Overview of Company Registration in Panama
Panama is a republic in Central America that is bordered by Colombia to the southeast, Costa Rica to the west, the Caribbean Sea and the Pacific Ocean to the North and the South, respectively. Panama City is the capital of this location. The major sectors in Panama include banking, commerce, and tourism. Panama is considred the best country for human development. Its economy is among the most competitive among Latin American nations. The Balboa (PAB) and US Dollar (USD) is the official Panamanian currency. The population of this destination is over 4 million people.
The country is well known for its canal (Panama Canal), a man-made waterway that opened in 1914. The canal cuts through the country, which links the Caribbean Sea (Atlantic) with the Pacific Ocean. The canal is owned and administered by the Republic of Panama.
Benefits of Company Registration in Panama
Company registration in Panama has the following benefits
A Stable Economy
The country has witnessed constant economic growth over the last few years, and it is a competitive economy among other jurisdictions in the Caribbean.
Easy Company Registration
The Panama company registration process is a simple one which encourages entrepreneurs to register a company in Panama.
Easy Company Management
Local company laws permit flexible company management as there isn’t any need for holding meetings in Panama or maintaining the accounts in this location.
Favourable Taxation Policies
Panama offers an attractive taxation regime due to the absence of tax on business activities or transactions performed abroad.
Panama has signed numerous free trade agreements, and trade is liberalized; moreover, there is a free trade zone, among other special economic zones.
Types of Company Structures in Panama
An entrepreneur intending to register a company in Panama must be aware of the different types of company structures that can be registered in Panama. The same are discussed below
General Partnership (“Sociedad Colectiva General”)
In this type of company, the partners have a joint and unlimited liability towards corporate operations. Therefore, even if only one of them has made a mistake to the detriment of the partnership, it would imply that all the partners could be sued. The name is usually accompanied by the phrase “Y compañía”, “Y hermanos”, “E hijos", or similar, including abbreviations.
Limited Company (“Sociedad Colectiva Limitada”)
It is known as a Limited Liability Company (Similar to an LLC in the United States) and can have between 2 and 20 partners who must be registered in the Public Registry Office; they can be natural or legal persons. The share capital is integrated by the contributions of the partners and can be in any currency. The denomination is free to choose, but the term “Sociedad de Responsabilidad Limitada” or its abbreviation "SRL" must be added to the name of the company.
Limited Partnership (“Sociedad en Comandita Simple”)
It operates as a hybrid between the general partnership and the joint-stock company, here the partnership coexists between partners who contribute work (“comanditados" and are jointly and unlimitedly liable for the obligations of the company) and general partners who contribute capital but don’t participate in the management (“comanditarios”, limited to the capital contributed by each partner). Its name includes “Sociedad en Comandita” or its abbreviation “S. en C” or “S.Com.”
Limited Partnership by Shares (“Sociedad en Comandita por Acciones”)
It is a company whose capital is divided into shares as per the contributions of the partners, wherein one of the partners is in charge of the administration of the company and is responsible for the obligations of the company. The rest of the partners don't share this responsibility. Liability is divided in the same way as in the Limited Partnership: "Comanditarios” and “Comanditados”. Its name includes “Sociedad en Comandita por Acciones” or its abbreviation “S.Com. p.A.” or “S.C.A.”.
Stock Company (“Sociedad Anónima”)
This type of company is mostly preferred for company registration in Panama. More than 90% of the companies have been created under this structure due to the tax benefits granted to them. Its capital stock is based on the economic contributions of all its partners and is divided into shares. It must have two or more persons of any nationality; they don’t need to be domiciled in Panama.
Foreign Corporation (“Sociedad Anónima Extranjera”)
One of the benefits of the Panamanian legislation is that it can validate those foreign corporations registering some necessary papers in the Public Registry Office,
Individual Limited Liability Companies (“Empresas Individuales de Responsabilidad Limitada”):
This company is an option for the sole owner. Such a person transfers the assets of the business, and the civil liability is limited to the number of assets transferred.
Eligibility Criteria for Company registration in Panama
The eligibility criteria that must be followed by the entrepreneur for company registration in Panama are
- Minimum 3 director
- A president, treasurer and secretary (also to be named dignitaries)
- 2 subscribers wherein each subscriber must agree to subscribe to at least one share at the time of registration)
- Legal representative can be the president, an associate or one of the directors – established in the Social Pact (El Pacto Social)
- A resident agent (it is mandatory by law to have a Panamanian lawyer)
- Register a company fiscal address
- Prepare and submit annual tax declarations
- A minimum of two shareholders or associates
- Annual account payment to the Public Registry
necessary papers Required for Company Registration in Panama
The below mentioned necessary papers are required for company registration in Panama
- MOA and Charter (includes residential addresses and names of the founders, amount of the charter capital, objective of the company formation, legal address, etc.)
- Protocol on appointing the Director (decision of the first meeting of shareholders)
- Share Certificates and resolution of its issue
- Director's consent on the discharge of duties
- Registers of shareholders and directors.
Procedure for Company Registration in Panama
The procedure for company registration in Panama is discussed below
Choose the business form
The entrepreneur must choose the type of company which can be best suited as per the preference of the entrepreneur and business activities.
Draft the company necessary papers
The entrepreneurs must have investors draft and then sign the company's constitutive necessary papers in order to proceed with company registration in Panama.
Register the company
The entrepreneur must get the company registered with the Panamian Public Registry and submit a draft of the bylaws of the company, which shall consist of the Company name, details about the Legal Representative, Share capital information, Company activities, Registered/ Legal address, Management structure, Extinction and liquidation details Other general dispositions.
All these necessary papers must be notarized by a public notary and then submitted to the Panamian Public Registry for revision and final approval.
Open a bank account in Panama
Once the company is registered, the entrepreneur must open a corporate bank account for carrying out the day-to-day financial activities
Some business activities require extra licensing, depending upon the particular business field; a financial services license is required for companies in this field, issued by the Superintendency of Banks.