Company Formation in Colombia

Many foreigners looking to start a business in Colombia quickly realize that the process differs from countries like the United States, where companies can be registered online. In Colombia, company formation requires specific legal steps and compliance with local regulations. This guide will walk you through everything you need to know about company formation in Colombia, from choosing the right business structure to completing the registration process successfully.

Types of Companies in Colombia: Choosing the Right Business Structure

When starting a business in Colombia, choosing the right legal entity is crucial. The ideal structure depends on factors like the number of shareholders, tax obligations, liability protection, and operational flexibility. Below are the main types of companies in Colombia and their key characteristics:

Sociedad por Acciones Simplificada (SAS) - Simplified Stock Company:

• Can be formed by one or multiple shareholders.
• Shareholders' liability is limited to their capital contribution.
• No minimum capital requirement.
• Offers a simplified registration process and flexible corporate governance.

Example: A tech entrepreneur launching a startup in Colombia opts for the SAS structure because it allows full control with minimal regulatory requirements.

Sociedad Anónima (SA) - Corporation:

• Requires at least five shareholders.
• Liability is limited to the capital invested.
• Suitable for large-scale businesses requiring capital investment.

Example: A group of investors setting up a large manufacturing plant in Bogotá chooses an SA due to its structured framework and ability to attract multiple shareholders.

Sociedad de Responsabilidad Limitada (Ltda) - Limited Liability Company (LLC):

The Ltda structure is ideal for small and medium-sized businesses looking for limited liability protection.

• Requires between 2 and 25 partners.
• Liability is limited to the partners' contributions.

Example: Three entrepreneurs decide to open a boutique coffee shop in Medellín. They choose a Ltda company because it allows them to share responsibilities while keeping their personal assets protected.

Sociedad Colectiva - General Partnership:

This structure is based on mutual trust, as all partners assume unlimited liability.

• All partners are personally liable for the company's debts.
• Best for businesses where partners have a close professional or family relationship.

Example: Two family members launch a traditional Colombian crafts business. Since they trust each other and are willing to assume full liability, they register a Sociedad Colectiva.

Sociedad Comandita Simple (SCS) and Sociedad Comandita por Acciones (SCA) - Limited Partnership and Partnership by Shares:

A partnership structure with two types of partners:

• Active partners (unlimited liability, manage operations).
• Silent partners (limited liability, only provide capital).

Example: An entrepreneur with a great business idea but limited funds partners with an investor. The entrepreneur becomes the active partner in an SCS company, handling daily operations, while the investor acts as a silent partner, only contributing capital.

Sucursal de Sociedad Extranjera - Branch of a Foreign Company:

Foreign businesses looking to expand into Colombia can establish a Sucursal de Sociedad Extranjera, allowing them to operate under the parent company's name.

• The branch operates under Colombian regulations but is linked to the parent company.
• Suitable for multinational corporations entering the Colombian business market.

Example: A European pharmaceutical company wants to enter the Colombian market. Instead of forming a new entity, they open a branch in Colombia, maintaining their corporate structure.

Entidad Sin Ánimo de Lucro (ESAL) - Non-Profit Entity:

Designed for organizations with social, educational, scientific, or humanitarian purposes.

• Focused on non-commercial activities.
• Can receive donations and funding for community projects.

Example: A group of environmentalists forms an ESAL company to promote conservation projects in the Amazon rainforest. This structure allows them to legally receive donations and operate as a non-profit organization in Colombia.

Choosing the Right Company Structure in Colombia

If you're considering company formation in Colombia, selecting the right entity is crucial for long-term success. Whether you're an entrepreneur launching a startup, an investor expanding into the Colombian market, or an organization focused on non-profit initiatives, Colombia offers a variety of business structures tailored to your needs.

Need help setting up your business? Our expert team provides guidance on starting a business in Colombia, legal compliance, and incorporation processes. Contact us today!

Can a Foreigner Open a Company in Colombia Without a Visa?

Yes! Foreigners can establish a company in Colombia without needing a visa to reside in the country. Colombia's business-friendly policies encourage foreign investment, and there are no nationality restrictions for shareholders or directors of a Colombian company.

However, there are several key aspects to consider when starting a business in Colombia as a foreigner:

Company Formation Without a Visa

Foreign investors can register a company in Colombia remotely. However, if they are not physically present to complete formalities, they may need to grant a power of attorney to a local representative to handle paperwork and legal procedures.

Example: An entrepreneur in Europe wants to launch a SAS company in Colombia but cannot travel immediately. By granting power of attorney, a legal representative can complete the company formation process on their behalf.

Operating a Business in Colombia

While forming a company does not require a visa, foreigners who intend to live in Colombia to manage their business will likely need an appropriate visa, such as:

• Investor Visa – For those investing a significant amount in a Colombian company.
• Business Owner Visa – For entrepreneurs actively managing their company within the country.

Example: A U.S. entrepreneur registers a company in Colombia remotely. Later, as the business grows, he applies for an Investor Visa to oversee operations directly from Bogotá.

Corporate Bank Accounts

Opening a corporate bank account in Colombia may require additional documentation. While a visa is not always necessary, banks might request:

• Proof of ownership in the company.
• Official company registration documents.
• Additional identity verification requirements.

Tip: Different banks have varying policies, so consulting with a financial expert can simplify the process.

Tax & Legal Considerations

Foreign-owned companies in Colombia are subject to the country's tax laws. Key considerations include:

• Corporate Taxes – Businesses must comply with tax regulations set by the Colombian authorities.
• Double-Taxation Agreements – Foreign investors should check if their country has a tax treaty with Colombia to avoid being taxed twice.
• Legal Compliance – A business must adhere to Colombian business law, including reporting obligations and employment regulations.

Tip: Partnering with a Colombian business lawyer can help navigate tax responsibilities and legal procedures efficiently.

Legal Representation & Business Structure

Foreigners have full ownership rights when establishing a Colombian company, but certain legal and procedural nuances may require professional guidance. The most common business structure chosen by foreign investors is the SAS company, due to its flexibility and limited liability benefits.

Example: A Canadian entrepreneur researching what a SAS company is decides to incorporate this type of business structure because it does not require a local partner and offers limited liability.

How can a foreigner operate a company in Colombia if they are overseas?

Operating a company in Colombia as a foreigner from overseas is feasible, especially with the advancements in technology that enable remote management. Here are some steps and considerations to help a foreigner operate a Colombian company from abroad:

Appoint a Legal Representative in Colombia

Colombian law requires every registered business to have a legal representative (representante legal). This individual will have the authority to act on behalf of the company, sign contracts, and handle legal obligations.

Example: A foreign investor running an SAS company in Colombia appoints a local representative to oversee compliance and day-to-day operations while they manage strategy remotely.

Use a Power of Attorney (POA) for Legal Formalities

If you are unable to be in Colombia to sign official documents, you can grant a power of attorney (poder) to a trusted individual or a legal firm. This ensures smooth handling of:

• Business registrations
• Contract signings
• Legal filings
• Banking procedures

Tip: Choose a professional with expertise in Colombian business law to ensure all actions align with legal requirements.

Stay Compliant with Regulatory & Business Laws

• Ensure your company in Colombia adheres to corporate governance, labor laws, and annual reporting obligations.
• Regularly review licensing and permit requirements.
• Keep up to date with changes in Colombian business laws affecting foreign ownership.

Example: A foreign entrepreneur in the tourism sector ensures compliance by working with a local business attorney who tracks evolving regulations.

Manage Banking & Financial Transactions Efficiently

Opening a corporate bank account in Colombia is essential for business operations. However, some banks have strict requirements for foreign-owned entities.

• Research banking regulations for foreign investors.
• Choose a financial institution that facilitates online banking for international access.
• Appoint a local financial manager if necessary.

Tip: If you're starting a business in Colombia, work with a financial consultant to streamline banking and compliance.

Meet Tax Obligations as a Foreign Business Owner

Foreign-owned companies in Colombia must comply with corporate tax regulations. Hiring a local tax consultant ensures:

• Proper tax filings and payments.
• Compliance with double-taxation agreements (if applicable).
• Optimization of tax benefits for foreign investors.

Example: A European entrepreneur owning a Colombian company remotely hires a tax expert to manage VAT, payroll taxes, and corporate obligations.

Draft Legally Secure Contracts for Employees & Partners

All agreements with employees, suppliers, and business partners must be legally sound under Colombian business law. Key considerations:

• Ensure contracts comply with labor and commercial regulations.
• Work with a business lawyer in Colombia to draft and review contracts.
• Protect intellectual property and business interests in agreements.

Tip: Using a standard contract template may not always be sufficient—seek legal advice for enforceable agreements.

Ensure Compliance with Data Protection Laws

If your business collects customer data, you must follow Colombian data protection regulations. Key steps include:

• Securely storing customer information.
• Complying with personal data privacy laws.
• Implementing cybersecurity best practices.

Example: A foreign-owned SAS company in Colombia operating an e-commerce store ensures compliance by adopting GDPR-style data protection measures.

Work with a Legal Advisor for Smooth Operations

To successfully run a business in Colombia while living abroad, partnering with a local expert is highly recommended. A business attorney specializing in company formation and Colombian corporate law can help with:

• Ongoing legal compliance.
• Representation before government authorities.
• Tax, labor, and banking regulations.

Need Expert Guidance? Our professionals specialize in company formation in Colombia and provide ongoing support for foreign investors. Contact us today to ensure your Colombian company operates smoothly!

Required Documents to Open a Company in Colombia as a Foreigner

Starting a business in Colombia as a foreign investor requires submitting specific documents to comply with Colombian business law. Below is an overview of the key requirements:

• 1. Valid Passport: A clear copy of the foreign investor's passport. Some authorities may request an apostilled or legalized copy.
• 2. Foreign Investment Registration: Before contributing capital, foreign investors must register their investment with the Banco de la República (Central Bank). Upon approval, they receive a Foreign Direct Investment Certificate.
• 3. Power of Attorney (POA): If the investor is not in Colombia, a duly apostilled power of attorney must be granted to a legal representative to handle the company formation process.
• 4. Business Name Verification: Before registering the business, the chosen company name must be verified and reserved with the Chamber of Commerce.
• 5. Articles of Incorporation: This document defines the legal structure of the business, including its purpose, capital, and operational framework. It must be officially registered with the Chamber of Commerce.
• 6. Registered Office Address: Proof of a physical address in Colombia, such as a rental contract or utility bill, is required for company registration.
• 7. Tax Registration (NIT): Once the company is registered, it must obtain a Tax Identification Number (NIT) from the Dirección de Impuestos y Aduanas Nacionales (DIAN) for tax compliance.
• 8. Corporate Bank Account: While not required for incorporation, opening a corporate bank account is essential. Banks may have specific requirements for foreign-owned companies.
• 9. Additional Permits or Licenses: Depending on the industry, additional licenses, permits, or certifications may be necessary. Examples include: Health permits for restaurants, tourism licenses for travel agencies, financial authorizations for regulated businesses.

Expert Guidance for Foreign Investors: The exact requirements may vary based on Colombian business law, the type of company formation, and regulatory updates. Working with a specialized Colombian business attorney ensures compliance and streamlines the incorporation process.

Is There a Minimum Investment Amount Required to Open a Company in Colombia?

No, Colombian business law does not establish a fixed minimum investment amount for either locals or foreigners when starting a business in Colombia. However, there are several key considerations to keep in mind:

1. Investment Requirements by Business Structure

- Sociedad por Acciones Simplificada (SAS) – Simplified Stock Company

* The SAS company is the most popular structure for foreign investors due to its flexibility. It has no minimum capital requirement, allowing shareholders to determine the amount freely.

- Sociedad Anónima (SA) – Corporation

* While SA companies do not have a fixed minimum capital, they must have at least five shareholders and distribute capital into shares, which may require a more structured financial plan.

2. Foreign Investment Registration Considerations

* If an investor registers their contribution as foreign capital with the Banco de la República (Central Bank), there might be a minimum investment threshold depending on the regulatory framework at the time. Checking with a legal expert ensures compliance with current regulations.

3. Sector-Specific Capital Requirements

* Certain regulated industries, such as finance, insurance, and telecommunications, may impose minimum capital requirements to ensure financial stability. Always verify sector-specific rules before company formation in Colombia.

4. Practical Financial Considerations

* Even if there is no legal minimum, it is advisable to start with sufficient capital to cover:

• Initial setup costs (legal fees, registrations, office space).
• Operational expenses (salaries, marketing, inventory).
• Contingencies to ensure business sustainability.

5. Expert Legal & Financial Guidance

While company formation in Colombia does not require a fixed investment amount, professional guidance ensures compliance with Colombian business laws and optimizes financial planning.

Need assistance? Our experts at Colombia Law Connection provide up-to-date legal and financial advice for starting a business in Colombia, ensuring compliance and a smooth incorporation process.

Does a Company Need to Be Registered with DIAN or Other Government Entities Before Operating in Colombia?

Yes, after company formation in Colombia, businesses must complete several mandatory registrations with government entities to operate legally.

• Chamber of Commerce Registration: Before starting operations, the company must be registered with the Chamber of Commerce (Cámara de Comercio). This process establishes the legal identity of the Colombian company, including details about its shareholders, business activities, and legal representatives.
• DIAN - Tax Registration: After completing the Chamber of Commerce registration, the company must obtain a Tax Identification Number (NIT - Número de Identificación Tributaria) from DIAN (Dirección de Impuestos y Aduanas Nacionales). This number is necessary for tax compliance, including issuing invoices, filing tax returns, and managing financial obligations.
• Municipal Permits: Depending on the company's location and industry, additional municipal permits may be required. These can include operational licenses, zoning approvals, and health permits, particularly for businesses in sectors such as hospitality, retail, or food services.
• Sector-Specific Registrations: Certain industries require registration with specialized regulatory bodies. For example, financial institutions must comply with the Superintendencia Financiera, while healthcare businesses may need accreditation from health authorities. These sector-specific regulations ensure compliance with Colombian business law.
• Employer Registration: If the company plans to hire employees, it must register with labor and social security entities, including health insurance, pension funds, and workers' compensation systems. This step is crucial for compliance with labor laws and employee benefits management.
• Foreign Investment Registration: For businesses funded with foreign capital, the investment must be registered with the Banco de la República (Central Bank). This ensures the legal right to repatriate profits and withdraw capital if needed, aligning with regulations for foreign-owned companies in Colombia.

Failing to complete these registrations—especially with the Chamber of Commerce and DIAN—can lead to significant penalties and legal restrictions, preventing the company from operating legally in Colombia. Ensuring compliance with Colombian business laws from the outset is essential for smooth and risk-free business operations.

Why Partner with Colombia Law Connection for Your Company Formation in Colombia?

Setting up and operating a Colombian company can be an exciting yet complex process. At Colombia Law Connection, we simplify the journey, ensuring a seamless experience for foreign entrepreneurs. With our team of experts, you're not just hiring a law firm—you're partnering with professionals who understand the local market and your business goals.

• Expert Guidance on Company Formation: Navigating company formation in Colombia requires strategic planning. We provide step-by-step assistance in choosing the right business structure, whether it's an SAS company, an SA, or another legal entity that best suits your needs.
• Comprehensive Legal Documentation: From drafting articles of incorporation to shareholder agreements, we ensure that all your business documents comply with Colombian business law and are properly registered.
• Streamlined Registration Process: We expedite the company formation process, handling business registration with the Chamber of Commerce, obtaining your NIT from DIAN, and securing necessary permits to make your company operational as quickly as possible.
• Regulatory Compliance & Ongoing Advisory: Staying compliant with Colombian business laws is essential to avoid penalties. Our team ensures that your company meets all tax, labor, and sector-specific regulations, so you can focus on growing your business.
• Direct Liaison with Local Authorities: Dealing with multiple government offices can be time-consuming. We act as your business representative, managing interactions with tax authorities, municipal agencies, and other regulatory bodies.
• Tailored Solutions for Your Business: Whether you are an independent entrepreneur or a multinational corporation, we customize our services to fit your specific business model and industry requirements.
• Transparent Communication & Cultural Insight: As native English and Spanish speakers, we eliminate the language barrier, providing clear explanations and real-time updates. Beyond legal matters, we also offer valuable insights into Colombian business culture, helping you establish strong local connections.

By choosing Colombia Law Connection, you gain a reliable legal partner who bridges the gap between your business goals and Colombia's vast opportunities. Let us guide you through a smooth and successful company formation process.

Step-by-Step Process to Open a Company in Colombia

Registering a company in Colombia involves several steps, which can be detailed as follows:

Step 1: Choose the Right Business Structure

Selecting the appropriate company structure is crucial. Popular options include the Sociedad Anónima (SA), Sociedad por Acciones Simplificada (SAS company), and Sociedad de Responsabilidad Limitada (Ltda.).

Step 2: Business Name Search and Reservation

Before registration, the business name must be verified with the Chamber of Commerce to ensure availability.

Step 3: Draft and Notarize Company Bylaws

The company's bylaws outline its purpose, shareholders, and operational framework. Once drafted, they must be notarized.

Step 4: Register with the Chamber of Commerce

The notarized bylaws and required documentation must be submitted to the Chamber of Commerce, along with payment of registration fees.

Step 5: Obtain a Tax Identification Number (NIT) from DIAN

After business registration, companies must apply for a NIT (Tax ID) with DIAN, essential for tax compliance.

Step 6: Open a Corporate Bank Account

A corporate bank account is necessary for managing financial transactions. Requirements may vary by bank, especially for foreign investors.

Step 7: Register for Social Security & Employer Obligations

Companies hiring employees must enroll in health insurance, pension funds, and social security systems.

Step 8: Obtain Industry-Specific Permits

Certain businesses require additional permits or licenses based on their industry, such as environmental or health permits.

Step 9: Set Up Accounting & Tax Compliance

A professional accountant ensures that the company adheres to Colombian tax laws and reporting standards.

Step 10: Maintain Annual Renewals & Updates

Companies must renew registrations annually and update their records with DIAN and the Chamber of Commerce.

At Colombia Law Connection, we guide you through each step, ensuring a smooth company formation process.