In Colombia, small and medium-sized companies represent 96% of the national business, contribute 40% to GDP, generate more than 17 million jobs and represent 9.8% of national exports. This shows its importance both for entrepreneurs and for the national economy.
So, if you are motivated and want to legally establish a company in Colombia, you must bear in mind that this process does not only represent the payment of taxes as many see it, but it is also an opportunity to obtain benefits that help improve financial aspects, tax and fiscal, market strategies, staff training, among others including their good image and market positioning.
However, although these benefits exist, there are certain incorrect thoughts on the businessman or entrepreneur minds at the time of setting up or formalizing their company and part of this is due to ignorance of the law and the non-application of the regulations that exist in their favor.
If you want to make your dream come true and set up your company in this article, we explain what is needed to set it up.
When deciding to set up a company, it is necessary to take into account its global and long-term planning, definition of the activity to be carried out, risk assessment, financial capacity, business viability, market study, etc. All these aspects should be collected in what is called a Business Plan.
A Business Plan is a working document in which the idea of the business to be started is developed. It is an open and dynamic work scheme that must be completed as the idea progresses. It must be synthetic and clear and, although it does not conform to any standard model, it must include the following aspects:
- Description of the company
- Product definition
- Description or needs covered
- Differences with competitive products
- Market analysis
- Marketing plan
- Economic-financial study
- Financial structure of the company
- Profitability analysis
Classification by Economic Activity – CIIU Code
The CIIU Code is the International Standard Industrial Classification (revision 3.1 of the United Nations and adapted for Colombia by DANE). Its purpose is to group all similar economic activities by categories.
Classification by Economic Sector
Companies can be classified according to the economic sector in:
- Industrial or Manufacturing: The primary activity of this type of company is the production of goods through the transformation and / or extraction of raw materials.
- Commercial: They are intermediaries between producer and consumer, their main function is the sale of finished products and can be classified as wholesalers, retailers or retailers, and commission agents.
- Service: As their name indicates, they are those that provide a service by transforming inputs (knowledge) into products with intangible characteristics, in exchange for a fee or based on a contract.
Size of the company
According to Law 905 of 2004, commonly called the Mipyme Law, the following parameters are followed to determine the size of a company. In the case of a combination of parameters, the determinant will be total assets:
- Microenterprise: Personnel with no more than ten (10) workers, total assets excluding housing for a value of less than five hundred (500) current legal monthly minimum wages.
- Small sized entity: Personnel between eleven (11) and fifty (50) workers, total assets worth between five hundred and one (501) and less than five thousand (5,000) current legal monthly minimum wages.
- Medium sized entity: Personnel between fifty-one (51) and two hundred (200) workers, total assets worth between five thousand and one (5,001) to thirty thousand (30,000) current legal monthly minimum wages.
Steps to create a business
The Bogota Chamber of Commerce on its portal guides you in the process of setting up and consolidation of your company and allows you to do all the procedures to legally incorporate it.
Business definitions to consider
RUT: The Tax Registration, RUT, constitutes the unique mechanism to identify, locate and classify people and entities that have the quality of taxpayers filing income tax and non-taxpayers declaring income and assets; those VAT and Non VAT responsible; withholding agents; importers, exporters and other customs users, and other subjects of obligations managed by the tax office – DIAN.
Mercantile Registry: The Mercantile Registry is the one in which the facts and acts related to individual entrepreneurs and mercantile companies are registered, in order to make them public so that they can be known by the people who contract with them.
Income tax: Income tax is levied on all income that a taxpayer obtains in the year.
These are the consequences of not bookkeeping.
If you are an entrepreneur and want to start your business set up process in Colombia, it is important that you take into account both the legal obligations to which you are subject, as well as the protocols to follow with the different public entities. Although the above sounds a bit complex, our experts at JLC Auditors will want to share with you the step by step that you must follow so that your business or company complies with all the requirements established in the law.