Before setting up your Colombian business as a foreign investor, it’s crucial to understand all of the legal requirements.
At expatgroup, our clients are constantly asking us about the best way to legally structure their business, how to navigate DIAN for their tax number, and dealing with the Colombian Chamber of Commerce.
With this in mind, we’ve put together a comprehensive list of the most important steps you need to take legally to incorporate your Colombian business.
In this blog, you’ll learn about...
1. Draft a letter stating the power of attorney
Drafting a letter that states power of attorney (POA) is the first step to legally creating your Colombian business. This letter tells the Colombian government who your legal representative will be should it be required.
Stating your power of attorney letter is necessary, for instance, if you and your shareholders are outside of Colombia and you need legal representation to make a decision on your behalf. This letter will be drafted so that your official company bylaws will be recognized by the Colombian Chamber of Commerce.
2. Name your business
In terms of intellectual property, nothing is more valuable than your company’s name.
Once you’ve established your legal representation, the name of your business must be registered through the Single Business Register (RUE). This is the Colombian government’s official database which contains all the names of officially listed Colombian companies and will be able to confirm whether you can use your chosen name or not.
Naming your business is not a process that should be taken lightly, especially if you’re planning to use a Spanish name. It’s always wise to consult a brand consultant or a translator to understand the significance of names in both English and Spanish before making a decision.
For a free consultation, you can book an appointment to discuss the process of deciding your business’ name before formally registering it.
3. Define your business’ legal framework
There are several different business legal frameworks to consider when creating a Colombian company, each suiting a different business model, product, or service.
To be exact, there are three main legal structures for you to choose from:
Simplified Stock Companies (SAS)
This are the most commonly and flexibles related to structure. It requires only one shareholder, allows the company to participate in most business activities, and doesn’t require a board of investors to be created.
Limited Liability Companies (LTDA)
Ideal for foreign investors, the LTDA company can have between 2-25 partners and must be incorporated publicly unless they have fewer than 10 employees or assets below 500 times the Colombian minimum wage.
Corporations Companies (SA)
Ideal for larger business, SA have to be 5 or more shareholders and a board of directors. No one can own more than 95% of its capital stock and must define their mission and responsibilities before incorporation.
Download the official guide on the Colombian tax regime
4. Register with the Colombian Chamber of Commerce and obtain tax identification (NIT)
Registering with the Colombian Chamber of Commerce is fairly straightforward.
Essentially, the Chamber of Commerce is Colombia’s business regulator and must administer the formal creation of Colombian companies.
To do this, they need the following information:
Documentation outlining your company’s business activities
Documentation stating company bylaws
Documentation of who is your company’s shareholders, their business involvement, and how many shares they have
Your letter stating power of attorney
With all this information the Chamber of Commerce will formally recognize your company within 24 hours. As they are checking through your legal documentation, you are free to begin business operations.
Once the Chamber of Commerce has legally listed your business, you’ll need to get the Colombian tax identification (NIT) number through DIAN. If you’re unsure how to navigate DIANs website to correctly apply for your NIT number, reach out to us and we’ll be happy to walk you through the steps as part of our business creation service.
5. Legalize your Investment
The Bank of the Republic of Colombia is the highest authority in matters of economic regulation in the country. This entity has established certain rules for foreign investments entering the country through decrees such as Decree 2080 of 2000.
Ignoring these rules could negatively affect your business, such as audits or fines. If you have any doubt about how to legalize your investments in Colombia in a safe way, contact us.
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6. Open your Colombian bank account
Lastly, with your NIT number and the formal listing of your new Colombian company, you’ll be eligible for a Colombian business bank account.
There are several prominent Colombian banks, including:
Creating a bank account is not mandatory but is the most recommendable way to manage your company’s money easily.
When choosing your Colombian bank, it’s always best to find out their areas of financial specialization, international presence, and interest rates. If you’re unsure which bank’s best for your business, book a free consultation with expatgroup right now.
Book a free business creation consultation with expatgroup.co today
Before taking on a new business venture in a foreign country, it’s important to know your legal requirements, visa rights, and most certainly the language.
At expatgroup.co, we’ve already helped hundreds of foreign businesses like yours start, grow and prosper into established Colombian companies.
For information on what makes our business creation and consultancy service so special, or any advice about the content of this article, book a call with us here and start your Colombian enterprise adventure today.
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FAQs about legal requirements for business in Colombia
In Colombia, businesses can choose from several legal structures, including sole proprietorship (Persona Natural), simplified stock company (SAS), limited liability company (LTDA), and corporation (Sociedad Anónima). Each structure has its own advantages and disadvantages in terms of liability, taxation, and administrative requirements. It’s important for entrepreneurs to carefully consider their business needs and seek legal advice to determine the most suitable legal structure for their ventures.
To obtain a tax identification number (NIT) for your business in Colombia, you’ll need to register with the National Tax and Customs Directorate (DIAN). This process typically involves submitting an application form along with supporting documents such as identification, proof of business registration, and other relevant paperwork. Once your application is processed, DIAN will issue your NIT, which is essential for conducting business activities, opening bank accounts, and fulfilling tax obligations in Colombia.
Yes, obtaining a letter of power of attorney (POA) is a common requirement when establishing a business in Colombia, especially for foreign investors who may not be physically present during the incorporation process. The POA grants authority to a representative or attorney to act on behalf of the investor in legal matters related to the establishment of the business. It’s advisable to work with legal professionals who can assist in drafting and notarizing the POA to ensure compliance with Colombian regulations.
Businesses operating in Colombia are subject to various tax obligations, including income tax, value-added tax (VAT), and payroll taxes. The corporate income tax rate is determined based on the type of legal entity and the amount of taxable income generated. Additionally, businesses must comply with VAT regulations by collecting and remitting taxes on goods and services sold. Payroll taxes are also levied on employers based on their employees’ salaries. Understanding and fulfilling these tax obligations is essential to avoid penalties and maintain compliance with Colombian tax laws.
Importing and exporting goods in Colombia involves complying with various legal requirements and regulations. This includes obtaining an importer or exporter registration number (RUT), adhering to customs procedures, and paying applicable tariffs and taxes. Additionally, certain products may require special permits or certifications from relevant government agencies. It’s important for businesses engaged in international trade to familiarize themselves with Colombian customs regulations and seek assistance from customs brokers or legal professionals to ensure smooth import and export operations.
Check out what you need to know about the Colombian tax regime
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Create a Colombian company
- Incorporation of a company in COLOMBIA
- NIT Presentation
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- Opening balance
- RUT
- Shareholder structure
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