Most Common Types of Companies in Panama

Panama receives a great deal of attention due to its business-friendly tax policies and its buzzing financial sectors. These sectors can offer numerous benefits to investors and entrepreneurs who want to take advantage of the country’s friendly policies toward trade and business. 

Panama is also highly stable when it comes to politics. As a result, the economy of the country is growing and is considered one of the most fruitful countries for international trade in Latin America. All of this is on top of providing a low VAT (value-added tax) of 7%.

To set up a company in Panama, make sure you choose the right type of entity that suits your needs. This is a vital part of the process because your business will have to comply with all restrictions and regulations in accordance with the entity type.

In this article, we have compiled a list of the most common types of companies in Panama.

1. Limited Liability Company

The Limited liability company is one of the most common types of companies in Panama. It is also known as “Sociedad De Responsabilidad Limitada.”

To form a Limited Liability Company in Panama, there are some specific requirements that you must follow. Consider that the incorporation of a Limited Liability company in Panama is very fast, and it can be completed in approximately 1-2 weeks.

If you are an entrepreneur looking to set up a business in Panama, a Limited Liability company might be the right option for you as this type of entity separates liability. In an LLC, owners are not personally liable for the company’s debt or liabilities.

Here are some of the principal requirements for the formation of a Limited Liability company in Panama.

1. Must have at least one administrative member.

2. Just like a corporation, there must be a president, a secretary, and a treasurer.

3. Must have an appointed legal representative.

4. Must appoint a resident agent (a lawyer from Panama).

5. Must fill in tax declarations.

6. Company registered address registration.

7. Public registry payments annually.

8. A minimum of two shareholders.

2. Corporation or Stock Company

Corporations are also one of the most common types of companies in Panama. A corporation in Panama is required to go through a legal process referred to as “incorporation”. This is the process where all the documentation of the primary purpose of the business, the location, the name, and information regarding the shares and stocks are drafted. As with an LLC, a Corporation registration in Panama is very fast, and it can be completed in approximately 1-2 weeks.

The corporation, also known as a Stock company or “Sociedad Anónima” must have at least one shareholder at the time of the incorporation. This incorporation process offers the company a unique feature that provides protection to the owners against any sort of liability in the event of a legal issue. It is also the main structure for offshore companies, which can also be beneficial when considering a legal structure to hold your offshore interests. This company type is also preferred for anonymity, as nominee directors are also accepted, meaning that your personal information at the level of the Panamanian registries can remain anonymous.

One key thing to note is that even though there is no legislation for the minimum share capital of the company in Panama, a minimum of 10,000 USD is highly advised. Although this share capital does not have to be paid in, which is also a benefit for entrepreneurs or businesses that are looking for low financial barriers to entry.

Some of the other requirement of a corporation is as follows,

1. Must have a board with directors with a minimum of three directors (Nominee directors from a local provider can also be an option).

2. Must have three designated members: a president, a treasurer, and a secretary.

3. Must have a legal representative of the company.

4. Must appoint a resident agent (a lawyer from Panama).

5. Company registered address registration.

6. Public registry payments annually.

7. Must fill tax declarations, mandatory if your company has operated within Panamanian borders.

3. Sole Proprietorship

If you want to run a small business in Panama, then one of the most common go-to solutions is the sole proprietorship. This is an unincorporated business, where the owners have to pay personal income tax out of their own pockets.

This is the most simple and easiest type of business to set up in Panama. In this type of entity, the owner gets to run the business in both their name and an individual name for the business.

Some of the key benefits of a sole proprietorship are:

1. Comparatively inexpensive.

2. Very few governmental regulations.

3. Unlike a corporation, the need to pay tax is only once. As there is no entity of the business, there is no need to pay any income tax.

4. Private Interest Foundation

Known in Spanish as “Fundación de Interes Privado”, the Private Interest Foundation type of entity offers unique legal advantages.

The setup process of a Private Interest Foundation can take up to 3 weeks or more, but the advantage is that the offers in return can overweight any hurdles of the process. For instance, the entities of “Fundación de Interes Privado” will be exempt from any kind of taxes and payments in Panama, although some exceptions may apply.

Listed below are some of the characteristics of a Private Interest Foundation:

1. It is not required to issue shares.

2. Needs one beneficiary and one protectorate from the founding council.

3. Has no obligatory capital requirement, but a minimum of $50,000 is recommended.

4. Must have a Registered Office Address.

5. Free from any judicial orders on confiscation of assets.

6. Must have a bank account.

7. One must state the purpose of the business and whether the period of time for the company is definite or indefinite.

Start your business in Panama with Easyco

If you are looking to start a business in Panama, our company experts can help you register your company in Panama and assist with the formalities and compliance along the process.

Easyco also provides additional services to guarantee your company’s compliance, which include:

• Nominee directors in Panama

• Registered office address in Panama

• Handling tax and accounting

• Hassle-free Payroll Services

• Manage your Company bank account opening in Panama

• Panama’s Friendly Nations Visa coordination and assistance

• Manage your Trademark Registration in Panama

• Corporate Legal Services

At Easyco, we make company formation in Panama easy; our team of corporate experts has vast experience helping companies and individuals register their business in Panama, with a proven track record of success across all of our services. Easyco aims to tackle the complex company formation processes across LATAM and makes business registration easy by providing a hassle-free online company registration experience. Start your company in Panama today!