Many foreigners residing in the country are interested in starting a business in Panama every year. The reason is because Panama offers many opportunities for business entrepreneurs.
Panamanian laws must be understood and complied with. This article will be useful for every person who is thinking about starting a business in Panama.
Types of Panama Business Ownership
Sole ownership is where an individual or a family starts a new business and owns the entire business and all assets.
A business partnership is where you team with one or more people to start a new business. In Panama there are three types of business partnerships: General, Limited and Civil.
- Panama General Partnership
General Partnerships are recognized and permitted in Panama. As with most countries, the partners will have unlimited civil liability. That means every partner can be sued even if only one of them commits an error in the course of business.
- Panama Limited Partnership
Limited Partnerships (called Sociedad de Responsibilidad) are governed by the Commercial Code and Law No. 24 of 1966.
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.
While a General Partnership requires meetings to be held, If there are five members or less no meetings are needed. The partners’ civil liabilities are limited to the capital contribution.
- Panama Civil Partnership
Panama also recognizes a Civil Partnership called “Sociedad Civil”.
A Civil Partnership (Sociedad Civil) is allowed by the Commercial Code and Law No. 24 of 1966. Partners are subject to unlimited civil court judgment liability. This type of partnership is selected by professionals such as lawyers, doctors, architects and accountants.
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 (called Subscribers) or Nominees (who act on behalf of absent foreigners) who execute legal documents. Those documents are filed with the Panama Public Registry office.
A Panama corporation is legally registered with the government, and is required to issue corporate stocks and maintain a Board of Directors and at least three officers. The corporation must have a resident Registered Agent (Panamanian lawyer).
Any changes of Directors must also be filed with the Public Registry.
Requirements to Starting a Business in Panama
When you have decided on the type of entity to own the Panama business, you need to select a unique business name. Panama’s Public Registry will contain all of the Panama corporations along with their company’s business name.
Panama’s revenue agency (DGI) issues a RUC which is a company’s income tax ID number. This number is used for all business purchases and sales.
Workers must obtain a new social security employer number from Panama’s Social Security Administration (Seguro Social). The worker’s social security registration is also handled by the Segura Social in conjunction with the Ministry of Labor (Ministerio de Trabajo).
Foreigners cannot become medical or veterinarian doctors, attorneys, engineers, architects, or open a retail business.
Business Bank Account
If you are a sole proprietor you'll need to open a bank account for your business.
Partnerships and Corporations need to open separate Business or Corporate Bank Accounts.
When you open an account for a corporation, partnership, or a business most banks require the following information and documentation:
1. A personal interview or a telephone interview.
2. A clear copy of the account's Signatory and each corporate Director's Passport (must include the photo & personal information page, and Panama entry stamp page).
3. A clear copy of a second photo id (such as a driver's license or national id card).
4. Two bank references for each Director and account Signatory. Many Panamanian banks require the references be specifically addressed to that bank's branch. Some banks may accept only one bank reference letter.
5. Two professional references for each Director and account Signatory. These references may be written by one's accountant, lawyer, stock broker, insurance broker, real estate broker, or employer. They should be written on their company letterhead. These must include the duration and nature of their business relationship with the applicant. Only an Original letter will be accepted.
6. Proof of Address: You must provide a copy of a utility bill (phone, water, electricity, cable TV, or Internet service) which contains your name and address.
7. A "Company Profile" letter must be submitted which briefly describes the type of business the account holder will engage in. This will include the location of the business, the products or services you are selling.