Nicaragua, in Central America, offers prime investment opportunities. It boasts consistent economic growth, safety, and a strategic location. Setting up a business here is quick and straightforward, with low entry barriers.
Investors can tap into a growing middle class, thriving tourism, and government incentives fueling various sectors. Company formation/incorporation in Nicaragua is the first step to entering this market with immense potential.
In six easy-to-follow steps below, we will outline what investors need for company formation/incorporation in Nicaragua.
See also: Register a Company in Costa Rica
Table of Contents
How Do I Set Up a Corporation 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.
Step 6: Legal Representation
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.
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.
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
Yes, foreigners can own and operate businesses in Nicaragua. There are no restrictions on foreign ownership of businesses 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.
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.
“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.
In Nicaragua, both “S.A.” (Sociedad Anónima) and “Compañía Colectiva” (Compañía Colectiva Limitada) are legal entity types that offer limited liability to their shareholders.
Shareholders: Both entities should have a minimum of two shareholders. Nicaragua does not allow single-member companies.
Management: CCLs are managed by one or more partners, while SAs require the election of a board of directors from among the shareholders.
Liability: Shareholders of SAs and collective partners of CCLs are typically liable only up to the value of their shares or the monetary value of their contributions, respectively.
Company Size: CCLs are suitable for smaller companies where partners want to disclose their identities, while SAs may be preferable for larger companies to safeguard the anonymity of shareholders and their board of directors.
Regulatory Requirements: Both structures generally have similar regulations, but the existence and operation of CCLs are closely tied to the collective partners, whereas SAs are more impersonal, which often favors the management of the latter.
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 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.
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.