Business Opportunities in Colombia
In terms of economy, Colombia stands as a middle-income economy with the fourth and second positions in terms of gross domestic product. This makes Colombia a safe location for international trade and financial stability. Besides, the fast-growing information and technology of the country are sure to attract foreign investors to start a business in Colombia.
In 2020, Colombia supported at least 5000 American businesses by funding and investing USD 4.1 billion. So, the Colombian government has schemes to fund startups and promote the economy’s growth. Colombia’s extensive ongoing infrastructure projects have a demand for businesses concerning logistics, finance, and design. Another arena of the Colombian market that still needs to be explored is e-commerce. Entrepreneurs can come up with e-commerce businesses or create a branch office here. Some other fields in Colombia with ample business opportunities include agriculture, automotive, hardware and software services, and the IT industry.
To start a business here, read this detailed guide on company incorporation in Colombia.
Benefits of Starting a Business in Colombia
The advantages of doing business in Colombia are as follows:
Strategic geographical location
Colombia is the only South American nation with coastlines in the Atlantic, Pacific, and Caribbean Seas. This allows the country to have a prosperous foreign trade and quickly penetrate the global market, making it a hotspot for investors to start a business in Colombia.
Requirement of less capital investment
Investing in Colombia can be done with much less capital due to the devaluation of the Colombian peso. So, compared to American dollars, the capital share in Colombia is one of the greatest advantages of starting a business here. Therefore, with less budget, you can have a better scope of investing in Colombia.
Presence of free trade zones
The benefit of settling in free trade zones in Colombia adds to one of the many reasons for starting a business in Colombia. These offer tax benefits, facilities legal conditions and promote unique marketing opportunities for your business. The free trade zones also feature direct foreign investment in Colombia.
Exemplary tax benefits
The country aims at becoming an investment hub for entrepreneurs and businesses. So, it has several attractive tax benefits, including exemption from taxes and income tax reduction under certain conditions. From 2023, the corporate tax rate in Colombia is 35%.
High investor confidence
The constant growth of investor confidence in Colombia and the country’s political stability hints at steady economic growth. Being a free market economy, Colombia shares free trade agreements with two countries – the European Union and the United States. This reduces the import-export barrier and facilitates more robust and hassle-free trade.
The Colombians are qualified enough to carry out entrepreneurial tasks. The country has a literacy rate of 95%. According to Global Entrepreneurship Monitor, the rate of potential entrepreneurs in Colombia is 60%, while 71% consider entrepreneurship a means to the country’s positive growth. Again, a study conducted by the World Economic Forum and Global Entrepreneurship Monitoring revealed that Colombia has a high rate of innovative and ambitious entrepreneurs.
The Colombian government has various programs to support businesses and entrepreneurs. Ruta N of Colombia is a federally-sponsored organization that helps startups with networking, finance opportunities, and promotion. iNNPulsa is the national government’s business growth management unit that promotes productivity, entrepreneurship, and innovation in Colombia. So, starting a business in Colombia can fetch you some governmental help.
Requirements for Starting a Business in Colombia
The requirements to do business in Colombia are highlighted below:
The available visas to establish a company in Colombia include a visitor V-type visa, a migrant M-type visa, a resident R-type visa, a technical visa, and a digital nomad visa.
You have to register your company’s name in the Single Business Register. Make sure to pick a name that is not registered yet. It should be unique and free from any contradictions.
The tax system of Colombia consists of taxes at the municipal, departmental, and national levels. The residents and native companies of Colombia have to pay taxes based on their overall assets and income. On the other hand, foreign investors and entrepreneurs are taxed on their income generated in Colombia. The corporate income tax in Colombia is 35%. The taxpayer is subject to a withholding tax of 20% for overseas payments.
Directors and company secretary
The number of directors and company secretaries depends on the business type you want to establish.
- In a general partnership, two partners are required who stand as the company’s directors as long as they have not designated another person as the director.
- The limited partnership business is formed by one limited partner and one managing partner.
- For a limited liability company, a minimum of two partners are a must.
- A corporation has five shareholders.
- A simplified stock company has at least one shareholder.
Types of Business Structures in Colombia
If you have business to do in Colombia, it is vital to figure out the various business structures that Colombian law approves. The different business structures of Colombia are pointed out below:
- The highest corporate body here is the partnership board, with subsidiary personal liability given to its partners.
- A form of a closed company where the partners have to manage the company or assign a third person unanimously to take charge of the company
- A hybrid type of company
- Partners can either manage other partners or limited partners
- Each partner’s functions, participation, liability, and voting rights differ.
- It can be categorized into a simple limited partnership and a shared limited partnership.
Limited liability company
- A hybrid form of a company where partners can limit their responsibility and keep it equal to the amount of their contribution to the company
- The number of partners can be at most 25.
- No personal liability of the shareholders
- The Shareholders General Assembly is considered the highest corporate body.
- It comprises a board of directors, a statutory auditor, and a legal representative nominated by the board of directors.
- Most suitable for financial organizations and large enterprises.
Simplified stock company
- No personal liability of shareholders
- A Shareholders’ General Assembly and a legal representative are the highest corporate bodies.
- It can have a board of directors only if the shareholders need it.
Company Registration Process
The company registration process in Colombia is given in a stepwise format below:
Step 1: Establishing company foundations
- Check the availability of the company name.
- Present your business in written format bylaws.
- The legal agreement should have every information about the company.
Step 2: Understanding legal structures
- Three legal structures are available in Colombia – limited company, joint stock company, and simplified stock company.
- Foreign investors mainly choose the simplified stock company due to less formalities requirements.
Step 3: Company registration at public institutions
- The process of offshore company registration in Colombia can be registered and incorporated in three institutions – the Chamber of Commerce, the Colombian Tax Authority, and the Local bank.
- The Chamber of Commerce’s primary task is determining if your company registration process adheres to the current legal system and policies.
- Once your business is registered with the Colombian Tax Authority, you get a unique tax number.
Step 4: Corporate bank account opening
- You must provide the Existence Certificate issued by the Chamber of Commerce, the tax ID certificate, and the legal representative ID to the bank.
- The bank also asks for the company’s opening balance sheet.
Step 5: Creating entity corporation document
- You must create an incorporation document stating everything about the company partners, name, and activities.
- This incorporating document should contain capital structure, the board of directors, partner responsibility, and termination causes.
Step 6: Hiring a legal representative
- The procedure for incorporation of a company in Colombia must have a legal representative.
- It is not necessary to have a legal representative from within the company.
- This representative has to be adept in the company’s operation. He should also be able to handle all legal actions on behalf of the company.
How Much Does it Cost to Incorporate a Company in Colombia?
The cost of incorporating a company in Colombia in the first year amounts to US$6,875. However, in the second year, the cost gets reduced to US$1,060. The fees for local bank account opening and governmental fees amount to nearly US$13,772.
Are Foreigners in Colombia on Certain Passes Allowed to Start a Business in Colombia?
Yes, foreigners can set up an offshore company in Colombia, provided they have the necessary visas. Five types of visas are available in Colombia, as elaborated below:
- Visitor V-type visa – Can be used by visitors who are not aiming for a permanent establishment in the country.
- Migrant M-type visa – Suitable for people who want to enter Colombia and live temporarily
- Resident R type visa – Suitable for those wanting to settle permanently in Colombia
- Technical visa – Special visa for foreigners to impart technical assistance in Colombia for cumulative 365 days or continuous 180 days
- Digital nomad visa – Can be availed of by individuals employed outside Colombia for two years
Of all the different types of visas, the M type is the most commonly used among expats. To obtain any of the above-mentioned visas, these are the documents required:
- An applicant’s passport with six-month validity
- Medical insurance proof
- Documents filed abroad
- Legalized or apostilled bachelor’s degree diploma
Government Assistance for Foreign-owned Businesses
The Colombian government provides some grants for starting a business in Colombia which are as follows:
- The government started the iNNPulsa in 2012 to support startups, partner with private companies, and stimulate the country’s economic growth. Besides, the Colombian government actively encourages and welcomes foreign direct investments.
- The Colombian government has an entity known as ProColombia that promotes foreign investments. Since the government is aware of the businesses and investments in the country, you will not find risks of doing business in Colombia.
How Multiplier Can Help
When forming a business, organizations must pay close attention to compliance and administrative requirements. Establishing a business in a foreign country can appear tedious at first glance. However, to make business incorporation an easy and seamless task, you can rely on Multiplier.
Multiplier takes pride in offering businesses global staffing solutions in the most transparent manner. Considering the market’s demands, Multiplier uses the latest tools and technology to hire appropriate personnel from all over the globe. You don’t need to worry about finding the right employees when you join hands with Multiplier.