Types of corporations in Costa Rica. ☎️ Legal guide to incorporate.
You may wish to do business, or buy a property in Costa Rica. If so, you will want to consider forming a corporation in Costa Rica. A minimum of two people are required to do so. Everything is done through a notary public who will notarize the articles of incorporation. He must later proceed with the incorporation process and registration at the Costa Rican Company Registry (Registro Mercantil de Costa Rica). You will find that it is easy to incorporate in Costa Rica, with the aid of our legal experts. The incorporation process is fairly quick, and will only take a few days. Most people create a Costa Rica corporation, either to have a holding company to buy property, or to open a business.
When you form a corporation, you will receive two things: shares (or quota certificates), and the corporate “legal books.” You receive “shares” if you constitute a standard company, or “sociedad anonima”. On the other hand, you will receive “quota certificates” if you create an LLC. Once the company registration process ends, you must request and receive your corporation’s legal books. These documents are essential as they provide valuable information about the company’s structures and owners. All companies in Costa Rica must have these books secured, in a safe location.
The limited Liability Corporation (SRL) and the Standard Corporations (SA):
Therefore, you should know the differences and benefits of the two types of Costa Rican corporations I recommend. These are: The Limited Liability Company (LLC), or “Sociedad de Responsabilidad Limitada, and The Standard Corporation, or “Sociedad Anónima“. I can only recommend these two company structures under Costa Rican corporate laws. This is because of their limited liability, which is separate from the stockholders.
So, legally speaking, what happens when you incorporate in Costa Rica? Well, a corporate entity is born. It´s separate because its personality is different “personality” from that of the stockholders. This means that there is a separate liability from that of the shareholders. Costa Rica corporations are reputed as persons by law and are, therefore, separate entities from their shareholders. Corporations in Costa Rica 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.
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 companies. There are some benefits to owning property in Costa Rica through corporations. Or, you can use it to start your business, 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 by laws 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 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.
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 incorporation 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 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. This legal document, acts as the certificate of incorporation, and shows the current status of the corporate entity.
Our corporate law firm recommends you read this prior to doing business in Costa Rica
Who represents the Costa Rica 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.
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.
When you hire us to set up a corporation in Costa Rica, we will do several things. First and foremost, we will incorporate the corporation in the Public Registry. Then, you will receive the shares (or quotas if you do an LLC.) Lastly, we will create the legal books for you, fill in all the necessary information, and hand them to you. These legal services are included in the Costa Rica incorporation package.
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. They are even needed for banking purposes. When you open a bank account in Costa Rica, the banks will ask for notarized certifications of who the shareholders are. You must provide the shareholder´s legal books to the notary public for this.
The legal books are important because they show who the shareholders are. They 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 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 the incorporation process in Costa Rica is done, your company will be duly registered. You will have t comply with several regulatory obligations in Costa Rica. Corporate regulatory compliance includes:
- Paying the income and corporate taxes.
- Filing the RTBF declaration.
Who keeps the corporate books of your company in Costa Rica?
If the business is under a standard 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.
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.