To incorporate a company in Puerto Rico, adhering to local regulations and following the required steps is crucial for success. Strategically positioned as a U.S. territory in the Caribbean it offers foreign investors exciting opportunities. Partnering with knowledgeable experts ensures compliance and streamlines the process. Biz Latin Hub provides tailored support and back-office services to guide you through starting a business in Puerto Rico, setting your company up for success and sustainable growth in this dynamic market. This guide outlines the integration of local Puerto Rican requirements with US federal regulations for a successful business launch.
Key Takeaways On How To Incorporate a Business in Puerto Rico
| Is Foreign Ownership Permitted in Puerto Rico? | Yes, 100% foreign ownership is possible. |
| Steps to Incorporate a Business in Puerto Rico: | Step 1 – Reserve the name of the business you wish to incorporate in Puerto Rico. Step 2 – Appoint a legal representative. Step 3 – Establish the company bylaws. Step 4 – Register the company. Step 5 – Open a corporate bank account. |
| What Are The Most Common Types of Companies? | Corporation (Sociedad Anónima). Limited Liability Company (LLC) (Sociedad de Responsabilidad Limitada). Sole Proprietorship (Empresa Individual). |
| Why Choose to Incorporate a Business in Puerto Rico? | Puerto Rico has a dynamic and diverse economy with access to both North American and Latin American markets. |
| What are the benefits of Act 60 incentives? | Under Act 60, businesses offering export services (e.g., consulting, tech, finance) can access a 4% CIT, exempt dividends, and 75% exemption on property tax. |
5 Steps to Incorporate a Business in Puerto Rico
You will need to follow these five key steps when you incorporate a business in Puerto Rico:
- Step 1 – Reserve the name of the business you wish to incorporate in Puerto Rico.
- Step 2 – Appoint a legal representative.
- Step 3 – Establish the company bylaws.
- Step 4 – Register the company.
- Step 5 – Open a corporate bank account.
1. Reserve the name of the business you wish to incorporate in Puerto Rico
The first thing you must do when you incorporate a business in Puerto Rico is to reserve your company name. This entails entering potential names into official databases to ensure that they are not in use or too similar to companies already active in the market.
2. Appoint a legal representative
If you will be overseeing your Puerto Rican business interests from elsewhere, or are planning to be away from the territory for long stretches, you will need to appoint a legal representative. Once appointed via a power of attorney, they will be able to act on your behalf, including signing important official documents.
3. Establish the company bylaws
Once you have completed the two aforementioned steps, you will next need to draw up the company bylaws, which describe the activities, structure, objectives, and shareholders of the company.
4. Register the company
With the bylaws drawn up, you or your legal representative will be able to register the company before local authorities, including the Puerto Rico Chamber of Commerce.
Expert Tip: The Order of Operations
From our experience, the sequence of registration is critical in Puerto Rico. You cannot obtain your Municipal License (Patente) without first having your detailed tax registration (Registro de Comerciante) from SURI. And you cannot register in SURI without your EIN. We advise clients to strictly follow the order: Department of State -> IRS (EIN) -> SURI -> Municipality. Attempting to skip ahead or do these in parallel often leads to rejected applications and lost time.
5. Open a corporate bank account
The final step to incorporate a business in Puerto Rico is to open a corporate bank account, through which all transactions related to the company will pass through. Your legal representative will be able to offer you advice on the best providers based on your location and commercial activity.
What are the Main Types of Companies in Puerto Rico?
Puerto Rico, while boasting a vibrant Spanish-speaking culture akin to many Latin American countries, maintains its status as a US territory. This entails strong ties to the United States and comparable administrative procedures.
There are three main types of companies in Puerto Rico:
- Corporation (Sociedad Anónima): A corporation is a separate legal entity from its owners (shareholders), offering limited liability protection. It requires a board of directors, officers, and a formal governance structure.
- Limited Liability Company (LLC) (Sociedad de Responsabilidad Limitada): An LLC combines the limited liability features of a corporation with the operational flexibility of a partnership. It offers pass-through taxation and allows for a more informal management structure.
- Sole Proprietorship (Empresa Individual): A sole proprietorship is the simplest form of business, owned and operated by one individual who is personally liable for all business debts and obligations.
The SURI System
The Unified Internal Revenue System (SURI) is the digital platform used by the Puerto Rico Department of Treasury (Hacienda). All tax registrations, filings, and sales tax (IVU) management must be done through SURI. It is the central hub for fiscal compliance.
Why Choose to Incorporate a Business in Puerto Rico?
Located in the Caribbean Sea between the Dominican Republic and the US Virgin Islands, Puerto Rico has a population of around 3.2 million people and registered a gross domestic product (GDP) of $103.1 billion in 2020. That represented a slight GDP decline compared to the previous year, owing to the turmoil caused by the COVID-19. However, the Puerto Rican economy has now bounced back.
Once a major producer of sugar, Puerto Rico now has a dynamic and diverse economy. Its well-developed manufacturing industry contributes more than 50% of total GDP and is a major draw for investors. Among the manufactured products representing key export goods to Puerto Rico are pharmaceuticals, medical equipment, garments, and computers.
Call centers are also a growing business activity because of the high level of English proficiency on the island. Puerto Rico is also home to a dynamic startup scene and an increasing pool of tech talent.
For investors looking to take advantage of these growing sectors and incorporate a business in Puerto Rico, the island has three free trade zones (FTZs) — known as foreign trade zones in the United States and its territories — that offer lucrative financial incentives to businesses located within their boundaries. Beyond the FTZs, the island also has a huge tourism sector that draws significant overseas investment.
Being a US territory, Puerto Rico uses the US dollar, which creates stability for locally-based businesses. The island also boasts considerably better infrastructure than many other nations in Latin America and the Caribbean.
Although a great deal of Puerto Rico’s trade is with the mainland United States, local businesses benefit from preferential access to a wide range of major global and regional markets, via US participation in a wide range of free trade agreements (FTAs).
Frequently Asked Questions when Forming a Company in Puerto Rico
Here are some answers to some of the most common questions we get asked by our clients.
1. Can a foreigner own a business in Puerto Rico?
Yes, a business can be 100% foreign-owned by either legal persons (legal entities) or natural persons (individuals).
2. What is the Puerto Rico Company Tax ID (TIN)?
The Puerto Rico Company Tax ID is known as the Employer Identification Number (EIN), a unique nine-digit number assigned by the Internal Revenue Service (IRS).
3. How long does it take to register a company in Puerto Rico?
Registering a company in Puerto Rico takes 4 weeks.
4. What does the SRL company name mean in Puerto Rico?
SRL in Puerto Rico stands for Sociedad de Responsabilidad Limitada, which Is similar 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.
5. What does Domestic Corporation mean in Puerto Rico?
A Domestic Corporation in Puerto Rico refers to a company that is officially established and registered under the laws of Puerto Rico and operates within the territory of the island. In essence, it’s a corporation that is both legally incorporated in Puerto Rico and conducts its business activities exclusively within this region.
6. What entity types offer Limited Liability in Puerto Rico?
In Puerto Rico, the S.R.L (Sociedad de Responsabilidad Limitada) is the limited liability company.
7. What is an EIN?
The EIN (Employer Identification Number) is a tax ID issued by the US Internal Revenue Service (IRS). Even though Puerto Rico has its own tax system, companies still need a US EIN for banking and federal purposes.
8. What is the Department of State?
The Puerto Rico Department of State is the registry for all corporations and LLCs. This is where you file your Certificate of Formation.
9. What is Act 60?
Act 60 is the Puerto Rico Incentives Code, offering significant tax breaks (like a 4% corporate tax rate) to eligible businesses, particularly in export services.
10. Is a resident agent required?
Yes, every corporation or LLC must have a designated resident agent with a physical address in Puerto Rico to receive legal service of process.
11. What are the differences between a domestic corporation and an SRL in Puerto Rico?
| Aspect | Domestic Corporation | SRL |
|---|---|---|
| Shareholders/Members | Issues shares | Maintains percentage ownership, members instead of shareholders |
| Annual Meetings | Mandated | Not necessary unless stipulated in the Operating Agreement |
| Formal Requirements | Entails more formalities and reporting obligations | Entails fewer formalities and reporting obligations |
| Management and Governance | Structured framework with a board of directors elected by shareholders | Members directly oversee the business or designate managers, flexible management structure |
Biz Latin Hub can help you incorporate a business in Puerto Rico
At Biz Latin Hub, our local team of corporate support professionals is on hand to assist you when you incorporate a business in Puerto Rico.
We offer a comprehensive portfolio of services, including company formation, accounting & taxation, legal services, visa processing, and hiring & PEO, meaning that we can assist with market entry and ongoing operations, and offer tailored packages of back-office support to suit every need.
With offices in 16 markets around Latin America and the Caribbean and trusted partners taking our coverage to almost every corner of the region, we also specialize in multi-jurisdiction market entry and ongoing support.
Contact us now to find out more about how we can support you doing business in Puerto Rico.
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