Despite its small size, Costa Rica is an attractive location for establishing a company. It’s known as one of the most developed and secure countries in Central America. Besides its economic strength, Costa Rica is a popular tourist destination with a strong economic history.
There are many reasons to consider business formation in Costa Rica. Foreign investors who incorporate a company in Costa Rica’s economy might choose to operate in several thriving industries, including technology, tourism, agriculture, manufacturing, and renewable energy. Among the sectors with significant business prospects, sustainable and green innovation is the most captivating opportunity for setting up a company in Costa Rica.
Its focus on innovation and sustainability makes it an attractive destination for investment. Successful examples of green tech include dosmil50, while the eco-tourism industry alone contributes almost USD 1.5 billion a year to the economy! Costa Rica is undoubtedly a world leader in this area.
As a result, Foreign Direct Investment (FDI) has surged in the past decade, reaching $3.7 billion in 2022. It has solid Free Trade Agreements (FTAs) with Chile, Panama, and Mexico, and is a key member of the Central American Common Market (CACM) with El Salvador, Guatemala, Honduras, and Nicaragua.
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Starting a business in Costa Rica: Types of companies
The three most common legal entities in Costa Rica are:
Corporation/Joint Stock Company (Sociedad Anónima – S.A)
The S.A. is the most common legal entity structure in Costa Rica. See below some of its key characteristics:
- A public document must be drafted with the bylaws and signed by the Public Notary and company shareholders.
- A minimum of (2) shareholders are required.
- There is no established minimum capital.
- A board must be appointed, consisting of three board members and a controlling agent.
The availability of the company name needs to be checked with the National Registry Database.
Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L)
The Limited Liability Company has the same requirements as the S.A., with the only exception being the administration; shareholders are required to appoint at least one General Manager. Shares are called ¨quotas¨ and there is no minimum required capital, however, the amount subscribed must be divisible by 100. It’s essential to verify the availability of the company name on the National Registry database.
Branches of Foreign Companies
Branches of foreign companies are incorporated with a public deed signed by the Public Notary and the power of attorney of the foreign company. Due to the complexities of drafting and signing all the agreements, this legal structure is not recommended for SMEs. Apart from the requisites asked by the National Registry, it is also considered more expensive than other legal entities in Costa Rica.
What are the minimum requirements to incorporate an LLC–SRL in Costa Rica?
The Minimum requirements to incorporate a Sociedad de Responsabilidad Limitada in Costa Rica – SRL are the following:
- A name for the new legal entity to be formed.
- A minimum of (2) shareholders, which can be either natural (i.e. persons) or legal persons (i.e. entities).
- Appoint a resident director (and where this person is a foreign national, there is a need to also appoint a resident agent, who is a locally educated and certified lawyer).
- Confirm business activities and corporate purpose.
- A minimum capital of USD 400, needs to be transferred upon bank account opening.
- Register a Fiscal Address which must be within the country and is used for official correspondence.
Important Tip(s):
Although the minimum capital is USD 400, we would recommend a minimum capital of USD 1,000, which should be commensurate with the planned business activities of the company.
The founding shareholders do not need to physically travel to the country as the establishment can be completed via a power of attorney signed via DocuSign.
Company formation in Costa Rica: What do you need to get started?
To proceed with incorporating an SRL in Costa Rica, you will need to provide the following:
- A name for your legal entity.
- Shareholder (s) identification document.
- Confirm the business activities, corporate purpose, and primary operations.
- Minimum initial capital to be registered.
Important Tip: We always recommend having a preferred legal name and two alternatives in case the primary legal name is unavailable.
If you’re considering doing business in Costa Rica, read on for 10 simple steps to register a company in Costa Rica.
10 simple steps to register/form a company in Costa Rica
Registering a company in Costa Rica is easier compared to many other countries. You can handle it remotely with the help of a Power of Attorney and an incorporation agent.
1. Pay agency fees when forming your Costa Rican company
If you’re using a firm to help you with the incorporation process, the firm may ask for upfront payment on services to obtain the necessary due diligence documents.
2. Choose the company structure
You need to choose the right company structure for your company’s needs and activities. Following this, you’ll need a project plan draft detailing the timeline and tasks for each week of the incorporation process.
3. Search for homonyms of the company name
A firm will help search for homonyms of your proposed company name and file an application to reserve your company name with the Costa Rica Registrar of Companies.
4. Sign off on proper documentation
The agency will ask you to sign, notarize, and legalize documents from your country of residence. You’ll then return them to the agency for timely documentation registration in Costa Rica.
5. Register an incorporation charter
A company incorporation charter, also called an M&AA, is filed at the mercantile section of the public registry in Costa Rica. The firm can then legalize the company’s bookkeeping.
6. Open a corporate bank account in Costa Rica
Once you’ve successfully incorporated your company, the law firm will open a corporate bank account for the company and deposit the capital to start the business. Additionally, depending on the firm, they might pay incorporation fees to the bank on behalf of your company.
7. Register as a taxpayer in Costa Rica
The agency files a D-140 form to the government to register your company as a legal taxpayer in Costa Rica. The company may let you use their office address for tax purposes until you get an office address in the country for your company.
8. Apply for insurance
After your company hires staff in Costa Rica, the company will be registered for labor risk insurance with the National Insurance Institute.
9. Register with Costa Rican social security
Post-incorporation, the firm will register your company as an employer with the Caja Costarricense de Seguro Social (CCSS).
10. Receive your Costa Rica Company Kit
Ideally, your contracted firm will send you all of the documentation for your company that has been filed throughout the incorporation process.
Common FAQs when forming a company in Costa Rica
Based on our experience, these are the typical questions and areas of uncertainty for our clients.
Yes, a business can be 100% foreign-owned by either legal persons (“legal entities”) or natural persons (“individuals”)
It takes 6 weeks to register an operating company in Costa Rica.
The S.A. in a company name in Costa Rica refers to a “Sociedad Anónima,” which translates to a “Joint Stock Company.” This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, crafting a safeguarded boundary. The S.A. structure holds substantial prominence in Costa Rica due to its exceptional adaptability and flexibility, rendering it the favored option for a diverse range of business ventures.
SRL in Costa Rica, stands for “Sociedad de Responsabilidad Limitada,” which translates to Limited Liability Company in English. This legal entity operates independently from its shareholders, offering them limited liability. SRL companies are prevalent due to their simplified requirements, making them a popular choice for business structures.
In Costa Rica, both “S.A” (Sociedad Anónima) and “S.R.L” (Sociedad de Responsabilidad Limitada) are limited liability entity types.
1. Shareholders: An S.R.L. can have a minimum of 2 to unlimited shareholders, while an S.A. must have at least two shareholders, three board members, and a comptroller who is not part of the board but is nevertheless a statutory requirement.
2. Administration: An S.R.L. has no board of directors, only appointed administrators; an S.A. requires a board with at least three members.
3. Liability: In both entities, shareholders are jointly liable for debts up to their contributions.
4. Transfer of shares: S.R.L. share transfers require approval from other shareholders, while S.A. shares can be transferred through endorsement without approval.
5. Company Size: S.R.L. is ideal for smaller companies or those with shareholders outside Costa Rica, while S.A. suits larger companies.
6. Regulatory requirements: S.R.L. faces easier regulations compared to S.A., with fewer formalization requirements.
Register your company in Costa Rica with the help of Biz Latin Hub
Forming a company in Costa Rica can be challenging. Using an incorporation firm to aid you in starting your business can save you time, stress, and money in the long run.
At Biz Latin Hub, our multilingual team of company formation has the expertise and experience to help you with any of your projects. We offer comprehensive legal, recruitment, and tax advisory services to support your business success in the Central American nation and the 15 other countries in Latin America and the Caribbean where we operate.
Get in touch with us today for personalized advice and support.
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
