Company Formation/Incorporation in Nicaragua: A Six-Step Guide

Forming a company in Nicaragua is the first step to entering this market with immense potential. In these six steps below, we’ll explain what investors need to do to establish their business in Nicaragua. From navigating the legal requirements to understanding the tax implications, our guide provides comprehensive assistance to ensure a smooth and successful incorporation process in Nicaragua. Whether you are a local entrepreneur looking to expand your business or an international investor seeking new opportunities, Nicaragua offers a welcoming environment for growth and prosperity.

Nicaragua, located in Central America, offers excellent investment opportunities. It has steady economic growth, security and a strategic location. Establishing a business here, with the right advice, can be a smooth process. Investors can take advantage of the growing middle class, thriving tourism and government incentives that boost various sectors.

How Do I Set Up a Company in Nicaragua?

To set up a company in Nicaragua you must follow these 6 steps:

  • Step 1 – Draft Act of Incorporation.
  • Step 2 – Buy Accounting and Corporate Books.
  • Step 3 – Submit Act of Incorporation at VUI.
  • Step 4 – Register as a Trader and Register Accounting Books.
  • Step 5 – Obtain the Single Registration Document.
  • Step 6 – Legal Representation.
A Biz Latin Hub infographic of 6 steps to forma a company in Nicaragua
6 steps to form a company in Nicaragua.

Step 1: Draft Act of Incorporation:

The drafting of an Act of Incorporation requires at least two shareholders, either individuals or corporations and a minimum start-up capital of C$10,000 (approximately US$400). A legal representative with a Nicaraguan residency must be appointed. Additionally, the final act must be authorized and certified by a Nicaraguan public notary.

Step 2: Buy Accounting and Corporate Books:

These books are required for the registration of a company and may be acquired at local bookstores.

Step 3: Submit Act of Incorporation at VUI:

These documents are received at the Ventanilla Unica de Inversiones (Investment Service) and processed by the Commercial Registry. They require a payment of 1% of the company’s capital but up to a maximum of C$30,000 (approximately US$1,200).

Step 4: Register as a Trader and Register Accounting Books:

Once the act of incorporation has been processed, one must register as a trader and also register the accounting books with the Commercial Registry. This procedure is also done at the VUI.

Step 5: Obtain the Single Registration Document: 

This procedure may be done simultaneously with the previous one. This document is completed and submitted at the VUI and through it the investor receives the Municipal License, the License of the Nicaraguan Social Security Institute (INSS, for its acronym in Spanish), and the Tax Payer Registration (RUC, for its acronym in Spanish) of the General Revenue Department. The DUR requires a payment of 1% of the company’s capital.

For a corporation, shareholders must appoint a legal representative, who must be a Nicaraguan Resident or Citizen residing in the country. Choosing a trusted individual is crucial. The representative’s powers may be limited by the Board of Directors as deemed reasonable.

What are the Challenges of Doing Business in Nicaragua?

Nicaragua welcomes foreign investment through a streamlined legal process for new businesses, catering to both individual investors and established companies. Its territorial tax system offers fiscal incentives for key industries like tourism, energy generation, Free Trade Zone production, and innovative ventures, making it an attractive destination for investment.

Businesses operating in Nicaragua face significant challenges including inadequate rule of law, political instability, and arbitrary government regulations. The crackdown on dissent and arrests of business leaders has led to private sector exodus. Customs delays, arbitrary valuations, and excessive fines are common, while frequent and prolonged audits burden businesses. 

The weak legal environment hampers relief options, and the judiciary lacks independence and is prone to corruption. Property rights are hard to defend due to increasing expropriations and land seizures since 2018. 

High energy costs, driven by power losses, nontransparent power generation, and fossil fuel dependency, add to the challenges. Nationalization of the electricity distribution company further contributes to uncertainty for businesses in long-term planning.

Doing Business is a part of company formation in Nicaragua.

What are My Immediate Obligations After Incorporating a Company in Nicaragua?

After incorporating your obligations are to report taxes each month to both national and municipal tax authorities. For businesses that need to maintain inventory, once a year an annual year-end inventory declaration is due within the first 30 days of January.

All corporations must also declare an annual year-end income tax declaration without exception before the last day of February of every year.

Corporations must also maintain accounting records in compliance with regulations in Nicaragua and utilize fiscal documents under policies established by Nicaraguan Tax Authorities. 

GDP in Nicaragua infographic by Biz latin Hub for an article about company formation in Nicaragua
Think about the country’s GDP to decide on Company Formation in Nicaragua

Frequently asked questions When Incorporating a Company in Nicaragua

According to our experience, these are the most common questions and doubts of our clients when incorporating a company in Nicaragua:

1. Can a foreigner have a business in Nicaragua?

Yes, foreigners can own and operate businesses in Nicaragua. There are no restrictions on foreign ownership of businesses in Nicaragua.

2. How long does it take to register a company in Nicaragua?

The process of incorporating a company in Nicaragua, once the Articles of Incorporation and Bylaws have been finalized and signed, typically takes 4 to 6 weeks. After this process, you can begin carrying out the various activities for which you established the company and apply for any applicable incentives.

3. What does “S.A.” mean in Nicaragua?

In Nicaragua, “S.A.” stands for “Sociedad Anónima,” which translates to “Anonymous Society.” This legal structure separates the company from its shareholders, each of whom owns shares representing their ownership stake. The financial liability of shareholders is limited to the value of their shares.

4. What does “Compañía Colectiva” mean in Nicaragua?

“Compañía Colectiva” is a partnership where there must be a minimum of 2 natural persons as partners. The business name of the “Compañía Colectiva” is a listing of the names of all the partners or some of them, with the addition of the words “y compañía.” This legal entity offers limited liability to its shareholders, similar to “S.A.” companies, as long as the word “limitada” is added to the business name.

5. What types of entities offer Limited Liability in Nicaragua?

In Nicaragua, both “S.A.” (Sociedad Anónima) and “Compañía Colectiva” (Compañía Colectiva Limitada) are legal entity types that offer limited liability to their shareholders.

What are the Key differences between SA and CCL in Nicaragua?

ShareholdersMinimum of two shareholders; single-member companies are not allowed in Nicaragua.
ManagementManaged by one or more partners.Requires the election of a board of directors from among the shareholders.
LiabilityLiable only up to the monetary value of their contributions.Liable only up to the value of their shares.
Company SizeSuitable for smaller companies; partners’ identities are disclosed.Preferable for larger companies to safeguard shareholder and director anonymity.
Regulatory RequirementsClosely tied to the collective partners.More impersonal, often favoring management.

Biz Latin Hub Can Support You with Company Formation/Incorporation in Nicaragua

At Biz Latin Hub, we offer a comprehensive range of market entry and back-office solutions in Latin America and the Caribbean. 

We have expertise in company formation/incorporation in Nicaragua, with legal services, accounting and taxation, hiring, and visa processing available. 

We retain a large presence in LATAM with strong partnerships throughout the region. This far-reaching network gives us lots of tools to help with international projects and entering new markets in different countries.

Contact us today to learn more about our services and how we can help you achieve your business goals in Latin America and the Caribbean.

If this article on company formation/incorporation in Nicaragua grabbed your attention, check out the rest of our coverage of the region. Or read about our team and expert authors.

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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.
Craig Dempsey

Craig Dempsey

Craig is a seasoned business professional in Latin America. He is the Managing Director and Co-Founder of the Biz Latin Hub Group that specializes in the provision market entry and back office services. Craig holds a degree in Mechanical Engineering, with honors and a Master's Degree in Project Management from the University of New South Wales. Craig is also an active board member on the Australian Colombian Business Council, and likewise also active with the Australian Latin American Business Council.

Craig is also a military veteran, having served in the Australian military on numerous overseas missions and also a former mining executive with experience in various overseas jurisdictions, including, Canada, Australia, Peru and Colombia.

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