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Starting a Business in Costa Rica

by Ed Underwood, President
Central American Consulting Services, Inc.

For outsiders, doing business in a foreign country can be daunting--Costa Rica is no exception. Like many small countries, the business environment in Costa Rica is controlled by a few entrenched interests. However, the opening of the global marketplace has put pressure on those entrenched interests to yield to outside investment and investors. Costa Rica, a peaceful democracy for decades, has a history of actually inviting foreign investment. An example of this is that it is relatively simple to begin a business in Costa Rica. What one does after a business is begun is an entirely different matter.

Costa Rica is an enchanting place to live. Of course, there are some internal problems, but there are problems everywhere. Costa Rica is centrally located between two of the largest consumer markets in the world and, with all the neat, new technology, business can be done from here as easily as from Peoria, Illinois or Patagonia, Argentina! Costa Rica's government is as stable as one could want (in Central America) and the Costa Rican people are simply "a cut above."

The Costa Rican corporate legal system is like the country itself--"user friendly." Incorporating here is painless and suggested as the first step to doing any other kind of business. With a smattering of business sense, a rudimentary grasp of Spanish, a bit of ready cash, and the desire to become a global power (!), anyone can be a recognized business entity.

Formalization of a business venture in Costa Rica, as in most other jurisdictions, comes in a variety of packages:

General Partnership (Razón Social)

Limited Partnership (Compañia)

Limited Liability Company (Sociedad de Responsabilidad Limitada)

Corporation (Sociedad Anónima)

The Sociedad Anónima (S.A.) is probably the most popular. Comparable to the "Inc." in the United States, the S.A. confers upon the holder(s) the right (and obligations) to do corporate business in Costa Rica.

Because the process of establishing a business entity is a legal one, seeking the help of a qualified commercial attorney is a wise first step for those not familiar with the Costa Rican legal system. Most commercial sections of embassies or consulates can recommend a qualified attorney; the Yellow Pages of the phone book, under "ABOGADOS," is another place to look; recommendations from those who have gone before can also prove useful. In any event, almost any attorney with a speciality in Commercial Law will have the capacity to get you incorporated and on your way to doing business here in the land of eternal spring.

Unlike some Latin American countries, it is not obligatory to have a native Costa Rican as a partner in the establishment of any type of business entity. In certain instances, having a Costa Rican partner is a good idea; however, do not be pressured into accepting a native partner if you would rather not.

As an example, to start a Sociedad Anónima (S.A.) at least two stock holders must be named, and there must be at least three officers: President, Secretary and Treasurer. One person can hold various offices. A fiscal should also be named--in theory, this position is the corporate Comptroller. There also must be a designated Resident Agent, a person responsible for Judicial and Administrative notifications which might arise during the life of the corporation. The Resident Agent must be a resident of Costa Rica though not necessarily an attorney.

Choosing a corporate name is important. The name of the corporation must be in Spanish and unlike any other name already in use. Before the registration of the corporation, the attorney responsible for the work should check the registry carefully to determine the uniqueness of the chosen name. The corporate name will be the exclusive property of the company. Simultaneously with the registration of the corporation, a Cédula de Persona Jurídica will have to be requested. Analogous to a federal tax number, the Cédula de Persona Jurídica allows the corporation to operate freely in the market(s) defined in the corporate charter.

With the new tax laws just passed by the government, keeping corporate books up to date has become very important. These books--Minutes of the Board of Directors’ meetings, Minutes of the Shareholders’ meetings, Registrar of Shareholders, and three accounting books (Mayor, Inventario, and Diario)--must be kept up-to-date, accurately reflecting the activities of the corporation. Under the new tax law, if any tampering with the books is found, the corporate officers face fines and/or imprisonment.

The cost of incorporation, from beginning to end, runs between $300.00 and $600.00, depending on the attorney. It pays to shop around. Incorporation in Costa Rica by a foreigner requires that an amount equal to the total nominal value of the stock available be deposited in a special colones account with the government. This deposit is refundable the minute the corporation becomes active.

Incorporation takes between two and three months. No corporate business can take place before the process is complete. Should a person be in a hurry, some attorneys have new, clean corporations duly registered and ready to go. Cost for these is about the same, but there is no choice of names. A bit more overall caution should be exercised if this route is chosen.

The business environment in Costa Rica is changing rapidly. New laws impacting on every aspect of corporate life have recently been passed and more are on the way. The strictness of these laws reflect the government’s desire to restructure its house in such a way as to address the internal needs of the Costa Rican people as well as those of the visitors this beautiful country attracts. In a country with the reputation of being somewhat unstructured, these new laws represent, basically, a new way of life for all.

Regardless of the changes in the business community, Costa Rica is still an attractive place in and from which to do business. Hopefully, the new laws will deter some unscrupulous people, whether nationals or foreigners, from doing business here. Costa Rica is a beautiful, democratic and peaceful country. If you decide to do corporate business here, remember that.

Copyright © 1995 by Ed Underwood. All rights reserved.

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Updated on April 13, 1996 by M.L. Smith