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5 Things you Need to Know When Starting a Business in Colombia

June 11, 2018

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Panoramic View of Bogotá Colombia
Over the last decade, Colombia has evidenced an exceptional financial growth, which has positioned the country as one of the most promising and dynamic emerging markets in the world, what makes it a very attractive destination for investors. This is the result of economic, political and social reforms made by the Colombian government during the last 10 years. The Organization for Economic Co-operation and Development (OECD) in the Colombia Economic Survey published in January 2015, recognized that Colombia's economy has done outstandingly well over the last decade, thanks to the improvement of the security situation, as well as a strong monetary, fiscal and financial framework that has helped to reduce macroeconomic volatility and encouraged a more inclusive growth.

All these facts and statistics show how Colombia has straightened its economy, through the implementation of successful politics that include the encouragement of entrepreneurship and the economic freedom, which allow generating both positive and visible results in terms of international investment. In this opportunity, our specialists in business and corporate law show you this quick guide of essential information that you need to learn whether you are considering starting a business in Colombia. In order to make the process easier for you, it is advisable that you have the guidance of a Colombian lawyer, that provides you with all the information about the registration of a foreign investment in the country. The following is a quick guide of important aspects you need to know when starting a business in Colombia:

 Colombian Lawyer Meeting for Starting a Business in Colombia

  1. Registration of a Foreign Investment
  2. A foreign investment comprises the investment of resources from abroad in the country. Every foreign currency investment entering the country must be registered at the Central Bank of Colombia, according to the procedures established through general regulations and this capital will be handled as the investment of a resident. The registration of a capital foreign investment before the Central Bank is automatic, this means that once the investor submits the minimum required information for the operation –Exchange Declaration– the investment will be automatically registered.

  3. Types of Companies
  4. Commercial legislation in Colombia provides for different types of companies through which investors can establish a permanent business in Colombia. The most usual legal vehicles –as they are known– are Simplified Share Companies (Sociedad por Acciones Simplificadas or S.A.S), and branch offices of foreign companies (Sucursal). Others legal vehicles such as Corporations (Sociedad Anónima) and Limited Liability Companies (Sociedad de Responsabilidad Limitada) are still used, but they have been replaced by Simplified Share Companies.

    • Simplified Share Companies (S.A.S)
    • This legal vehicle is a choice for both local and foreign investors, no matter the size of the business to be undertaken, due to its basic scheme, that allows the company to be managed and administrated without problems, with special attention on the will of the shareholders expressed through its primary source of regulation, the bylaws. S.A.S has the flexibility of shares' negotiation and the payment of capital, which make it a favorable vehicle for the pursuit of incorporated joint ventures.

      The liability of the shareholders in this type of entity is limited to the number of their capital contributions. Another characteristic is that shareholders of the S.A.S don't have obligations like labor or tax, however, they should be held liable before third parts, in case the company is used to abuse legal regulations.

      The incorporation of a S.A.S consists of a notarized private document registered in the Mercantile Registry of the Chamber of Commerce of the city where the company is to be based. If shareholders' contributions include assets that require public deed for its transfer, the incorporation must be formalized by means of a notary public deed.

    • Branch offices of foreign companies (Sucursal)
    • Foreign companies that are looking to establish permanent legal activities in Colombia are allowed by the Colombian Commercial Code to open branches in the country. The field of the business will be defined by the parent company and it must assign at least one permanent resident in the country, of any nationality, as the company's legal representative in Colombia.
      The branch and its home office are considered to be one and the same legal entity, therefore, the branch has the same legal capacity than its home office and it's illegal to make contracts between the home office and its branch in Colombia.

     Starting a Business in Colombia in an Example of a paper clippings
  5. Commercial Registration
  6. Commercial companies and branches must be registered before the commercial registry by the corresponding Chamber of Commerce of the city. For this, the Chamber of Commerce requests a documentation that companies and branches must submit as well as its bylaws in the case of corporations and the public deed for branches. The Chamber of Commerce also processes the registration in the National Tax and Customs Office (DIAN), to request a provisional registration for the National Tax Registry (RUT). This form includes the general information of the taxpayer, as well as its tax and customs responsibility.

  7. National Tax Registry
  8. The National Tax Registry (Registro Único Tributario) offers two presentations: one for the individual taxpayer and another one for corporations and will be needed for all the transactions related to billing and dealing with the Colombian tax authorities called DIAN, so it is recommended that all legal representatives of the company must have both RUT.

  9. Benefits granted under the First Employment Law
  10. When companies are duly registered before the Chamber of Commerce and qualify as small companies, are able to enjoy the benefits provided in the First Employment Law. According to this law, small companies are those with less than 50 employees and with total assets below 5.000 legal monthly salary (approx. USD 1.100.000). Every year, the company with this qualification must be validated to continue having the benefits. The mentioned benefits provided in the law are the reduction on the applicable corporate income tax rate and other tax incentives; and the reduction of the rates for certain social security contributions.

    As you can see Colombia has identified the importance of foreign investment, for this reason, the country began a strong initiative to promote it as one of the best destinations in Latin America to set up a business, thanks to its privileged location and rich in natural resources, as well as its commercial opportunities, legal stability and one of the most stable economies of the region, establishing an ideal environment for business.

    As a foreign investor that is planning to start a company in Colombia, it is advisable for you to get help from experienced business and corporate law attorneys in Colombia. At AGT Attorneys, we take pride in offering you the most qualified attorneys with wide experience in foreign investment in the country. Contact us at +57 1 702-3671 or fill out the form in our "contact us" section to learn more about our services. Remember to subscribe to our newsletter to stay up to date with the latest information in the legal field.

    If you found this article helpful then let us know in the comments section below. Likewise, feel free to share it using the share options below. Want us to cover another topic of your interest pertaining to legal affairs? If so, then like us and follow us on social media, and post to any of our social media profiles the topic you'd like us to discuss: Facebook AGT Attorneys and Twitter @AttorneysAGT

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