Costa Rica Corporation Formation
Costa Rica is officially called the “Republic of Costa Rica”, its English translation is “Rich Coast” and is a country in Central America, bordered by Ecuador to the south, Panama to the southeast, the Caribbean Sea to the east, Nicaragua to the north, and the Pacific Ocean to the west. Its estimated population is approximately 4.5 million, where nearly 25% live in the metropolitan area of the capital and largest city, San José.
Costa Rica Incorporation
Costa Rica Incorporation follows the laws of The Commercial Code of Costa Rica, which regulates the formation and daily operations of corporations.
A Costa Rica corporation is known as (Sociedad Anonima or “S.A.”) which is similar to a limited liability company, or LLC, in the United States. For this type of corporation formed in Costa Rica, typically the abbreviation S.A. follows the company name, much like the LLC initials follow companies like this formed in the United States. Other company types are the Costa Rica SRL with is the Sociedad De Responsabilidad Limitada Costa Rica.
Costa Rica Corporation Benefits
- Limits Personal Liabilities: Business owners enjoy protection from personal liability involving corporation misdeeds and lawsuits.
- One Shareholder: Only one shareholder is required to form a Costa Rica corporation.
- Asset Protection: Many foreigners own separate corporations for each valuable asset, such as, real estate, yachts, vehicles, bank accounts & securities, etc.
- Low Tax Rates: Costa Rica offers low taxes.
- Stable Government: Costa Rica has a long history of avoiding civil wars, political instability, military coups, and other internal problems experienced by Central American countries.
- Strong Economy: Costa Rica’s economy is strong.
Costa Rica Corporate Name
Before obtaining the corporate name, corporations must submit the required document, which must be notarized, and filed with the Costa Rican Registry that will then assign a corporate identification number. To complete this document, two or more people need to sign off on the Articles of Incorporation.
While working on the submission to the Registry, the corporation must verify through the notary and with the Public Registry that the business is incorporating under a unique name not used by another corporation.
Costa Rica Office Address and Local Registered Agent
Those incorporating in Costa Rica need to have a local registered agent for the corporation. The registered agent is available to receive any service of process or official notices on behalf of the corporation. The registered agent can also provide a local address for the corporation at his or her office. This service is automatically provided by your agent when setting up company in Costa Rica. This service is renewed annually at a reasonable cost.
Reserve Fund
Costa Rica requires corporations to maintain a reserve fund in a special bank account. This fund is called “Fondo de Reserva Legal” which translates into English as the “Reserved Legal Fund”. This is not enforced for offshore corporations formed in Belize. For local companies, the Commercial Code of Costa Rica requires that 5% of the corporation’s annual profits must go in this fund. However, this requirement is temporary, and once the corporation’s reserve funds reach the equivalent of 20% of the corporation’s original stock value (declared in the Articles of Incorporation), the requirement has been satisfied. The registered agent can help set up the necessary reserve fund.
Shareholders
In Costa Rica, corporations are required to have at least one shareholder.
Directors and Officers
Costa Rica requires corporations to have at least one director.
Authorized Capital
The common disclosed amount for authorized capital is around 1,000 CRC, but no minimum capital is required.
Taxes
Corporations which are considered active must pay around 180,300 CRC ($360) in taxes. Companies that are inactive must pay around 90,150 CRC ($180) in taxes.
Annual Fees
Registration fees are paid to the Registro Nacional, CRC 15,335; and to the nearest Municipal 0.2% of capital for a total of around $26 USD plus registered agent/office fees.
Public Records
Costa Rica has a few specific requirements a corporation must address when forming the articles of incorporation, that your agent will complete for you. These include:
- Listing where and when the company incorporation took place.
- Including the type of corporation been formed.
- Submitting a clear mission statement, or corporate purpose, within the Articles of Incorporation.
- Disclosing the residence address of the corporation.
- Disclosing certain information about the shareholders, which includes name, residence, nationality, and marital status.
- Including the names of the corporate officers and the Board of Directors. This includes submitting three directors’ names and officers—a president, treasurer, and secretary.
- Disclose the planned length of the corporation, which can be between 99 to 100 years beginning with the corporation’s formation date. In addition, mention any possible corporate extensions which might be required.
- Declare the total capital stock, either in dollars or local colones. The commonly disclosed amount for the stock is around 1,000 CRC. Keep in mind that shares are indivisible. Along with this, your agent needs to mention how the capital stock will be divided among the listed shareholders.
- Next, the Articles of Incorporation must state both enumerations of powers, and expected profits and losses.
- Finally, the Articles of Incorporation must include plans for how the corporation might dissolve or liquidate should either one of those instances ever occur.
Nominee directors and shareholders are available to offer corporations some privacy protection.
Both the US Dollar and the Costa Rican colón are widely used.
Accounting and Audit Requirements
Corporations are required to appoint and keep an internal auditor.
The corporation must keep:
— “Libro de Actas” (Corporate Books) with three types of record logs;
–Shareholder meetings, and a Stock Registry log;
— Board of Director meeting minutes;
— “Inventario y Balances” (Inventory and Balances);
— “Registro de Accionistas” (Stockholder Registrations);
— “Libro de Diario” (Daily Transaction Book keeping records of daily transactions);
— “Libro Mayor” (Daily and Monthly Transaction Books keeping records of each account’s transactions).
Annual General Meeting
Companies in Costa Rica are required to have an annual general meeting.
Time Required for Incorporation
It is estimated that incorporation in Costa Rica can take anywhere from two weeks to one month.
Shelf Corporations
The incorporation process can be accelerated by purchasing a pre-registered (shelf) type corporation.
Costa Rican Incorporation – Conclusion
Costa Rica has the longest history of political and economic stability in all of Central America. Only one shareholder and a director are required to incorporate. Corporate taxes are low, as well as, the initial registration fee and annual renewal fees. The minimum authorized capital is also low. Nominee directors and shareholders can be appointed for privacy.
