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Starting a Business In Colombia

Sole Proprietorship In Colombia

Colombia is a well-known destination in Latin America that has come into the limelight for being the investment hub of choice for foreign companies. Thanks to a stable government structure, free trade agreements, democratic policies, and reliable economic policies, Colombia has been a leader in economic terms in the Latin American region.

The country has grown stably due to its consistent foreign direct investment. The latter is expected to reach 3200.00 USD million by 2023. Over the last few years, the country has been a prime pick for startups and offshore businesspersons. Macroeconomic strength, legal security, and guarantees on investment have combined to assist Colombia in becoming a strategic hub in bridging South and North America.

Colombia’s free trade zones make investing attractive, while the multiple incentives further back the offshore investor interests. Even regarding international issues like sustainable development, Colombia is working soundly to reduce carbon emissions by around 51% until 2030.  It also plans to achieve a zero deforestation rate by the same year and commit to carbon neutrality by 2050. It ranks 82nd on the list of Ease of Doing Business report 2020.

Colombia also has a business-friendly corporate tax structure. Setting up a sole proprietorship in Colombia benefits companies looking to expand their wings globally. Colombia offers direct access to a vast consumer market thanks to a 52 million, predominantly young population. Read up on how to register a sole proprietorship in Colombia.

Who can be a Sole Proprietor in Colombia? 

A sole proprietorship is individually owned, and the personal income is no different from business income for a proprietor. Any person can set up a sole proprietorship in Colombia to provide goods or services. 

Any nationality can establish a sole proprietorship in Colombia if the identity documentation is verified.  An entrepreneur or sole proprietor in Colombia needs to

  • Be registered with the mercantile register
  • Not participate in other businesses that are incorporated
  • Foreigners must have permits and licenses to operate a sole proprietorship in Colombia.

There is no liability on anyone else except the proprietor. Establishing a sole proprietorship in Colombia needs minor document verifications but is the easiest and most cost-effective way to initiate a company.

Benefits of Sole Proprietorship in Colombia

You can set up a sole proprietorship in Colombia when registering a business as an investor, entrepreneur, or freelancer.  This makes the owner self-employed or a sole proprietor in Colombia.  There are numerous advantages to having such a setup .-

  • Sole proprietorships in Colombia do not need extensive record maintenance or complicated annual reporting.
  • Additionally, proprietors need to pay taxes as per the personal tax regime.
  • Proprietors get to enjoy total control over every aspect of this firm.
  • The tax and registration structures are not complicated for sole proprietorships in Colombia.

Documents Required for Registering Your Business in Colombia

The documents you need to register a sole proprietorship in Colombia are as follows: 

  • Identity proof of proprietor. No residency proofs are needed.
  • Registration form submission at the Chamber of Commerce
  • Registration with Mercantile register
  • Documents stating the business intention of the entrepreneur
  • Articles of association
  • Declaration of the company name with the Naming Certificate 

Special note 

  • All documents have to be notarized and in Spanish.
  • You need a business license stating the sole proprietorship’s purpose.
  • There is no specific paid-up capital for a sole proprietorship in Colombia.

Other Criteria for Registering a Sole Proprietorship in Colombia

When the registration for a sole proprietorship in Colombia is complete, ensure the following-

  • Open a local bank account for any transactions
  • RUT application 
  • Registered tax ID called the NIT number that is obtained after RUT application processing
  • Social security registration
  • Annual turnover record
  • Existence certificate from the Colombian Chamber of Commerce

Post-registration compliances

You require the following post-registration compliances to operate a sole proprietorship in Colombia, which includes:

Tax registration

  • Special license sanction
  • Company’s opening balance sheet

Taxation

There are a number of taxes applicable to a sole proprietorship in Colombia. 

  • Taxes on Dividends at 10%
  • Value Added Tax stands at 19% 
  • Industry and Commerce Tax ranges between 0.2% to 1.4% of the company’s income

ANNUAL INCOME  IN COP (COLOMBIAN PESO)

TAX RATE IN %

0-1,090

0

1,090-1,700

19

1,700-4,100

28

4,100-8,670

33

8,670- 18,970

35

18,970 to 31,000

37

Above 31,000

39

How to Register a Sole Proprietorship Firm in Colombia?

The sole proprietorship company in Colombia usually takes 2 to 3 weeks to register. Refer to these steps to learn how to register a sole proprietorship in Colombia-

STEP 1: Documentation

  • You need to get a company incorporation certificate after submitting your business intention and a copy of your passport.
  • You can also submit an authorization certificate for a lawyer or a representative to act on your behalf if you are not in Colombia.
  • Select a company name and ensure it does not clash with other existing businesses.
  • Apply for a business visa by applying to open a sole proprietorship in Colombia. You can visit the Ministerio de Relaciones Exteriores in Bogotá for this purpose. 

STEP 2: Cámara de Comercio Registration

  • Register with DIAN (Colombia Tax and Revenue Department)
  • You will get the RUT (Registro Unico Tributario), and the tax registry and business are added to the tax system. After this, you get a unique tax number to operate legally in the country.
  • You can seek help understanding the tax structure before getting the NIT number after-tax registration.

STEP 3: Company book registration

  • Apply for registration with the Chamber of Commerce and submit the general ledger and account journal. 

STEP 4: Bank account opening

  • As a sole proprietor, open a local bank account for all business transactions.

How Multiplier Can Help?

When setting up a sole proprietorship in Colombia, you must understand and adhere to local rules and regulations. Partner with a SaaS provider like Multiplier to ease the research and application process. This is a global employment solution applicable to any business or sole proprietorship.

As you set up a business in Colombia, managing the same could be tough. Multiplier offers EOR solutions to help with all recruitment services.

Frequently Asked Questions

Yes, a foreigner can open a business in Colombia since there is no residential mandate applicable to open a business.

It is compulsory for all documents related to setting up a sole proprietorship in Colombia to be in Spanish.

The Colombian government offers free trade zones wherein the rates of value-added taxes are variable from that in non-free trade zones.

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