How to Start a Business in Colombia as a Foreigner A Step by Step Guide.

Starting a business in Colombia as a foreigner might seem like a complex process, but with the right guidance, it’s an achievable goal. Whether you’re planning to live in Medellín or another city, Colombia offers numerous opportunities for entrepreneurs from abroad. However, navigating the legal requirements can be challenging, especially when you’re unfamiliar with the local language and legal system.

In this guide, we’ll walk you through the essential steps to establish your business in Colombia, from understanding the legal requirements to securing the necessary permits and visas.

1. Understanding the Colombian Business Landscape

Colombia is becoming an increasingly attractive destination for foreign entrepreneurs, thanks to its growing economy and government incentives for foreign investment. Medellín, in particular, is a hotspot for expats due to its modern infrastructure, thriving tech scene, and supportive startup ecosystem.

Before diving into the process of creating your business, it’s important to know the types of business structures available in Colombia. Here are the most common types:

Simplified Stock Company (SAS)

Sociedad por Acciones Simplificada in Spanish.
The most popular and flexible business structure.
Ideal for small to medium-sized enterprises (SMEs).
Allows for one or more shareholders.
Limited liability protection for owners.

Limited Liability Company (LLC)

Sociedad de Responsabilidad Limitada (SRL) in Spanish.
Suitable for small businesses with multiple partners.
Liability is limited to the capital contributed by each partner.
Requires at least two partners and has a maximum limit on the number of partners.

Public Limited Company (PLC)

Sociedad Anónima (S.A.) in Spanish.
Suitable for larger enterprises that may want to issue shares to the public.
Provides limited liability to shareholders, meaning their personal assets are protected.
Involves more complex regulatory requirements and governance structures.

Collective Company

Sociedad Colectiva in Spanish.
A partnership where all partners share unlimited liability.
Generally used by businesses where personal trust and collaboration among partners are key.
All partners are actively involved in the management of the company.

Limited Partnership (LP)

Sociedad en Comandita in Spanish.
Consists of general partners with unlimited liability and limited partners with liability limited to their investment.
Offers flexibility in management and capital contribution.
Suitable for businesses seeking to attract investors while retaining control by general partners.

Joint Venture

Not a formal business structure but a contractual agreement between two or more parties.
Commonly used for specific projects or business activities.
Allows parties to pool resources while sharing risks and profits.
Can be structured in various ways depending on the agreement.

Cooperative

Profits are typically distributed among the members based on their participation..

Cooperativa in Spanish.

A member-owned business structure that operates for the mutual benefit of its members.

Most foreign entrepreneurs opt for the SAS model because it offers flexibility, limited liability, and minimal bureaucracy compared to other structures.

2. Visa Requirements for Foreign Entrepreneurs

To start a business in Colombia, you’ll need the appropriate visa. The Migrant Visa is ideal for entrepreneurs who want to start a company and reside in Colombia. This visa allows you to live and work in the country while managing your business.

If you’re considering obtaining a visa, Legal ally can assist you throughout the process, ensuring that your visa application is submitted correctly and promptly. Handling immigration paperwork on your own can be confusing, especially with language barriers, but Legal ally is here to help make it easier.

For more details on visa requirements and processes, you can check the Cancillería de Colombia website or contact Migración Colombia for updated information.

3. Registering Your Business in Colombia

Once you have your visa sorted out, it’s time to register your business. Here’s a breakdown of the steps you’ll need to follow:

A. Choose a Business Name

Your first step is selecting a unique business name. You can search for available names using the Colombian Chamber of Commerce’s online platform.

B. Draft Your Company Bylaws

Your company bylaws define how your business will be governed. For an SAS, this includes naming the shareholders, outlining their rights and responsibilities, and defining how decisions will be made.

At Legal ally, we can assist in drafting legally sound bylaws to ensure your business operates smoothly while complying with Colombian law.

C. Register with the Chamber of Commerce

After drafting your bylaws, you need to register your company with the Chamber of Commerce in your city. This registration is essential for legalizing your business and gaining tax identification (RUT).

D. Obtain a Tax Identification Number (RUT)

The RUT (Registro Único Tributario) is your company’s tax ID number in Colombia. You’ll need it to carry out any financial or commercial activity. To get your RUT, you’ll need to register with DIAN, the Colombian tax authority.

This process might seem overwhelming, but Legal ally provides step-by-step assistance to ensure you comply with every legal requirement.

4. Open a Business Bank Account

Once your company is officially registered, you’ll need to open a corporate bank account in Colombia. This step is crucial for managing your business finances, paying employees, and handling taxes.

Colombian banks often require legal documentation such as your RUT, business registration, and proof of your visa status. We at Legalally can guide you through this process and ensure you have all the necessary paperwork.

5. Understanding Colombian Taxes

As a business owner in Colombia, you must comply with local tax regulations. This includes corporate taxes, VAT (Value Added Tax), and other industry-specific taxes depending on your business type.

Navigating the Colombian tax system can be tricky, especially for foreigners. Ensuring compliance with tax obligations is crucial to avoid fines or penalties. Legalally can help with tax planning and compliance to ensure your business runs smoothly without any legal hiccups.

6. Employment Law and Hiring Staff

If you plan on hiring employees, it’s essential to understand Colombian labor laws. Employment contracts must be written in Spanish, and you’re required to provide social security and health benefits to your staff.

Colombian labor law is very employee-friendly, and failing to comply with legal obligations can result in significant penalties. Legalally specializes in employment law and can help you draft contracts, manage payroll, and ensure you meet all your legal obligations as an employer.

7. Leveraging Colombia’s Startup Ecosystem

Colombia, and especially Medellín, has a vibrant startup scene. As a foreign entrepreneur, you can tap into local incubators, accelerators, and government initiatives designed to foster innovation and entrepreneurship.

Organizations such as Ruta N in Medellín provide support and resources for tech startups and entrepreneurs. Engaging with these resources can help you scale your business quickly while networking with other professionals in the ecosystem.

Conclusion Legal Ally Is Your Trusted Partner in Colombia

Starting a business in Colombia as a foreigner involves navigating legal, tax, and immigration challenges. While it can be a rewarding experience, it’s essential to have expert guidance throughout the process.

At Legalally, we specialize in helping foreign entrepreneurs successfully establish and manage their businesses in Colombia. Whether you need assistance with visa applications, legal compliance, or navigating employment law, our team is here to support you every step of the way.

For personalized assistance in setting up your business in Colombia, contact Legalally today and let us handle the legal complexities so you can focus on growing your business.