As well as the banking system, and being a globally famous offshore hub, there is a growing tourism and services sector which is providing exciting opportunities for foreign investors. Your next best move might just be to register a company in Panama.
Panama is the registered domicile for over 500,000 Panama corporations & foundations, making it the second most popular jurisdiction to incorporate in the world, next to Hong Kong.
In terms of key industries, the strategic importance of the Panama Canal, an influential spot for maritime trade, has made Panama a leader in exports to the northern tip of South America whilst also providing crucial access to the Pacific and Atlantic Oceans.
The country is tiny, with a population of just over 4 million people, however, in 2016 it exported an impressive US$8.8 billion, with major beneficiaries, of course, being the United States (24%), as well as Venezuela and Ecuador (6.8%), neighbors Guatemala (6.2%) and Japan (4.4%).
Major exports include chemical products such as oxygen compounds and sulfonamides (accounting for over 18% of exports), passenger and cargo ships (9.8%), and packaged medication (8.2%). Other exciting business prospects include a growing tourism industry in a country that boasts natural beauty in abundance and retail, with the largest commercial center in Latin America, Albrook Mall.
This article will take you through the steps of how to register a company in Panama; compared to other countries in the region, this process is relatively stress-free!
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Choose your entity: Types of companies in Panama
Considerations such as the nature of the business, the number of owners, liability, and tax implications should be taken into account when choosing a type of company in Panama.
There are several different types of legal structures in Panama to choose from, but the three most commonly utilized options are:
Corporation (Sociedad Anonima – S.A.)
A corporate structure that provides limited liability to shareholders and is commonly employed for various business activities. It is crucial to note some key characteristics associated with the formation of this entity. Most notably, shareholders bear responsibility solely for their own assets and contributions. Panama’s legislation does not specify a minimum social capital requirement for the company, although a recommended minimum of USD$10,000 is advised.
Recommendation: In most cases, we would recommend clients to establish a Sociedad Anonima for their business needs.
Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L.)
A company structure that offers limited liability to its members and is well-suited for small or micro-sized businesses.
Private Interest Foundation (Fundacion de Interes Privado)
A unique legal entity that operates similarly to a trust, providing a flexible framework for asset management, estate planning, and charitable purposes. To learn more about this type of structure please get in touch with the Biz Latin Hub team.
What are the minimum requirements to incorporate an SA in Panama?
The minimum requirements to incorporate a SA in Panama are:
- A name for your legal entity
- (1) shareholder, which can be of any nationality and reside outside of Panama and can be either a natural or legal person (i.e. an individual or a legal entity).
- Appoint at least (3) Directors for your company
- Appoint a local resident agent within the bylaws of the company
- Describe the main company activities
- A minimum initial capital, although no minimum capital amount is required by law, we would strongly recommend a minimum share capital of USD$1,000 however it should be commensurate with your planned business activities.
- Register a Fiscal Address which must be within the country and is used for official correspondence
Important Tip: The founding shareholder(s) do not need to physically travel to the country as the establishment can be completed by our local Panamanian team.
6 Steps to Register Your Company in Panama
Please see below the 6 steps for incorporating a Sociedad Anónima (S.A.) in Panama
Step 1: Organize the name and structure of your company
As with most countries in Latin America, the first step to registering a business is to choose the name and legal structure of your company. The main types of company are:
- A Corporation/Joint Stock Company (Sociedad Anónima – S.A) – this is by far the most common type of company to form in Panama, which means that shareholders are only responsible for their own contributions and assets.
- A Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L) – This will help provide insulation to you as an investor and will mean you are not personally liable for the debts or funds of your company.
PRO TIP: It is very important you think about this decision carefully as it can limit the type of business you can legally engage in, and once you sign your documents, amending the structure can be a very long and complicated process.
Step 2: Company Incorporation: Draft and sign bylaws
The bylaws of a company can be simply described as the ‘constitution’ of a company. These documents will contain all the crucial information of the structure and ethos of the company, including:
- Information regarding the frequency and nature of shareholder/board meetings
- Documentation of all the details of the company (name, registered address, share capital, location, company type, Board of Directors, etc)
- Procedure for record keeping
- Company’s ‘ objeto social’ which identifies the company’s business activities
The Bylaws will undergo notarization by a Public Notary in Panama, formalizing them as a Public Deed. This procedural step typically spans a duration of (5) to (10) business days.
Step 3: Register your company in Panama
The next process is to formally register your company in Panama. This step will ensure that the company is officially recognized in the country and that it is properly registered with the relevant tax authorities.
REMEMBER: Your physical presence in Panama is not required for the completion of the corporation formation process, instead this can be done through a power of attorney. So we can manage all necessary procedures efficiently without you needing to come to Panama, although we would love to meet you in person.
Step 4: Obtain a Tax Identification Number (RUC)
Once a company is Registered, the next step is to apply for a tax identification number (Registro Único de Contribuyentes – RUC) with the Directorate General of Revenue (DGI).
Step 5: Open a Corporate Bank Account
The final step is to open a Panamanian Bank Account for your company. Here’s a general guide for opening a bank account for a Sociedad Anónima (SA):
- Match your business needs with a suitable Panama bank
- Complete all required banking documentation
According to research from the Banker, 41 of the top 100 Central American banks are in Panama. The country boasts some of the best banks in the region in terms of attractiveness of investment and security for assets. Banco General, Bladex, and Bancolombia Panama are all in the top 5.
Step 6: Obtain Municipal Commercial License
Acquire a commercial license from the municipal government where the company is located, which will enable you to legally commence operations.
Common FAQs when forming a company in Panama
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”)
It takes 8 weeks to register an operating company in Panamá
The S.A. in a company name in Panamá refers to a “Sociedad Anónima,” which translates to a “Joint Stock Company.” This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, crafting a safeguarded boundary. The S.A. structure holds substantial prominence in Panamá due to its exceptional adaptability and flexibility, rendering it the favored option for a diverse range of business ventures.
SRL in Panamá stands for “Sociedad de Responsabilidad Limitada,” which translates 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.
In Panama, both “S.A” (Sociedad Anónima) and “S.R.L” (Sociedad de Responsabilidad Limitada) are limited liability entity types.
A. Shareholders: The incorporation of an LLC company requires at least two (shareholders), while S.A. companies can be incorporated with one (1) shareholder.
B. Registration: In the incorporation of an LLC, the registration of the shareholders within the Public Registry is mandatory, while in the S.A. company, the shareholder’s registration is not registered within the Public Registry.
C. Incorporation structure: For an LLC, the necessary members to incorporate are one administrator, two shareholders, and the agent resident. The establishment of a board of directors is not necessary. In an S.A., the establishment of three directors is mandatory (President, Secretary, and Treasurer), along with the appointment of the agent resident.
D. Responsibility of the shareholders: In both legal vehicles, the shareholders are jointly and severally liable for the debts of the company up to the amount of their contributions.
E. Regulation: The S.A Company is regulated by the law of anonymous societies (law N° 32 of 1927) and the LLC is regulated by Law 4 of January 9, 2009.
Biz Latin Hub can support you register a company in Panama
With Panama being such an exciting business opportunity and only seeming to be growing in terms of economic stability and buoyancy, now is the perfect time to start a venture in the country and incorporate your company. Biz Latin Hub’s new office will be directed by the hugely talented and competent Patrick Caunter and a dedicated team of accountants and lawyers.
If you have any questions about the entity incorporation process or the steps involved with the business registration please do not hesitate to contact Craig, our CEO here at Biz Latin Hub.
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.