To incorporate a company in Colombia there are many steps, but it’s not as hard as you might think. In this guide, we’ll help you learn how to register and incorporate a company in Colombia.
When planning to expand your business operations to Latin America, there’s every reason to consider Colombia. It is a fantastic choice to incorporate a company in Colombia.
In 2016, The Economist named Colombia Country of The Year. The same year, the country had a foreign direct investment (FDI) of USD 13.5 billion. This was a 15.8% increase from the previous year. Flash forward to 2022 and this has risen to USD 17.05 billion.
The country also boasts better investor protection than other countries. As of 2022, it has a ranking of 7.6, which is higher than for most countries, including the US, Germany, and Israel.
So, if you want to know how to register a company or corporation in Colombia, this post is here to guide you through all the critical steps.
Keep on reading to learn more about how to incorporate a company in Colombia!
Why choose Colombia to incorporate / Form a company?
Before we get into the details of how to incorporate a company in Colombia, lets quickly review why Colombia is a great place to engage in business.There are an array of advantages for incorporating a company in Colombia, making it an appealing destination for business ventures. Firstly, its strategic location in South America provides easy access to regional and international markets. The country has a rapidly growing economy and a large, youthful, and skilled workforce, offering competitive labor costs and fostering innovation. This is a key reason for incorporating a company in Colombia. Colombia has made significant strides in improving its business climate through regulatory reforms, simplifying processes, and encouraging foreign investment. The government offers tax incentives and free trade zones to attract foreign entrepreneurs. These are but a few incentives to incorporate a company in Colombia.
Moreover, Colombia is abundant in natural resources, particularly in sectors like agriculture, mining, and renewable energy, opening up opportunities for various industries. The country’s improving infrastructure and transportation networks further facilitate business operations. With a diverse and expanding consumer base, Colombia presents a promising market for both domestic and export-oriented companies seeking growth in Latin America.
Create / Register / Incorporate a Company in Colombia
1. Establish the Foundations of the Company
If you want to incorporate a company in Colombia, you need to check if your company’s name is available. Your legal business name and trademark can be different.
Be sure to write and present your business’ bylaws. This agreement will establish all the information relating the company, the way it will function and the activities it will be involved with.
If you’re establishing your company in Bogota, the process of getting a Tax ID will be done in the Chamber of Commerce. However, if you’re going to be located in another city, additional steps will be needed, as you will need to apply for a provisional Tax ID and later on apply for the final Tax ID before DIAN. This is a crucial step when you incorporate a company in Colombia.
2. New Company Formation: Understand the Available Legal Structures
There are three legal structures when you incorporate a company in Colombia. You can choose the one that best suits your needs. They include:
- Limited company
- Joint-stock company
- Simplified stock company
A simplified stock company (SAS) is the simplest option for most foreign investors as it doesn’t require special formalities for its incorporation. The law permitting the establishment of this structure was passed in 2008. To this date, SAS has become a great option for both local and foreign investors. This is the perfect option when you incorporate a company in Colombia.
3. Register your company at public institutions to incorporate a company in Colombia
There are three primary institutions you’ll deal with to register and incorporate a company in Colombia. They include:
- The Chamber of Commerce
- Colombian Tax Authority
- Local bank of your choice
The Chamber of Commerce is responsible for regulating the creation of new companies in Colombia. It ensures that your registration adheres to the current legal structures and policies. It will also provide a certificate that demonstrates the existence and status of your company.
This certificate will be requested while you operate the company by the majority of private and public entities existing in Colombia.
The Tax Authority registers your business into the tax system. This registration earns you a unique tax number (NIT), that will identify you for all purposes and will enable you to present the mandatory tax declarations.
You’ll also need to open a company bank account for operating your business and getting money from foreign investment. This is another crucial step when you incorporate a company in Colombia.
4. Open a Corporate Bank Account
This is a fairly straightforward process, on which you’ll need to present the Existence Certificate from the Chamber of Commerce, the Tax ID certificate (RUT), the ID of the legal representative and the opening balance sheet of the company.
Keep in mind that some banks might have specific requirements for opening an account. Once you open a corporate bank account you will be ready to incorporate a company in Colombia.
5. Create an Entity Incorporation Document
In order to incorporate a company in Colombia, you’ll need an incorporation document that highlights the names and personal information of all partners involved in the business. It should also indicate the name of the company and the activities it will be performing in Colombia.
Other important things the incorporating document need to show include?
- Capital structure
- The board of directors
- Partner responsibilities
- Causes of termination
6. Hire a Legal Representative to incorporate a company in Colombia
You must have a legal representative, in order to incorporate a Colombian company, who can be different from the owners of the company. This person is responsible for the good operation of the company and is responsible for signing all contracts, legal documents, authorizing tax declarations, and handling all other company activities.
7. Understand the Laws Regarding Hiring Employees
The final step in order to incorporate a company in Colombia has to do with hiring employees, if you do this you will need to register your business with the Family Compensation Fund, the Colombian Family Institute, and the Governmental Learning Service. You’ll need to fill a unique form for all of these agencies.
You’ll also need to register your employees for public health coverage. Employees have the right to choose their desired provider, and your company has to submit the respective form to the provider.
Your company must also affiliate itself with a pension system. You can register with the public fund or other private funds. Keep in mind that you can’t choose the pension fund for your employees as they have the right to choose the public or private fund.
Registering your business with the Labor Risks Administrator is also essential. The agency helps in covering professional illness and workplace injury cases. You have to pay monthly contributions to the program, and protection starts 24 hours after submitting your form.
Common FAQs when forming a company in Colombia
In our experience, these are the common questions and doubtful points of our Clients.
Yes, a business can be 100% foreign owned by either legal persons (“legal entities”) or natural persons (“individuals”).
Registering a company in Colombia takes 4 weeks
LTDA in a company name in Colombia refers to a “Sociedad de Responsabilidad Limitada,” which refers to a Limited Liability Company. This type of corporate structure is characterized by the partners’ liability being limited to their contributions to the company’s capital. In an LTDA, partners are not personally responsible for the company’s debts beyond their investment, providing a level of protection for individual assets. Small to medium-sized businesses frequently use it in Colombia because it combines elements of partnership and corporate structures, providing flexibility and legal protections.
S.A.S means “Sociedad por acciones Simplificada”, which translates to “Joint Stock Company.” This is a type of commercial company with legal personality and assets independent from those of its owners. Shareholders are liable only up to the amount of their respective contributions corresponding to the integration of the shares they subscribe to or acquire. Shareholders are not liable for labor, tax, or any other type of obligations incurred by the company beyond its contribution, except in the event that the legal personality of the company is declared unenforceable.
Both the Sociedad por Acciones Simplificada (S.A.S) and Sociedad de Responsabilidad Limitada are Limited Liability Companies in Colombia.
A.Incorporation: An SAS is established through an authenticated private document, while an LTDA is established through a public deed before a notary.
B.Number of shareholders: An SAS can have a single shareholder (up to an unlimited number), whereas an LTDA must be incorporated with a minimum of two shareholders and a maximum of 25 shareholders
C. Liability: In both types of companies, shareholders are liable only up to the amount of their respective capital contributions.
D. Capital: In a SAS, the capital is divided into shares of equal value, and the payment is not stipulated. In an LTDA, the capital is divided into equal value portions (cuotas partes) and must be fully paid at the time of the company’s incorporation.
Want More Information On How to Incorporate / Form a Company in Colombia?
Colombia is a great destination if you are looking to expand your business operations or start a new business. However, before you get everything up and running, you need to complete the company registration process.
The Biz Latin Hub Group offers tailored business services including company formation, legal services, accounting/taxation services, and visa processing. Contact us now and see how we can assist you to register your new company in Colombia
Watch the following video to learn more about the company formation process in Colombia.
Learn more about our authors and our team.
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.