Setting Up a Business In Panama

Hundreds of foreigners residing here are starting up new businesses in Panama every year.
Panama offers many opportunities for business entrepreneurs. You can start a bar, restaurant, retail shop, hotel, bed & breakfast, provide tour-guides or professional services.

Your first consideration is to decide what type of business structure to use.
There are 3 normal business entities here in Panama:
-Sole Proprietor: Where you and your spouse & family operate a business as sole owners.
-Partnership: Where you team up with one or more persons in running the business.
-Corporation: Where you register with the government as a company issuing stocks, having a Board of Directors and corporate officers.

While a sole proprietorship can be an oral agreement between close family members, the other two entities need the assistance of a Panamanian lawyer. That's because legal documents need to be prepared forming a Partnership or Corporation. If they are wrongly prepared, they will be legally null and void causing a business legal nightmare for its members.

Let's examine the different legal structures here in Panama:
 
Corporation.
Corporations are formed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5).

A Panamanian corporation is formed by two persons or Nominees who execute legal documents called the Articles of Incorporation. Those documents are filed with the Panama Public Registry office. After the corporation is formed, only one shareholder will be required.
Corporate shares are issued which can be of various classes, can have par value or not, may be officially registered, or can be discreet Bearer shares.
The corporation must have a resident Registered Agent (Panamanian lawyer).

There must be at least three Directors whose names must be in the Articles of Incorporation. Any changes of Directors must also be filed with the Public Registry. Unless the Articles are changed or the corporation merges or dissolves there will be no other filing requirements.

Foreign Corporation
If you already have a corporation in another country, it can do business in Panama by filing the following documents at the Public Registry Office:

1. A notarized Spanish translation of the Articles of Incorporation.
2. Board of Directors minutes authorizing the Panamanian registration.
3. Copies of the most recent financial statements.
4. A certificate from a Panamanian Consul confirming that the company is organized according to the laws of its place of incorporation.
5. Notification of the transfer of capital to the Panamanian operation.

 
Commandite CompanyThe Commandite Company is a hybrid partnership and corporation also governed by the Commercial Code and Law No. 24 of 1966. At least one partner must have unlimited liability, while the liability of the limited partners is limited to the amount of capital subscribed. This type of legal structure is seldom used in Panama.
 
Civil Partnership
A Civil Partnership is allowed by the Commercial Code and Law No. 24 of 1966. The liability of the partners is unlimited. This type of partnership is often selected by professionals such as lawyers and accountants.


General Partnership
There may be from 2 to 20 partners with no restrictions as to their nationalities or domicile. Their Capital must be at least $2,000 up to $500,000. The names of the partners must be registered with the Public Registry Office including the amount of Capital each contributed. Each partner's civil liability for the Partnership's debts is limited to the amount subscribed to but unpaid.