Opening a business in Panama?… A quick guide to what you can’t find on Google
We have had many inquiries about starting or opening a business in Panama, whether it’s small, medium or with a larger investment. You must understand how it works to open a business in Panama in order to feel more confident through out the process. Truth is that there are some details that are not available on Internet when looking for a guide into convincing yourself on beginning your own business.
To start your business the first thing you must know is if it will be a small business, or will it pursue even the slightest growth, and later be considered a medium-size company in the future. You can start a business in Panama under your personal name through an Notice of Operations (Aviso de Operación). This can be made with your personal identification or passport, however this is recommended mainly for smaller and lower risk businesses.
We remind you that every time you make commercial connections and contracts you can be subject of many legal conditions such as lawsuits due to non compliance, warranties, labor contracts, among others. Therefore, although it means less investment to run your business as a natural person, if it is a medium-size company or small pursuing growth, we recommend it be done through a company, and this is because if you were to face legal matters, your personal property has less risk of being affected, being responsible the company (this will also depend on the case, for example, criminal lawsuits are always against a natural person) .
Once you decide to open your company
- Company Registration: Here you begin your documentation to initiate your business. It’s the first step to open a company in Panama. The figure of a Corporation is the more commonly used. There are others, for example for accountants, architects, lawyers, etc., the more commonly used is a Civil Company or Corporation. You can give your company the name you wish as long as it’s available in the Public Registry, three directors (mandatory), and you decide who will act as the President, Secretary and Treasurer, the company’s object (that is, the activity you will be carrying out). A minimum of 10 thousand dollars must be registered, however, it is not necessary to pay it out; it is a sum in order to determine your company’s value. It can be fully incorporated in approximately 5-7 business days (or less), and then you will be ready for the next step. With the company you are handed the Share Certificates which determines who is or are its owner or owners. The Directors and Officials can be third-persons and not precisely hold any power within the company. You can read more about companies here.
- Notice of Operations: It is mandatory for all companies carrying out business in Panamanian territory. It is important you know that from the moment you are granted a notice of operations, you will start paying municipal taxes. You will also have to declare income taxes and carry out payments, retain tax, obtain a fiscal printer, among others, depending on your activity and sales. It is obtained within a day, more or less. The Notice of Operation must be visible at your facilities or office. There are activities that will require permits prior to the issuance of the Notice of Operation, such as, restaurants selling liquor, bars, nightclubs, financial entities, insurance companies, and many more. Such permits are requested before the respective offices according to the activity.
- Municipal Registration: It is done immediately after issuing the Notice of Operation and it is mandatory. It communicates the Municipality about the existence of the new business and it officially starts issuing monthly account statements.
- Trade Registration: This is optional. All original ideas pursuing growth, including logos, slogans, commercial names, product names, etc., can be imitated or counterfeited. It is mostly recommended to register your brand to deter violations to your intellectual property. Even if it is a registered trademark internationally, you must carry out its registration in Panama in order to be valid before third-parties.
A company in Panama can have its address in a commercial establishment, an office, or even at your own home or apartment if from there you actually carry out your operations. There are also virtual offices which require a less significant investment due to rent and it facilitates you the option of office spaces to attend your clients. International Office Services is an example of these offices and you can visit there website here.
Once the Company is registered
Once all these documents are ready, you are set to start your business, and we provide you with the following recommendations:
- Hire a good Certified Public Accountant reliable to help you with the fiscal printers, tax retention, declarations of tax, and everything else that’s related with paying tax. Being able to keep up with tax from the beginning will avoid you many headaches.
- Contracts: You will be involved with many commercial transactions, so regardless how small your business is, we recommend you always keep contracts with all those commercial connections so that you can protect yourself from breaches, and be able to claim paybacks and protect your investment. Still, all terms and conditions exist in writing.
- Workers: If you will be hiring personnel, we advice you that in Panama Labor Law highly protects workers. To initiate, it is necessary that all your workers, regardless their pay level, have a signed contract. It must contain all conditions as to their hiring, including if you will put them in a test period (up to 3 months), if it is for a definite or indefinite time, among others. The Labor Code states that if such contract does not exist, true statement will always come from the worker. Additionally, when ending the relationship with any worker, it is also important to correctly draft their termination letters, it can be a mutual agreement, dismissal, or in case it is a resignation, it should be properly sealed by the Ministry of Labor. By all means attempt to draft a mutual agreement, and you must not fail to pay all of their benefits and have them registered with the Social Security (an accountant can handle this). You must also remember that any hired foreigner without a work permit can render you severe fines, and even the closure of your business.
- Banners and exterior publicity. If you will open a locale, the Notice of Operation will allow you to feature a banner having to pay an annuity per its size. If you will post more publicity, you must request a exterior publicity permit according the Municipal laws of your area. Failing to registration and payment of this publicity may cause you fines.
- If you are foreigner, even having your own business or company in Panama, if you plan to actively work in it, you must have a work permit. You can read information regarding Residency and Work Permits in our Immigration blog Panama Immigration.
Many starting businesses know a lot about the steps to take, however, we recommend to always follow professional advice, since trying to secure savings, due to a mistake, omission or commission of a particular detail, can lead to twice as much for not maintaining the corresponding advisory. Opening a business in Panama can be quite easy if you have a good team to support you.
If you have any doubt or question do not hesitate in writing to our email firstname.lastname@example.org or to request an appointment. We know it may be difficult to count with a professional to answer questions, and we are here to guide you. We back up entrepreneurship and support of new companies, and we advice you through all the steps from beginning to end.