Incorporate in Costa Rica: ☎️ Select the S.R.L or the S.A.
Forming a corporation in Costa Rica is a good idea for starting a business or creating a holding company for property purchases. I can only suggest two types of corporations: The Standard Stock Corporation (S.A.) or the Limited Liability Company or LLC. (Sociedad de Responsabilidad Limitada, abbreviated to SRL). These corporate structures are a good choice since they separate the shareholder´s personal liability. This means that you are not personally responsible for the company´s liability. So, if you are starting a business in Costa Rica, this is a key factor that is essential for investing since the risk is minimized. In this article, we will cover the basic incorporation and registration process. I will also provide an in-depth analysis of both the Limited Liability Company in Costa Rica and the Standard Stock Corporation. Let´s get started!
Incorporate to invest in Costa Rica:
Opening a business and investing in Costa Rica, can be a rewarding endeavor. Whether you’re a local entrepreneur or a foreign investor looking to tap into the country’s vibrant economy, Costa Rica offers security for your investment. Our country has a stable political environment, a strategic location, and a growing market. An attractive destination for starting a business from scratch, or to purchase a business for sale. Buying property through a corporation is a great idea if you are looking to acquire passive income investments.
To open a corporation in Costa Rica, we will guide you through key steps, including choosing a unique company name, drafting your company’s articles of incorporation, and fulfilling the necessary legal and tax requirements. Once the articles of incorporation are drafted and notarized, we will then proceed with the corporate registration at the Public Registry.
The best legal entities for doing business in Costa Rica:
The choice between a Standard Stock Corporation (sociedad anonima or SA) or a Limited Liability Company LLC (sociedad de responsabilidad limitada or SRL), is an important decision. It will depend on what type of business structure you are aiming for. The LLC is the corporate structure of choice, if you wish to minimize the amount of people operating it. It’s a solid choice for property purchase, or to place the family home. Special care must be taken, when using a corporation to place marital assets.
The S.A is great if you plan on having a medium to large business in Costa Rica. The SA allows the shares to be quickly and effectively endorsed, which makes the share´s transmission easier. So if you plan to have several shareholders, and start a business in Costa Rica, then by all means double down on the Costa Rican sociedad anonima or SA. The stock endorsement is easy. The S.A. is a good way to open 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 Stock Corporation (S.A.) is great for a larger business in Costa Rica:
The Costa Rican SA (sociedad anonima) 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 “Caja Costarricense del Seguro Social (CCSS).” The Sociedad Anonima is a solid legal structure, but it has several hiccups to form it. You see, it requires more people to incorporate. A minimum of four people on the board of directors, who can also be shareholders.
On the other hand, you should choose the LLC if you are not planning to hire many people or none at all. This corporate structure is great for small businesses or to act as a holding company for buying property in Costa Rica.
The company incorporation process:
Setting up companies in Costa Rica is not difficult, and only takes a few days with our law firm. The incorporation process is very straightforward. The corporation is founded with the aid of a notary public and then registered at the Public Registry.
When you form a corporation, you will receive the stock (either shares or quota certificates) and the corporate “legal books.” You receive “shares” if you constitute a standard stock company, or “sociedad anonima”. On the other hand, you will receive “quota certificates” if you create a Limited Liability Company or LLC.
Both the legal books and shares are essential corporate documents that must be kept in a secure location. These documents are essential as they provide valuable information about the company’s structures and owners. They are also necessary for proof of ownership and to make any future corporate modifications to the corporate bylaws.
The two main types of corporations in Costa Rica we recommend:
There are only two types of Costa Rican corporations I recommend: The Limited Liability Company (LLC), or “Sociedad de Responsabilidad Limitada, and the Standard Stock Corporation, or “Sociedad Anónima”. These two company structures offer limited liability, separate from that of the stockholders. Limited liability is the main reason for incorporating a company in Costa Rica.
There are other types of company structures in Costa Rica, like the “Simple Limited Partnership” or the “Collective Company”. However, these company structures do not offer limited liability under law and are therefore not recommended.
So, legally speaking, what happens when you incorporate in Costa Rica? Well, a corporate entity is born. Costa Rican corporations are reputed as persons by law. They can interact with the world. They are born, through incorporation, can grow financially, and can hire workers. A corporation in Costa Rica can make any business contract. They can also own, mortgage, and sell property like physical persons.
Companies are persons? Is a corporation needed to start a business in Costa Rica?
Yes. Under Costa Rican 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 form a corporation in Costa Rica, it is given a name and a domicile of your choice. You can create corporations to act as a holding company.
There are benefits to owning real estate in Costa Rica through corporations. You can also use it to start your business, and the corporation will be the one to hire workers. The corporation will also be the one to obligate itself through contracts; and do business, it can buy assets and mortgage them.It can execute almost all of the legal acts and contracts 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 the corporate bylaws that the founding stockholders establish. 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.
How many people are required to incorporate in Costa Rica?
At least two founding shareholders are required to incorporate a standard stock 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 wish to incorporate in Costa Rica, but I can´t come down personally. What can we do?
We can make things easy for you to incorporate in Costa Rica. We can draft the company´s paperwork, and if you can´t come down to sign personally, then we can do if tor you. You will be named as the sole representative, and 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. Our legal experts will make the incorporation process in Costa Rica an easy thing for you.
What documents are needed to incorporate in Costa Rica?
It does not matter what type of business entity you choose, the documents required will be the same. The only legal documents that you need to incorporate, is your valid passport, for identification purposes. You don´t need to have residency to constitute create the legal entity.
Once I open a corporation, is it automatically assigned in the Costa Rica Corporate Registry?
The incorporation process in Costa Rica is something we do for you. Registration of your Costa Rican corporation, will be done in just a few days. 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 Rican Corporate Registry (Registro Publico de Costa Rica, Sección Mercantil).
It´s essential to register the company correctly. To do so, you will first 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. This legal document acts as the certificate of incorporation and shows the current status of the corporate entity.
Who represents the Costa Rican corporation?
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.
Why are the corporate books so important when you form a corporation?
Legal books are crucial for your business in Costa Rica. If you want to modify your corporation’s bylaws, you will need them. Domicile changes, legal representation, and even changing the name of your corporation require the corporate legal books. These changes are made through shareholder meetings that are transcribed in the legal books. The books also keep the Shareholer Ledger, which provides information about the current stockholders.
If the corporation wishes to open a bank account in Costa Rica they will ask for notarized certifications of who the shareholders are. Any notary public can do the certification, but shareholder´s ledger must be provided to him, in order to do so. The books also contain the Board of Directors (Governance) minutes and the shareholders’ decisions. Minutes in Spanish translate to “Actas,” which are “acts.” Making significant changes to corporations is impossible without these books. Be sure to keep them in a safe place.
How are corporations modified? Is this done by your corporate law firm?
Modifications can be made to the LLC, or the S.A through shareholders meetings. These are corporate legal services we provide. Just like it happens with the corporation´s constitution, a notary public is involved if the stockholders wish to make changes to it. The corresponding shareholders or quota holders must first discuss and accept all corporate structure modifications. These modifications are subjected to a vote during the shareholder’s assembly and recorded in the company´s books. The notary public later makes a protocolization of the Act. These modifications are then registered at the Public Registry of Costa Rica (Registro Nacional de Costa Rica), per corporate law.
Once constituted, what are the corporate compliance obligations for companies in Costa Rica?
Once the incorporation process in Costa Rica is done, your company will be duly registered. Costa Rican corporate compliance requires several yearly obligations. Corporate regulatory compliance includes:
- Paying the income tax and corporate taxes. These taxes vary depending on whether the corporation has economic activity or not.
- Filing the RTBF declaration at the Central Bank of Costa Rica.
Who keeps the corporate books of your company in Costa Rica?
If the business is under a standard stock corporation, the books are kept by the secretary of the board of directors. If set up a corporation that is an LLC, then the manager usually keeps the books. It´s not unusual to have your attorney keep them for you. Law firms usually charge a yearly fee for these legal services. As part of the corporate packages we offer our clients, we can keep your books secured and take care of your yearly corporate obligations.
What reasons may I have to create a Costa Rica corporation?
You can register a corporation to start a business in Costa Rica or to use it 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 our corporate legal services are carefully planned and custom-fit for your specific requirements.
Conclusions:
In conclusion, creating a Standard Stock Corporation, or the Costa Rican Limited Liability Company (LLC), are both good bets for incorporation. If you want to open a small business in Costa Rica, the “Sociedad de Responsabilidad Limitada (SRL)” offers a flexible and efficient legal structure for both local and foreign investors. It’s also a solid bet, if you plan to own property in Costa Rica, through a corporation.
Incorporating in Costa Rica, whether through a standard stock corporation (S.A.) or a limited liability company (S.R.L.), provides solid structural options for business success. Both entities offer attractive benefits, including asset protection, favorable tax policies, and operational flexibility, making them ideal for both local and foreign investors. Choosing the right structure depends on your specific goals, and at CPG Legal, we’re here to help you navigate these choices with expertise. By incorporating in Costa Rica, you can confidently position your business venture for growth and security in a vibrant market.
Dr. Christopher Pirie Gil.
CPG LEGAL