How to Establish a Company in Panama: Company Formation Panama

Panama has sometimes been called the «Latin American Singapore» due to the success of its economy, keep in mind that Singapore is known as a highly developed free-market economy, a vision that Panama shares. Panama has shown an average growth of 5.9% until 2019, its economy is based on services, among the main ones we can mention: financial, tourism, and logistics services that represent 75% of its GDP.

It is important to mention that Panama’s economy depends on foreign investment, for that reason its regulations are focused on encouraging the entry of foreign investment; therefore, entrepreneurs who settle in the country have the opportunity to expand in the region. This makes Panama an ideal country to start a business.

Company Structure in Panama

A massive benefit that this jurisdiction has over various countries is how fast a company can be created in Panama. Companies in Panama are established usually within five to seven business days approximately.

As a founder, you must choose which will be the legal structure of your new company and define how many partners will be included, consider the following:

• Natural Person: This structure allows only one investor, who is the person who provides the capital and is the owner of the business who is identified with an ID card.

• Legal Entity: This structure defines an organization that is conformed by several investors and must have legal approval. These companies must be registered in the Public Registry along with the partners of the company and indicate the investment of each one. These types of companies are represented by shareholders or partners of the company and have the legal capacity to act, in addition, to having obligations within the performance of the company.

Types of Companies in Panama

If you want to form a company in Panama, you have to learn what company type best suits your business needs. These are some of the most popular types of companies in Panama:

• General Partnership (“Sociedad Colectiva General”): Here the partners are jointly and unlimitedly liable for the corporate operations, therefore, even if only one of them has made a mistake to the detriment of the partnership, this would imply that all the partners could be sued. The name is usually accompanied by the phrase «Y compañía», «Y hermanos», «E hijos» or similar, including abbreviations.

• Limited Company (“Sociedad Colectiva Limitada”): It is known as a Limited Liability Company (Similar to an LLC in the United States) and can have between 2 and 20 partners who must be registered in the Public Registry Office; they can be natural or legal persons. The share capital is integrated by the contributions of the partners and can be in any currency. The denomination is free to choose, but «Sociedad de Responsabilidad Limitada» or its abbreviation «SRL» must be added.

• Limited Partnership (“Sociedad en Comandita Simple”): It works as a hybrid between the general partnership and the joint-stock company, here coexists between partners who contribute work («comanditados», have joint and unlimited liability for the obligations of the company) and general partners who contribute capital but do not participate in the management («comanditarios», limited to the capital contributed by each partner). Its name includes «Sociedad en Comandita» or its abbreviation «S. en C» or «S.Com.»

• Limited Partnership by Shares (“Sociedad en Comandita por Acciones”): It is a company whose capital is divided into shares corresponding to the contributions of the partners. One of the partners is in charge of the administration of the company and is responsible for the obligations of the company, the rest of the partners don’t share this responsibility. Liability is divided in the same way as in the Limited Partnership: «Comanditarios» and «Comanditados». Its name includes «Sociedad en Comandita por Acciones» or its abbreviation «S.Com. p.A.» or «S.C.A.».

• Stock Company (“Sociedad Anónima”): This type of company is the most used in Panama, more than 90% of the companies have been created under this structure, this is due to the tax benefits granted to them. Its capital stock is based on the economic contributions of all its partners and is divided into shares. It is necessary to be composed of two or more persons of any nationality; they don’t need to be domiciled in Panama.

• Foreign Corporation (“Sociedad Anónima Extranjera”): One of the benefits of the Panamanian legislation is that it can validate those foreign corporations, registering some documents in the Public Registry Office, among the documents requested:

• Articles of Incorporation translated into Spanish and legalized before a notary public

• Minutes of the Board of Directors authorizing registration in Panama

• Copy of the last financial statements

• Certificate from the Panamanian Consul certifying that the organization of the company has been established according to the law of the place where it has been subscribed.

• Evidence of the notification of the capital transfer of the operation in Panama.

• Individual Limited Liability Companies (“Empresas Individuales de Responsabilidad Limitada”): This company is an option for the sole owner, such person transfers the assets of the business and the civil liability is limited to the number of assets transferred.

1. Choose the right type of company and structure

   The first step is to select the right structure for your business. In Panama, there are several different types of companies to choose from. It is important to learn about the pros and cons of each, as well as which is the best structure to fulfill all business needs. Consider that a “Stock Company” is the most common company type.

2. Register your company at the Panamian Public Registry

   In order to register your company at the Panamian Public Registry, you need to draft the company’s bylaws with all the required information and documents.

   • Company name

   • Legal Representative information

   • Share capital information

   • Company activities

   • Registered/ Legal address

   • Management structure

   • Extinction and liquidation details

   • Other general dispositions

   All these documents have to be notarized at a public notary and then submitted to the Panamian Public Registry for their revision and final approval.

3. Obtain your Tax ID or RUC in Panama

   When you set up your company in Panama, you must carry out the corresponding procedure to obtain its “RUC – Registro Único del Contribuyente” (Taxpayer Registry).

   This procedure is carried out through the website of the Dirección General de Ingresos (General Revenue Directorate). Once you have filled in all the requested data, your application will be verified, and once accepted, you will be given your tax identification number, either natural or legal person.

4. Panama Commercial Operation Permit

   Another important step to consider is the Operation Permit, which is a process requested by the Panamanian Government to both natural and legal persons in order to undertake a commercial activity within the country.

   The activity to be undertaken must be duly reported to the Public Administration together with an affidavit declaring to have complied with all the regulations covering the activity.

   In order to request the Operation Permit, the registration of the company in the Panamanian Public Registry must be done in advance.

5. Open a Corporate Bank Account

   Finally, visit a local bank to open your corporate bank account. It is advised to research the banks ahead of time so you know the rates, the benefits, and what documents to take with you when visiting.

Get Assistance from Easyco Experts

Panama is a great country to start your business, having a successful economy, ease of entry, tax benefits, and a business-friendly environment. Our 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 compliance, which include:

• Appointment of a Resident Agent in Panama

• Appointment of nominee directors for your company in Panama

• Providing a Registered Office Address in Panama

• Providing secretarial maintenance support in Panama

• Handling tax and accounting when required

• Hassle-free Payroll Services

• Recruiting and Hiring Talent

• Assist with your Company Bank Account opening in Panama

• Manage your Trademark Registration in Panama

• Corporate Legal Services in Panama

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!