In the past year, Panama has made its standing as an appealing choice for foreign investment, due to many reasons like its growing economy and helpful legal surroundings. Just in 2024, AMPYME reported that 184 legal companies started, showing that setting up legal entities, such as Limited Liability Companies (LLCs), stayed active among small and medium-sized businesses. In this environment, one of the most attractive choices for those looking to start business activities in the country is LLC formation in Panama.
While it might seem a bit complicated at first sight, the truth is that it’s a very practical way to start a business without putting your personal assets at risk, all while getting the tax and operational advantages the country offers. Here, we’ll explain how it works and how LLC formation in Panama is.
Overview of Limited Liability Companies
A Limited Liability Company (LLC) is an economic structure that limits the financial liability of the partners to the capital contributed, thus protecting their personal assets from the company’s responsibilities. This keeps their personal money safe from company debts. In other words, it is a way to have your enterprise legally set up without you having to pay with your personal belongings if things do not go well. So, if the company gets into debt, they won’t take your car or your house because of it.
The LLC formation in Panama is safer and more adaptable compared to IBCs Companies. When forming one, it becomes a separate legal entity from its owners. It can get rights, take on responsibilities, and be represented in and out of court. It makes getting money easier by splitting the capital into portions that can change.
Law 4 of 2009 establishes the principles for operating, dissolving, and forming an LLC in Panama. Under this regulation, with the Limited Liability Company registration, this entity is empowered to carry out any lawful activity, whether of a civil or commercial nature, both within Panamanian territory and internationally.
Advantages of Panama LLC
The LLC formation in Panama brings many important benefits. In addition to protecting the personal assets of the partners from company debts, it offers tax advantages, a flexible administrative structure, and a stable economic environment. The main points to consider are explained below.
- Tributation
- Structure
- Panamanian Economy
In Panama, the fiscal system is territorial, which means that income generated abroad is not subject to local taxes. For this type of corporate body, profits are distributed among all partners and taxed only once, thus avoiding double taxation.
The LLC formation in Panama offers great administrative adaptability with one or two administrators designated in the articles of incorporation. Its simple structure allows for adjusted internal management and does not require a board of directors or many formalities.
In 2024, the country’s economy grew by 2.9% compared to 2023. Similarly, the World Bank in Panama projects a GDP growth of 3.5% for 2025.
Steps in Limited Liability Company Registration
Although the process requires following certain legal steps, the LLC formation in Panama is perfectly accessible if the appropriate information is available. Below, the necessary steps and requirements for Limited Liability Company registration are indicated.
1. Appoint a Limited Liability Company’s Registered Agent
A Limited Liability Company’s registered agent is a Panamanian lawyer or law firm with professional suitability, responsible for acting as a link between the company and the authorities. Additionally, they have the responsibility to receive legal notifications on behalf of the entity, keep accounting records for 5 years, and verify the Flat Rate and the Sworn Statement.
Appointing an agent is one of the LLC compliance requirements, established by Panamanian legislation, which demands that every legal entity must have this type of representative to operate formally in the country.
2. Draft and Notarize the Articles of Incorporation
The Articles of Association, also known as the social pact, is a mandatory formal document for the LLC formation in Panama. It is drafted by the Resident Agent and contains the necessary information for its consolidation. This document includes:
- Identification and address of the partners.
- Address of the LLC.
- Duration of the association, which can be perpetual or for a term.
- Indication of the corporate purpose.
- Amount of authorized investment, number, and value of quotas.
- Names of administrators and representatives of the firm.
- Appointment of the Liability Company’s registered agent.
Once drafted, the Articles of Association must be signed by the subscribers, who can be the partners themselves or the persons legally designated for this purpose, and subsequently notarized by a public official of Panama.
3. Submit Registration to the Public Registry
Once the articles are already notarized, the next step is the Limited Liability Company registration in the responsible authority, Public Registry of Panama. There, the documentation is reviewed to verify compliance with all legal requirements. Once approved, the corporate body is formally constituted. Registration fees vary according to the corporate capital and other procedures, such as expenses in documentation and consultancies.
4. Obtain a Tax Identification Number (NIT)
The Tax Identification Number (NIT in Panamá), necessary for taxes, bank accounts, and commerce, establishes the financial identity of the company. It must be requested online from the General Directorate of Revenue (DGI). The documents to be submitted are:
- Copy of the Panamanian ID card or valid passport of the legal representative.
- Certificate issued by the Public Registry that validates the LLC formation in Panama.
- Sworn statement of truthfulness of the information.
5. Open a Corporate Bank Account
In Panama, there are more than 50 financial entities; thus, it should be considered that different payments have due diligence requirements that may vary. Generally, the opening of a corporate bank account requires:
- Copy of the Articles of Association.
- Commercial License.
- Copy of the passport or DNI of all shareholders.
- Bank reference letter.
- Proof of income: income statement, financial statements, or employment letter.
- Utility bill to verify the address of the associates.
- Tax Identification Number (NIT).
LLC Compliance Requirements in Panama
In the LLC formation in Panama, fiscal obligations must be met, such as:
- Paying an annual single fee of US$300 to maintain its legal status.
- If operating commercially in Panama, monthly taxes (including ITBMS) are declared, and an annual tax of 2% on the corporate capital is paid, along with a commercial license.
- Entities with local activity also file income tax annually; offshore firms without assets in Panama are exempt.
- In accordance with Law 254 of November 11, 2021, Panama LLCs are required to maintain accounting records and supporting documentation for a minimum period of five years.
In addition to fiscal matters, in the LLC formation in Panama, it is required to maintain a Liability Company’s registered agents who guarantee UBO/AML compliance, a local tax domicile for legal correspondence and government visits, as well as notifying any change in the articles of incorporation. These LLC compliance requirements are fundamental to avoiding sanctions, guaranteeing a good reputation, and the continuous operation of the organization.
Start Your LLC in Panama Today
Are you considering the LLC formation in Panama? Our expert team will guide you through each step, from the creation of the articles of incorporation to the follow-up of the LLC compliance requirements. Contact us today for legal guidance in your commercial objectives in Panama. All the necessary support will be provided for the Limited Liability Company registration in the country.
