Formation of a company

Formation of a company

Being a foreigner you can easily form your own company using only a small capital expenditure. The taxation for companies is quite low, but there is an obligation to proof from where and whom the invested capital originates.

Starting up a “Sociedad Anonima” (S.A.) under the name of your choice, with a standard company agreement is already possible at low costs with a minimum stock of CRC 10.000 ($ 25). Of course costs like lawyer's fees (from USD 500 up to USD 750) and small legal fees need to be covered, too.

After establishing an S.A. and the following registration at the Ministerio de Hazienda, your  corporation is activated. From then on, you can do a lot of things with your company: work, financial transactions, open subsidiaries, invest in assets and so on.
But first please make sure, what special conditions and regulations need to be followed in sectors like tourism, transportation, gastronomy or others. 
In order to get your books up to date and ready, you'll need a approved accountant (contador) who takes over your accounting work once a month for at least USD 50 (costs according to workload) and this does often not include the ear end closing as per September 30th.

The formation of a S.A. is also recommended for individual persons, because some acquisitions or contracts (eg. Telephone line, bank account) can only be established through your company (or a citizen) as long as you do not have a residence permit.

Please keep also in mind that for employees you need to calculate about 19% for the social security and there are more expenses for eg. vacation pay, Christmas allowance and so on, those costs have to be paid by the employer even if the company doesn't make profit. The social responsibility is up to you! Should you refuse to pay the social security insurance for your employees you could end up in prison or your company could be shut down. In case of management and qualified employees you need to figure on paying a severance payment should you ever dismiss somebody without cause.

Should you be on your company's payroll, you need to pay yourself a credible salary, depending on the business branch. Those salaries are different according to qualification definition, but they are for sure only fractions of what is common in e.g. Europe. But compared to profit and social security expenses we advise you to keep an eye on those costs!

Unfortunately people often forget that a foreigner in this country (like in all other places) can only succeed with his S.A. supplying high work and capital input, language skills, applied geography, knowledge of the human nature, leadership qualities, knowledge of the market and a former successful business career.

A shareholders company has nothing to do with a residence permit, to obtain that, you must apply separately. Exceptions of course are high direct investments in various projects as mentioned and ruled in the section “residence permit for investors”. A shareholder's company in Costa Rica does not have the same significance like the ones for example in Switzerland, mostly for its small size.

To establish international trading transactions, you additionally need according guarantees from your bank. Some companies need even higher financial coverage (eg. customs or transportation agencies and so on).

Before you decide to form your own S.A. in Costa Rica, we highly recommend you get in touch with an experienced lawyer and a tax advisor, those will be able to help you with more useful details. But: Be careful when choosing a lawyer, unfortunately there are also black sheep amongst them.

First of all Costa Rica is looking for innovative enterprises that create places of work. Companies, that for example consider university graduates are very welcome, companies like that are encouraged by the government, Intel and its sub-contractors for instance are good examples, even if the original goals and objectives could not be accomplished.

The industry sectors are correspondingly versatile, this becomes clear only looking at the yellow pages. Therefore and according to the sector you do not necessarily need to invest millions, but only a part of what would be required in other countries.

In Costa Rica there are good or even better possibilities to find qualified employees to recruit for your company and to offer them further training.

Where are the markets and the market gaps?

  • Why aren't there cross-linked Tourist Info database servers?
  • Why isn't there a nationwide cross-linked unique hotel reservation system?
  • Why isn't private accommodation in Costarican families not encouraged?
  • Why is so few software sold from Costa Rica to Europe and there are so many developers her?
  • Why doesn't a Mango beer exist?
  • Why isn't there a business that sells finished furniture ready to use?
  • Why are only so few medicinal herbs from the rain forest being exported?
  • Why aren't there more chairlifts in the country?
  • Why aren't there large runs for a free advertisement media?
  • Why isn't there an ecologically harmless incinerator?
  • Why are there only a few carpenter's shops that have a CNC based machinery?
  • Why does the telephone book not exist on CD?
  • Why aren't there old people's homes with medical attendance for foreigners?
  • Why are recycling processes only at their beginning?
  • Why isn't there no general Green-Label?
  • Why don't they build an ecological high speed train in the Central Valley?
  • Why aren't there digital road maps?
  • Why isn't there a city pass for bus rides?
  • Why can't you make international transfers using the Internet banking?
  • Why Tourism experts don't work on a plan to save the still existing Indian cultures?
  • Why sell detergent manufacturers only so few biodegradable detergents?
  • Why do shops that sell household articles not offer technical services?
  • Why are there only very few electric cars sold?

It's not difficult to list a huge variety of possible markets, the big work will be to analyze them and to establish according market studies.

Because Costa Rica is only a little bit bigger than Switzerland and only has about 4.3 mio inhabitants, the local market is indeed very small. The purchasing power is also relatively small due to the still existing poverty.

You make much less money establishing a service company or a restaurant than a chain selling products in the lower price segment. Competition is omni present, only a few will win.

In a city with 50.000 people you can easily count 150 shoe shops. Thousands of products for daily use are sold from home, so the family gets a financial contribution to the normally small monthly income.

Innovative enterprises are therefore looking for markets that demand specialists. There lies the chance and not in the copy shops, Internet cafés, sodas, restaurants, bars, bed & breakfasts, computer trade or others.

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