When you expand in Panama, you set the course for growth across continents!
Panama is a major player in global trade and finance. Perfectly positioned between the Americas, this country offers a stable economy, pro-business policies, and attractive tax benefits—it’s no surprise that companies choose it as their gateway to Central America.
The country’s GDP is set to hit $116.14 billion by 2029, its ninth consecutive year of growth. But, while the opportunities are big, so are the legal and administrative hurdles.
Setting up a company means navigating regulations, tax laws, and compliance
requirements. In this article, we understand the company registration process and explore how an Employer of Record (EOR) can help—handling the complexities so you can focus on business growth in this high-potential destination.
Why Panama is an ideal destination for business registration
Panama’s appeal stems from several key advantages:
Tax-friendly environment: Panama operates on a territorial tax system, meaning only income earned within the country is taxed. If your business generates revenue abroad, you won’t pay local taxes on it—making it a smart choice for international companies looking to optimize costs.
Confidentiality and privacy: Panamanian law ensures that shareholders’ identities remain confidential, guaranteeing a high level of privacy for business owners.
A global trade hub: With its world-renowned trade infrastructure, including the Panama Canal, the country is a gateway for international commerce. Businesses can easily connect to global markets and streamline operations.
Robust infrastructure: Panama boasts advanced logistics and telecommunications infrastructure, supporting efficient business operations and connectivity.
No currency restrictions: Panama imposes zero restrictions on currency movement, allowing businesses to send and receive international payments without bureaucratic roadblocks, making global trade and cross-border investments effortless.
Skilled workforce: With a diverse and educated labor pool, businesses can find talent across various sectors to meet their operational needs.
Free trade zones and business incentives: With special economic zones like the Colón Free Zone–the largest free trade zone in the Western Hemisphere–Panama offers generous tax breaks, duty exemptions, and other incentives designed to cut costs and boost competitiveness.
Whether you’re in manufacturing, logistics, or finance, these advantages make Panama a prime destination for businesses.
If your company is hiring in Panama or establishing a local presence, the next big decision is how to structure your setup. You can use the traditional route and register a legal entity or take a faster, more flexible approach with an EOR.
Traditional company registration vs. expanding through an EOR in Panama
Businesses expanding into Panama have two options—company registration or hiring through an EOR. Here’s how they compare:
Aspect | Standard company registration | EOR |
Purpose | Establish a standalone legal entity in Panama | Employ staff in Panama without setting up a local entity |
Control | Full control over operations | Operational control over daily activities; EOR manages employment-related functions |
Cost | Higher initial setup costs | Lower upfront costs with a predictable fee structure |
Compliance | Direct responsibility for adhering to local labor laws and tax regulations | EOR ensures compliance, mitigating legal risks |
Setup time | A few weeks | Rapid deployment, often within days |
Scalability | Requires formal restructuring for scaling. | Allows rapid workforce adjustments |
How to simplify business registration in Panama with an EOR
Partnering with an EOR for expansion to Panama offers numerous benefits:
Accelerated market entry: An EOR enables businesses to hire and operate swiftly within Panama by bypassing the need to establish a local entity.
Regulatory compliance: With an EOR, compliance isn’t a concern—local experts handle labor laws, tax filings, and legal risks, so you don’t have to.
Comprehensive HR management: From payroll processing to benefits administration, an EOR handles all HR functions, allowing you to focus on core business activities.
Cost efficiency: An EOR eliminates the costs of entity setup, offering a predictable pricing model that simplifies expansion.
However, establishing a legal entity might be the best choice if you need complete control over your operations. In the next section, we explore how you can do this.
A step-by-step guide to registering a company in Panama
From choosing the correct business structure to registering with local authorities, here’s a step-by-step guide to help you establish your business in Panama:
Step 1: Choose the type of business entity
Selecting the appropriate legal structure is crucial, as it influences liability, taxation, and management.
Common business structures in Panama include:
Corporation (Sociedad Anónima or S.A.):
An S.A. in Panama is similar to a public limited company.
- It is ideal for larger businesses and offers limited liability to shareholders.
- Requires a minimum of three directors (of any nationality)
- No legal minimum share capital is mandated; however, a standard authorized share capital is often set at US$10,000.
LLCs or Sociedad de Responsabilidad Limitada – S.R.L.:
- An S.R.L. is suitable for smaller businesses and has a simpler management structure.
- A minimum of two shareholders or associates and at least one administrator is recommended.
- There is no minimum capital requirement and you can express capital in any currency.
Sole proprietorship
A sole proprietorship is the simplest business structure available.
- It is owned and operated by a single individual
- The owner has complete control and unlimited liability for business debts.
Partnership (Sociedad en Comandita):
Partnerships in Panama can be either a general partnership or a limited partnership:
- General partnership: In this type of partnership, two or more people join forces to run the business. They share the profits, costs, and responsibilities equally. All partners are fully accountable for the business’s decisions and debts.
- Limited partnership: This structure includes general partners, who handle the operations and are entirely liable for any debts, and limited partners, who contribute capital but have less responsibility and liability.
Foreign branch office:
- Allows foreign companies to operate in Panama without forming a separate legal entity.
- Functions as an extension of the parent company, sharing liabilities and obligations.
In Panama, the most popular option is the Sociedad Anónima (S.A.). Some companies open a foreign branch office because it involves fewer regulatory requirements than incorporating an S.A. But, branches expose your parent company to full liability for local operations, and often, an EOR is a better option. It assumes responsibility for adhering to local labor laws, tax filings, and statutory requirements. You mitigate risks, avoid unnecessary entity setup, and can swiftly and easily enter or exit the Panamanian market.
However, if you are choosing another business structure, the next step is to reserve your company name.
Step 2: Reserve a company name
Your business name must be unique and follow Panama’s naming rules (e.g., including “S.A.” or “Inc.” for corporations). You can check availability through Panama’s Public Registry.
Step 3: Appoint directors and officers
For an S.A., you need at least three directors who can also act as president, secretary, and treasurer. They can be individuals or companies and don’t need to be Panamanian residents.
Step 4: Draft the articles of incorporation
The Articles of Incorporation (or corporate charter) define key details about your company, such as its name, purpose, authorized share capital, and governance structure. It must be written in Spanish and filed with the Public Registry.
Step 5: Register with the Panama Public Registry
To register, you must prepare the company’s bylaws, including all necessary details and documents.
These include:
- Company name
- Legal representative’s information
- Share capital details
- Company activities
- Registered/legal address
- Management structure
- Information on extinction and liquidation
- Other general provisions
You must notarize these documents and submit them to the Panama Public Registry for official approval.
Want to avoid this paperwork? An EOR like Multiplier lets you begin hiring and expanding your teams in Panama without registering your company or setting up a local entity here.
Step 6: Obtain a tax identification number (TIN)
Next, you’ll need to register for an RUC (Registro Único del Contribuyente), which is the Taxpayer Registry. You can do this online through the Dirección General de Ingresos (General Revenue Directorate) website.
After filling in the required information, your application will be reviewed. Once approved, you’ll receive your tax identification number, either for an individual or a legal entity.
Step 7: Obtain a business license
After your company has been registered with the Panamanian Public Registry, you require an Operation Notice (Aviso de Operación) to engage in commercial activities. You must apply for this online via the Panama Emprende.
Step 8: Open a corporate bank account
To set up a company bank account, you typically need:
- Articles of incorporation
- A resolution authorizing the account opening
- Identification documents for directors and shareholders
Step 9: Appoint a resident agent
Every Panamanian corporation is required to designate a licensed local attorney or law firm as its resident agent. This agent becomes your point of contact between your company and government agencies, helping your business stay compliant with local regulations.
Getting your business up and running is just the start. To operate smoothly in Panama, you must understand the financial commitments that come with company registration. Let’s take a closer look.
Cost considerations for business registration in Panama
The cost of registering a company in Panama depends on several factors, including the business structure, location, and required services. Legal and notary fees fluctuate based on the complexity of the registration process and the level of assistance needed. Additionally, government fees vary depending on the company type and location. These may include charges for Public Registry registration, obtaining a TIN, and securing a business license.
- Incorporation fees: Incorporation fees can vary depending on the services included and the service provider. Some firms offer basic incorporation packages starting from approximately $890, which may cover essential services such as notary fees, registration charges, and resident agent fees for the first year.
- A $300 annual franchise tax is required for the first year of incorporation.
- Minimum share capital: While a minimum share capital of $10,000 is recommended, it does not need to be fully disbursed at the time of incorporation.
- Yearly renewal fees: Annual maintenance costs typically include the $300 franchise tax and registered agent fees, but varies depending on the service provider. Additional expenses for accounting services and compliance-related costs depend on the specific requirements and the chosen service provider and would typically be $875 upwards.
Company registration costs in Panama often vary based on legal, accounting, and compliance fees. Regulations may also change, which could impact expenses at the time you’re reading this. For the latest estimates, we recommend consulting an expert.
Our team can help you navigate these costs and explore whether standard company registration or an EOR suits your business better.
Cost breakdown: standard company registration vs. EOR
Using Multiplier’s EOR services, companies have saved up to 70% on payroll costs alone. Beyond payroll, an EOR reduces many of the hidden costs tied to company registration—legal fees, compliance expenses, and administrative overhead.
Here’s how the total costs compare company registration versus partnering with an EOR in Panama.
Expense category | Standard registration | EOR |
Setup costs | No setup cost | |
Compliance costs | High (legal, tax, accounting) | Included in EOR fee |
Payroll management | Requires dedicated team | Managed by EOR |
Annual maintenance | $875 (varies by complexity) | Fixed monthly fee |
Scalability | Limited by legal setup | Immediate scalability |
This comparison illustrates how choosing an EOR can streamline your entry into the Panamanian market, making it a more efficient and cost-effective option for many businesses.
Multiplier can be your trusted partner here.
Businesses across industries rely on us to handle payroll, compliance, and hiring—helping them scale faster with zero operational headaches.
Streamline your Panamanian expansion with Multiplier
Expanding your business to Panama can be simple, swift, and hassle-free. Sidestep the challenges of entity formation—hire top talent, stay compliant, and scale faster with Multiplier.
Here’s how we make it easy:
- Hire in minutes, not months: With Multiplier, you can onboard employees in Panama in minutes. Our all-in-one platform keeps everything organized—contracts, time-off requests, and expenses are all in one place.
- Payroll without the stress: Paying your international team shouldn’t be complicated. Our automated payroll system ensures salaries, taxes, and benefits are handled correctly, with local experts on hand to navigate Panama’s regulations.
- HR tools that work for you: Say goodbye to scattered spreadsheets. With Multiplier, you can track timesheets, monitor expenses, and manage your workforce across multiple locations—all from a single dashboard.
- Stay 100% compliant: Our locally compliant contracts include everything from mandatory benefits to working hour policies, keeping you risk-free.
- Top-tier benefits for your team: Attract and retain the best talent with competitive benefits packages. Through our local partners, we offer healthcare and other perks that meet Panama’s corporate and tax standards.
Why deal with the complexities of setting up a local entity when you can hit the ground running with Multiplier? Let’s get started—book a demo today!
