Business Startup Law in Colombia
The government of Colombia wholeheartedly encourages and supports foreign investments in the country. They have an emphatic plan that motivates the various institutions to aid entrepreneurs in any and every way they can to start new businesses. As a result, the business startup law in the country is also one of the most agile ones in the continent.
According to international rankings, Colombia ranks within the top three Latin American countries in the index of ease of doing business. This shows that the systems are not just there but are effective and efficient as well. However, if you are interested in starting a business in Colombia, you need to know the local legal requirements.
Steps to Start a Business in Colombia
The business startup law in Colombia, like any other country, has its legal requirements that one needs to fulfill before being able to initiate a business. It is best to hire a local legal expert who can advise and assist you and ensure your compliance with all the accounting and corporate laws. Here are the steps you need to take:
Power of Attorney
The first and foremost step you need to take is to draft and sign the Power of Attorney (POA) document. It appoints an organization or a person to manage your medical, financial, and property affairs if you ever become unable to do so. Next, suppose your legal representative and shareholders are not in the country. In that case, you must sign the bylaws and submit them to the Chamber of Commerce.
The government of Colombia requests additional documents from abroad relating to the foreign shareholders. Therefore, a Power of Attorney and the additional documents must be apostilled and legalized before a Public Notary before being sent to Colombia in physical form.
The second step is to choose a name for your company and check its availability in the RUE or Single Business Register. They hold the public database for the government of Colombia. Your brand name might be different from the legal name of your company.
The social and legal structure you choose for your company might call for additional and specific accounting and legal processes and documentation. You need to pick a social network that adheres to the economic activities and needs of your business. The most common legal structures in Colombia are the following three:
Sociedad por Acciones Simplificadas (SAS) (Simplified Shares Company)
For this type of company, you do not need to make corporate documents available for public view. In addition, this structure allows you an unlimited number of shareholders.
Foreign Company Branch
If there is a parent company in a foreign country, it is its branch in Colombia.
Sociedad Anonima (SA) (Corporation)
A corporation in Colombia is divided into equal value shares, and a negotiable title represents them.
Next, you need to draft the constitution of your company. It will contain all the bylaws that will regulate the company’s systems, processes, procedures, and operations. Additional information about the company is also featured in it, including:
The legal representatives and shareholders of the company
The number of shares the company will release
The total capital of the company and its details
The company’s economic activities that it will engage in
The functionality and work cycles of the company
In Colombia, company creation is regulated and overseen by its Chamber of Commerce. Therefore, all the documents prepared until now, including the Power of Attorney, company’s bylaws, details of the company’s activities, and information regarding the shareholders, need to be submitted to the Chamber of Commerce.
The chamber will evaluate the documents and ensure that the documentation complies with the company creation policies and business startup laws in Colombia. The agility of the official systems supporting business in Colombia is instilled by the fact that this process takes only 24 hours. After that, you receive approval (if there is no trouble in verification) and can initiate the operations for your business.
Tax Identification (NIT)
The next step for your business is to obtain a tax identification number. The entity responsible for assigning it to you in Colombia is the National Directorate of Taxes and Customs (DIAN). The Colombian authorities will identify all your accounting and relevant tax activities through this unique number. Keep in mind that you have to submit the company’s monthly and annual tax returns.
In most cases, however, you do not have to go to the National Directorate of Taxes and Customs office to generate the NIT. Instead, it gets assigned to you automatically and digitally once the Chamber of Commerce approves your registration.
Tax Identification (NIT)
The last step, but an important one, you need to take to finish the process and start your business in Colombia is to open a corporate bank account for your company’s financial transactions. You can choose from several banks operating in the country, offering different agreements and benefits for corporate accounts.
You need to take the certificate of registration issued to you by the Chamber of Commerce to the bank to prove your company’s existence. You will also need to show your tax certificate (NIT) and your legal representative’s identification number.
After you deposit the opening balance amount into your account, you can start transacting on behalf of the business. Please note that some banks might have additional information or legal requirements for this step.
After this, you officially own a business in the country. You will continue getting supported by the Colombian government about your administrative processes throughout the life of your business. You can also perform many of the steps mentioned above and processes online. It is good to get a local, experienced accountant on board who can ensure that the business expenses get regularly registered and all the different types of taxes are paid and declared. Business startup law in Colombia is smooth and straightforward. These legal requirements are as little as they get in most countries.