Starting a business in Colombia is a significant goal that can be very rewarding in the end. Before you can reap the benefits, there are important steps you must follow if you wish to begin operating a business in Colombia.
Types of companies in Colombia
You can use any of the following legal vehicles to start doing business: (i) simplified stock corporation (S.A.S.); (ii) limited liability company; and (iii) corporation (S.A.). These are known as trading companies.
Choosing the SAS Company Type
The best and easiest way to start is by establishing an SAS, sometimes abbreviated as SSC or Simplified Stock Corporation. The SAS is the most favorable business startup option because it is flexible regarding the potential incorporation process. It is also flexible in terms of the great freedom its shareholders have to create the terms and conditions for its operation, internal structure, and administration.
The Commercial Code states that to create or incorporate an SAS, you must register its bylaws with the Chamber of Commerce for the corresponding domicile. There is also the requirement of the concept of permanent activity that must be met. Unlike the notion of a permanent establishment, this concept includes that the following activities must occur as follows:
- Opening commercial establishments and/or commercial offices in Colombia, even if these only provide advisory services;
- Participating as a contractor in the execution of works or in the provision of services;
- Participating in any form or activity aimed at the management, use, or investment of private savings funds;
- Engaging in the extractive industry in any of its branches or services;
- Obtaining a concession from the Colombian government or having the concession assigned under some title, or in any way participating in its exploitation;
- The performance of its associated assemblies, boards of directors, management, or administration in the national territory.
You may wonder when you are supposed to complete these activities, but the answer is not concrete. Colombian law does not provide entrepreneurs with specific deadlines or criteria to determine if an activity is permanent. For the activity requirements to be met, its basis for perpetuity depends on the development of the activity in Colombia, such as: (1) the nature or scope of the activity; (2) the necessary infrastructure in the country for its performance; (3) its regularity; (4) the hiring of personnel in Colombia; (5) and other necessary parties.
Company Incorporation in Colombia
To incorporate a commercial company, you must obtain a public deed and legalize it before a notary public or a notarized private document. The method you choose will depend on the legal vehicle chosen by the investor.
Registration of Your Corporation
Once you have legally created your company (i.e., you have the public deed or notarized private document), the next step is to register it with the corresponding authorities so that it can officially operate in Colombia.
What does this registration entail?
- Submitting the company’s bylaws (or articles of incorporation) and other required documents to the Chamber of Commerce of the city where the company’s main office is located.
- Filling out a special form to request registration with the DIAN, which is the national tax and customs entity. This allows obtaining the RUT (Registro Único Tributario), something like the company’s “tax identification number.”
- The Chamber of Commerce is responsible for processing this provisional registration with the DIAN.
- Finally, to complete the registration, the company must pay certain fees and taxes, which the Chamber of Commerce calculates and collects based on what has been submitted.
This last step ensures that the company is registered in the public records (Chamber of Commerce and DIAN), which is essential for operating legally, signing contracts, invoicing, opening bank accounts, etc.
Remember to seek legal advice from the beginning to avoid errors, such as the choice of your company type, which will allow you to take important steps later in your company’s growth.
If you need help with the process, we advise you with our service: Starting Securely, where we include everything foreseen in this process.
