Why register a company in Colombia?
Colombia offers a compelling proposition for entrepreneurs and investors. Its robust economic growth, strategic Latin American location, and expanding domestic market provide a fertile ground for business. The country offers tax incentives, favorable trade agreements, and a young, skilled workforce, facilitating business creation and expansion across various sectors.
Additionally, Colombia’s improved infrastructure, competitive operating costs, and a thriving entrepreneurial ecosystem, complete with access to venture capital and support programs, foster a conducive business environment. The nation’s relative political stability and advancements in security further bolster investor confidence, making Colombia an attractive destination for new businesses.
Register your
company with JLC
Our firm seamlessly blends legal expertise with cutting-edge technology to deliver exceptional legal services. With years of industry experience, we have refined our processes and developed a methodology that ensures efficient and effective legal solutions.
Our highly skilled team of attorneys, specializing in various legal areas, provides personalized, high-quality legal counsel. Furthermore, we leverage state-of-the-art technological tools to facilitate communication, optimize case management, and safeguard the confidentiality of your information.
Corporate structures
Colombia offers several corporate structures, including:
SAS
Simplified Stock Corporation
LTDA
Limited Liability Company
SA
Joint Stock
Company
The SAS structure is the most popular choice due to its flexibility and ease of formation. Key advantages of the SAS include
Legal Structure
- Board of Directors: Not required.
- Shareholders: No minimum or maximum number of shareholders. A single shareholder can form a company. Shareholders can be foreign individuals or entities.
- Ownership: A single individual can own 100% of the company.
- Legal Representation/Directors: The shareholder can serve as the legal representative. Alternatively, any other individual can be appointed. Foreigners can be legal representatives or directors.
- Shares: The company can issue various types of shares (ordinary, preferred, with preferential dividends, etc.).
- Duration: The company’s existence is not limited by time.
- Reserves: There is no requirement to maintain any reserves (statutory, legal, occasional, etc.).
Registration Process
- Articles of Incorporation: A simple private document registered with the Chamber of Commerce is sufficient. No formal notarial deed is required.
- Company Name: You can choose any name you prefer, subject to availability.
- Business Activity: There is no need to limit the company’s object to specific economic activities. The object can be unlimited.
Liability
- Shareholders’ liability is limited to their capital contributions. However, if the company is used for fraudulent activities, shareholders may be held jointly and severally liable.
Legal Representation
The role of a legal representative in Colombia is a cornerstone of corporate structure. This duly authorized individual acts as the legal face of the company, representing it in all legal matters. In other words, the legal representative signs contracts, conducts transactions with government entities, manages assets, and generally makes decisions on behalf of the company.
To serve as a legal representative in Colombia, neither residency nor Colombian citizenship is required. Today, most procedures are conducted electronically, allowing foreign individuals to act as legal representatives and perform most operations from abroad without needing to be physically present in the country.
While not strictly necessary for most corporate activities, a Colombian national identification document (cédula de ciudadanía) remains crucial for managing the company’s bank accounts. Most financial institutions in Colombia require the legal representative to present this document to open and manage corporate accounts. Although exceptions have been made in some cases, the trend is toward stricter enforcement of this requirement by banking institutions.
M Visa for Shareholders or Owners
To obtain an investor visa as the owner of a Colombian SAS (Simplified Stock Corporation), the company’s paid-in capital must equal or exceed one hundred times the current legal monthly minimum wage.
Most foreign investors establish companies with the required capital from the outset. However, it is possible to start a company with a smaller initial capital and subsequently increase it before applying for the visa.
Note: It is advisable to consult with an immigration and corporate law specialist for specific legal advice on this matter, as requirements may vary and be subject to change.
Procedure for Company Registration in Colombia
To draft the articles of incorporation, the following information is required:
- Company name
- Shareholder(s)
- Economic activity
- Legal representative(s)
- Address
- Capital amount
The bylaws of a Colombian company are akin to a company’s constitution. This foundational document establishes the internal rules and defines how the company will operate. It outlines the legal framework, conflict prevention mechanisms, shareholder protection, relationships with third parties, legal requirements, shareholder matters, and more.
The legal representative is a key figure in any Colombian company, serving as the company’s legal face to third parties. Foreigners can be appointed as legal representatives; only a copy of their passport is required. Similarly, they can appoint an employee, a trusted individual, or a law firm. The importance of a legal representative lies in the following:
- Representation before third parties: The legal representative is authorized to sign contracts, conduct transactions, open bank accounts, and generally carry out any act that binds the company.
- Legal liability: The legal representative assumes legal responsibility for the company’s actions, making it crucial to appoint a trustworthy individual with knowledge of legal obligations.
- Interaction with government entities: The legal representative serves as the direct link with entities such as the Chamber of Commerce, the DIAN (Tax Authority), and other authorities for procedures like company registration and tax returns.
- Protection of the company’s interests: The legal representative must safeguard the company’s interests at all times, making strategic decisions and representing the company in any negotiations.
- Conflict resolution: In case of legal disputes or conflicts, the legal representative is responsible for defending the company’s interests in court.
In-person: If the shareholders are physically present in Colombia, they may personally attend the regulatory agencies to complete the registration process. They must be accompanied by their legal counsel and present all required documentation.
Remote: For shareholders who are unable to be physically present in Colombia, the registration process can be conducted remotely by granting a power of attorney to a legal representative who will handle all necessary procedures.
Upon completion of the document review, the documentation will be submitted for registration to the corresponding Chamber of Commerce. Typically, this registration process is finalized within 1-3 business days. Once the registration is complete, the Chamber of Commerce will send an electronic notification to the registered email address regarding the status of the process. Alternatively, the status can be verified online.
Concurrent with the commercial registration at the Chamber of Commerce, the tax registration process is generally initiated automatically. Confirmation of this tax registration will be sent to the email address provided on the registration form. In certain instances, the tax registration process may take additional time, necessitating a scheduled appointment with the tax authority to request a copy of the registration certificate.
Procedures after the registration
Social security
Registration with Colombia’s social security authorities is mandatory for all individuals engaged in economic activities within the country, whether as dependent or independent workers. This process guarantees access to health services, pensions, and occupational hazards coverage, and complies with established legal provisions. Requirements and procedures may vary depending on the type of activity and the managing entity, but generally involve affiliation with a Health Promoting Entity (EPS), a Pension and Severance Fund Administrator (AFP), and a Labor Risk Administrator (ARL). It is essential to seek advice from an accountant or legal advisor to fulfill all requirements and avoid penalties.
Bank account
One of the primary challenges faced by foreign investors when establishing a company in Colombia is the temporary restriction imposed by some banking institutions on international transfers to new corporate accounts. This restriction period, which typically ranges from three to six months, can significantly hinder the initial capitalization of the company and the management of its operations.
The reason behind these restrictions is the need for financial institutions to verify the source of funds and mitigate the risk of suspicious transactions. However, this measure can be frustrating for investors seeking to quickly inject capital into their businesses.
The vast majority of banks do not allow corporate accounts to be opened by legal representatives who do not possess an official document permitting them to work and conduct business. Therefore, they often resort to using Colombian citizens to act as representatives of the company and open the account.
Municipal tax registration
Registration with the municipality of ICA is a fundamental requirement for individuals and companies wishing to conduct economic activities within the District. This process involves enrollment in the municipal unified tax registry and, in some cases, obtaining specific operating licenses depending on the nature of the business. Requirements and procedures may vary depending on the type of economic activity and applicable municipal ordinances. It is advisable to consult with the municipality of ICA or a legal advisor to determine the exact procedures to be followed and the necessary documents. In addition to fulfilling tax obligations, municipal registration allows taxpayers to access municipal services and participate in public procurement processes.
Foreign investment registration with the Central Bank
The registration of foreign direct investment in Colombia, specifically when capital is transferred to a Colombian company, is a process that involves multiple entities and procedures. Once the Colombian company has been established, foreign investors must register the investment with the Central Bank of Colombia. This registration involves the submission of a sworn statement detailing the amounts transferred, the method of payment, and the destination of the funds. Additionally, it is necessary to meet the requirements established by the Superintendence of Companies for the registration of capital increases and, in some cases, obtain the respective authorizations from the Financial Superintendence of Colombia. Failure to comply with these requirements may result in administrative and financial penalties.
Ultimate Beneficial Owner (UBO)
This is a tool implemented by the Colombian Tax and Customs Authority (DIAN) with the aim of increasing transparency regarding the ownership and effective control of legal entities and non-legal entities in Colombia. Through the UBO, it seeks to identify the individuals who, directly or indirectly, exercise ultimate control over an entity, regardless of whether they hold the share capital. This registry is mandatory and its information is used to prevent illicit activities such as money laundering, terrorist financing, and tax evasion. The information provided in the RUB must be updated periodically to ensure that it reflects the actual situation of the entity. Legal entities constituted after June 1, 2023, will only have 2 months from their registration in the RUT to comply with the initial RUB report.
Commercial premises application
New businesses often face a series of challenges when searching for a commercial property to lease. The main difficulty lies in the high competition for available spaces, especially in strategic areas or with high population density. Added to this is the need to find a property that meets the specific needs of the business in terms of size, location, and rental value. Another common challenge is the requirement of additional guarantees from the landlords, which can be a significant obstacle for companies that do not yet have a solid track record in the market. Furthermore, the administrative and legal procedures associated with leasing a commercial property can be complex and bureaucratic, requiring a significant investment of time and resources on the part of entrepreneurs