Before setting up your Colombian business as a foreign investor, it’s crucial to understand all of the legal requirements.
At Expat Group, 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.
You’ll learn about:
- The letter stating POA
- The different legal structures for Colombian businesses
- What you need for the Chamber of Commerce
- How to get your Colombian tax number (NIT)
Let’s get started.
1. Draft a letter stating 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 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): SAS companies are legally the most commonly structured companies in Colombia. It’s arguably the most flexible of the legal structures to choose from as 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): LTDA companies are ideal for foreign investors looking to form a business partnership with limited liability to the initial financial contribution upon incorporation. LTDA companies can have between 2-25 partners and must be incorporated publicly, unless they have fewer than 10 employees or has assets that are worth below 500 times Colomiban minimum wage.
- Corporations (SA): SA companies are legally structured for larger businesses. There have to be 5 shareholders or more to incorporate an SA company, of which no one shareholder can own more than 95% of its capital stock. An SA company must be incorporated publicly unless it fits the same criteria as the LTDA companies. Unlike SAS companies, SA companies must define their business mission and social responsibilities before incorporation and must have a board of directors, making this legal structure significantly more rigid.
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 who are 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. 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:
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 Expat Group right now.
Book a free business creation consultation with Expat Group 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 Expat Group, 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.