, legally speaking, what happens when you incorporate in Costa Rica? When you create a company, a corporate entity is born with a separate “personality” from the shareholders. Corporations are reputed as persons by law and are, therefore, separate entities from their shareholders. Corporations are also called “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? Is a corporation needed to start a business in Costa Rica?
Yes. Under corporate law, companies have “legal personality” and are reputed as “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 create a company in Costa Rica, it is given a name and a domicile.
Once you start your business in Costa Rica, the corporation will be the one to hire workers. The corporation will also be the one to obligate itself through contracts; it can buy assets and mortgage them. It can execute almost all of the legal acts that a physical person can do. It can sue, or be sued, purchase assets or sell them. Corporations can do anything you and I can legally do unless restricted by law or by corporate by laws. Since corporations are legal entities, they require the aid of physical persons to act. They do this through corporate “organs,” internal structures with people running them. In a standard corporation, internal organs are the Board of Directors and the Shareholder’s Assembly.
I want to open a corporation in Costa Rica. Which types does your corporate law firm recommend?
If you wish to invest and do business in Costa Rica, it’s best to incorporate. Our corporate laws, establish a variety of legal structures that you can use to do so. Many are interesting from a historical viewpoint. However, I can only recommend two legal structures for forming a corporation in Costa Rica. On the one hand, you have the Standard Corporation , commonly called an S.A. or “Sociedad Anónima).” On the other hand, I recommend the Limited Liability Company or LLC. (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.
Why the Standard Corporation for my company in Costa Rica?
The choice between a Standard Corporation or a Limited Liability Company (LLC) will depend on what business structure you wish to implement. I recommend the Standard Corporation if you plan on having a medium to large business in Costa Rica. If you plan to have several shareholders, the stock endorsement is easy under this corporate structure. The S.A. is a good way to start a business in Costa Rica for all types of commercial activity, such as agriculture, business, exports, imports, technology, etc. It´s also a great structure if you plan to hire workers.
The Standard Corporation is my legal recommendation if you plan to have a corporate bank account and business licenses. It´s also a great corporate structure for complying with the Costa Rican Social Security, or “Seguro Social.” The SA is a solid legal structure to open a corporation, because shares are endorsed quickly and easily. On the downside, the S.A. is harder to constitute, as it requires four people on the board of directors, who can also be shareholders.
For which legal scenarios do you recommend the LLC for my company in Costa Rica?
The Limited Liability Company (LLC) is also an excellent choice for incorporation in Costa Rica. If you want to open a corporation to hold assets or have a small business structure, then by all means, you should choose the Limited Liability Corporation (LLC). The LLC is more straightforward since it operates with only one manager. Therefore, you will need fewer people to create this corporate structure.
How many shareholders are required to open a corporation in Costa Rica?
At least two founding shareholders are required to incorporate a standard corporation or an LLC. The Act of Incorporation is notarized. Therefore, this is done in my notary public´s protocol. The Incorporation Act establishes the articles of incorporation and the corporate entity’s name, domicile, and life span. This act is of the utmost importance for corporate governance.
Since the company is a legal entity, it requires physical persons to represent it. In lieu of this, both shareholders must appoint a board of directors for the S.A, and at least one manager to represent the LLC. It´s important to note that the object of the corporation must also be established in the act of incorporation. The object refers to the commercial activity to undertake, when you open a corporation. As notary publics, we usually indicate a generic broad object without limitations to any commercial activity. If the corporation is represented by foreigners who don´t live in Costa Rica, then a resident agent must also be appointed.
Can the corporate domicile be established overseas, outside of Costa Rica?
I am afraid not. The company´s domicile is extremely important because it is where the corporation will be served with any lawsuit or any other type of notification. Under Costa Rican corporate laws, the company´s domicile must be established in our country in any of its provinces: San Jose, Alajuela, Cartago, Heredia, Puntarenas, Guanacaste, or Limon. It must be an actual address. This is usually circumvented by placing the domicile in our legal offices as part of our compliance packages.
What if I can´t come to Costa Rica to create a corporation personally?
Our corporate law firm in Costa Rica, can make this easy for you. We can draft the paperwork so that you can start your business in Costa Rica quickly. 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 automatically assigned in the Costa Rica Corporate Registry?
We take care of the registration for you. As previously stated, the articles of incorporation, the formal act of the constitution, are drafted by the 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 to register the corporation in the Costa Rica Corporate Registry. It´s essential to register the company correctly. To do so, first, you will need to pay some taxes. I will then take a certified copy of the articles of incorporation and get the company duly registered. 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. Most people choose this type of company, when they start a business in Costa Rica. The Standard Corporation, or “Sociedad Anónima,” is widely used to incorporate a type of business that is large in nature. Most law firms in Costa Rica recommend it. 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 to have many shareholders in the future. A good aspect of it 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. They must all be assigned to the Costa Rica Corporate Registry.
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 Limited Liability Company, or LLC, is called a “Sociedad de Responsabilidad Limitada”, or SRL in Spanish. 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 businesses. 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 LLC, must also be registered in the Costa Rica Corporate Registry.
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. Our corporate law firm will handle this for you.
Our corporate law firm recommends you read this prior to starting a business 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. Our law firm in Costa Rica 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.
I have heard that corporations have legal books. Does your corporate law firm in Costa Rica provide them?
Yes. The corporation´s legal books are essential. They are very important and should be kept safely. We will provide you with them when you incorporate. We can hold them for you in our corporate law firm, or you can keep them if you wish. You can click the following link to learn more about corporate legal books.
How are corporations modified? Is this done by your corporate law firm?
Modifications can be made to the LLC, or the S.A. 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.
Once constituted, what are the compliance obligations for companies in Costa Rica?
Once your company has been duly registered, it must comply with several regulatory obligations in Costa Rica. Corporate regulatory compliance includes:
- Paying the income and corporate taxes.
- Filing the RTBF declaration.
What reasons may I have to create a corporation in Costa Rica?
You can register a corporation to start a business in Costa Rica, or to use as a holding company to buy real estate. A lot of corporate law firms 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 to explaining 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 and custom-fit for your specific requirements.
Dr. Christopher Pirie Gil.
Corporate attorney in Costa Rica.
** Our corporate law firm in Costa Rica, is located in San José, and we can travel to any province, even Guanacaste. **