The law regulating Entrepreneurship Companies in Panama facilitates the creation of a legal entity in a quick and simple way by providing a series of benefits that will be listed below.
To facilitate the process, the law creates a single window for entrepreneurship and promotes the use of technology to carry out all the procedures related to it through PanamaEmprende.
These Entrepreneurship Companies must start operations within six months from the moment their legal status is approved. The purpose of the law is to make the process as fast as possible using technological tools, but while the technological systems are being adapted, the procedures can be carried out manually.
This law provides tax benefits and reduces the costs of establishing an ordinary legal entity.
Exceptions and Limitations for Limited Liability Entrepreneurship Companies
- They cannot be quoted on the stock exchange.
- It may be constituted of one to five natural persons.
- They may not engage in any activity contemplated in articles 23 and 24 of Law 23 of 2015, which basically include: companies established in free zones or special economic zones, remittances, casinos, betting (physical or electronic), development companies, real estate agents, real estate brokers, construction, securities, pawn shops, marketing of precious metals, buying and selling of cars (new and used), banks, and alike.
- Nor can they engage in the following activities: bars, cantinas, barbecues, discotheques, second-hand houses, hostels, lodgings, hotels, manufacturing, marketing, distribution or transportation of alcoholic beverages or tobacco.
- They have income limits which may not exceed US$150,000 gross per fiscal year, in the case of micro businesses; or up to US$1,000,000 gross per fiscal year, in the case of small businesses. If it is the case that the limited liability company exceeds gross income of US$1,000,000 it must be transformed into another type of legal entity, a corporation or limited liability company, within 6 calendar months.
- The presentation of financial statements through the PanamaEmprende website is mandatory.
Advantages of Limited Liability Entrepreneurship Companies
- Five percent (5%) additional score in public procurement competition for best value when included in the proposal.
- In case of being hired by the State, payments will be made within a period not exceeding 30 calendar days upon presentation of an invoice. In case of delay, the State will incur in a 1% monthly interest on the amount of the invoice.
- They do not pay a single annual rate.
- They are not obliged to invoice by means of fiscal printers.
- Exemption from income tax for the first two years of operations.
- Reductions of up to 50% on inputs and raw materials for the creation of innovative products, services or processes created by them.
- May receive donations of up to US$10,000.00 per person per fiscal year deductible from the donor’s income tax. The person who makes the contribution may not have any participation or benefit from the entrepreneurial society.
- They will enjoy the same benefits as micro and small businesses.
Entrepreneurship companies are exempt from income tax during the first 2 years.
Steps for the creation and registration of a Limited Liability Entrepreneurship Company
The persons interested in forming an entrepreneurship company must sign a statute that must contain the following:
- The name or names, address, identity card and e-mail address of each of the grantors of the standard statute, who must be partners of the company and its final beneficiaries.
- The name of the company, which shall not be the same or similar to that of another pre-existing company in such a way that it lends itself to confusion. The name shall include a word, phrase or abbreviation which indicates that it is a limited liability company and which distinguishes it from a natural person or from a company of another nature. The name of the limited liability company may be expressed in any language.
- The corporate purpose is limited to the activity to be developed.
- The name, address, identity card and e-mail of the administrator or of each one of the administrators.
- The name, domicile, document of identity and electronic mail of the legal representative, in case of being different from the administrator.
- The amount of the authorized capital, which may be in any currency, and the shares or quotas in which it is divided and the value of each one.
- The domicile of the company and the physical address of the company.
- The duration of the corporation, which may be perpetual or for a term.
- In case that the partners wish it, the designation of a resident agent, which is not obligatory.
- The other licit agreements that the grantors consider convenient, as long as they do not oppose the provisions of this Law, to morality or to the public order. A standard model of the model statute will be available in the portal of Panama Emprende in order to facilitate the creation of this document by the interested parties.
These statutes may be submitted physically or electronically. Once approved by the Ministry of Commerce and Industries, it proceeds to register it, physically or electronically, in the Public Registry to be constituted as a legal entity.
Once it has a folio number, this will be used to automatically generate the Sole Taxpayer Registry of the company, so it is understood that it will be automatically registered before the General Revenue Office.
In the cases that the activity to which the new enterprise society wants to dedicate itself requires resolution or previous license of another institution, they will have to carry out the procedure.
All the procedures for the operation of entrepreneurial companies, related to the payment of national or municipal taxes and fees, social security obligations and government permits, should be able to be managed through the virtual one-stop shop that is installed in the computer system of PanamaEmprende of the Ministry of Commerce and Industry.
The minimum share capital must be US$500, which may be increased and modified by means of contributions from the partners that will correspond to the share part of the total participation.
They must keep a digital record by means of the platform of PanamaEmprende of the Records of participations, minutes, administrators and any change in the statutes.
Contact us if you have questions or need help setting up an Entrepreneurship Company.