La Perla in San Juan, the capital of Puerto Rico, where you may wish to incorporate a business

Incorporate a Business in Puerto Rico: a 5-Step Guide

Opting to incorporate a business in Puerto Rico presents foreign investors with a unique blend of advantages, combining the opportunities of Latin America with the familiarity of home. 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.

For entrepreneurs who want to incorporate a business in Puerto Rico, it offers a direct route to establishing a legal presence and tapping into local opportunities. While alternatives like hiring local staff via a professional employer organization (PEO) may suit short-term or limited-scale engagements, starting your own business in Puerto Rico ensures greater autonomy and long-term viability in navigating the island’s dynamic business landscape.

With rising interest in nearshoring and a search for friendly countries with which to do business, it could be the perfect time to incorporate a business in Puerto Rico. At Biz Latin Hub, we are experts in Latin America and can help you navigate any unfamiliar local processes as you expand into the region.

Three good reasons to incorporate a business in Puerto Rico
3 reasons to incorporate a business in Puerto Rico

For those committed to entering the market on a more permanent basis, company incorporation in Puerto Rico requires five key steps, which are highlighted below after some insight into what makes the territory an enticing destination for investment.

Why 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).

What are the Main Types of Companies in Puerto Rico?

In Puerto Rico, the main types of companies include:

  • 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.

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 

A Biz Latin Hub infographic of 5 steps to incorporate a business in Puerto Rico
5 steps to incorporate a business 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.

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. 

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.

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 are the differences between a domestic corporation and an SRL in Puerto Rico?

AspectDomestic CorporationSRL
Shareholders/MembersIssues sharesMaintains percentage ownership, members instead of shareholders
Annual MeetingsMandatedNot necessary unless stipulated in the Operating Agreement
Formal RequirementsEntails more formalities and reporting obligationsEntails fewer formalities and reporting obligations
Management and GovernanceStructured framework with a board of directors elected by shareholdersMembers 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.

Or learn more about our team and expert authors.

Key services offered by BLH including legal services, accounting & taxation, hiring & PEO, due diligence, tax advisory, and visa processing
Key services offered by Biz Latin Hub to incorporate a business in Puerto Rico.

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.
Legal Team Puerto Rico

Legal Team Puerto Rico

Legal Team Puerto Rico is the Biz Latin Hub leading experts on doing business in Rico The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Puerto Rico via our "contact us page".

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