Starting a Business in Colombia: Preliminary Considerations PART 1

Alan Gongora, Esq. (NY)

Michelle Gil, Esq. (COL)

The following is intended to complement our video tutorial “Starting a Business in Colombia 101: Preliminary Considerations”. Anyone planning to start a business in Colombia should review all the videos and articles in this series prior to starting this process.

Anyone who has visited Colombia over the past decade will tell you that international business investment has transformed the country into one of the most dynamic and successful economies in the entire region. From tourism and hospitality to technology development and outsourcing, Colombia has become the destination of choice for many international investors.

If you are planning to invest in the local market it is essential that you understand what it will take to start a successful business in Colombia. And it all starts with a number of considerations you will need to keep in mind before you actually start your business:


Foreign investors interested in starting a business in Colombia should first conduct a comprehensive tax analysis in order to determine the most tax-efficient way to structure their operations. This analysis should focus on the best ways to book profits locally as well as how individual shareholders can properly repatriate those profits back to their home countries in a tax-efficient manner. Foreign investors are also encouraged to conduct a separate transfer pricing analysis in order to determine the best way to invoice business entities under common control. This will be key if a local subsidiary is set up to invoice a parent company and/or affiliates of the parent company outside of Colombia.


One of the most important decisions you will need to make is whether you will register your new business as either a solo proprietorship or as a separate business entity.

A Solo Proprietorship (often referred to as a “persona natural” in Colombia) allows you to register your business in your own name without having to have an actual company involved. The registration process essentially consists of registering yourself as the owner of the business and registering a separate local business bank account.

Here are some basic benefits of Solo Proprietorships (“SPs”):

  1. Simple and Less Expensive: SPs are much less complicated to set up so your legal and administrative fees will be significantly less than with an actual company.
  2. More Tax Efficient: Depending on your business, SPs may be more tax efficient than doing business via a formal business entity.

And here are some downsides:

  1. No Limited Liability: This means that if something goes wrong (you get sued, for example) you would be personally liable.
  2. Clunky for Partnerships: If you plan to have business partners, registering a company may be way to go.
  3. No Company Owner Visa: You won’t be able to apply for a Company Owner visa via an SP.

Our Advice

If your focus is starting a home business, will not have any employees and will be providing low-risk services like consulting, an SP is definitely an option.

On the other hand, if your business will have multiple partners, limited liability is important and/or you will be applying for a visa, registering a formal company is the way to go.


There are a variety of business structures that you can use to register your business in Colombia. These include:

  1. S.A.S. (“Sociedad por Acciones Simplificada”);
  2. S.A. (“Sociedad Anónima”);
  3. Ltda. (“Sociedad de responsabilidad limitada”); and
  4. “Sociedades en Comandita” (abbreviated as S. en C. or S.C.A.)

With some exceptions, most investors in Colombia will choose the S.A.S. structure to register their businesses. Here are some basic advantages of this business structure:

  • operates like a glorified S-Corp;
  • provides maximum flexibility for most business owners;
  • same person can be shareholder, legal representative and general manager; and
  • Board of Directors is not required.

Our Advice

The S.A.S. should be your go-to structure. However, if you have any questions re the appropriate business structure do chat with your local service provider prior to registering your company.


Another key threshold decision for any business expanding into the Colombian market is how to maintain control over the local business entity. In particular, it is essential that foreign investors choose the right decision-making mechanism that makes sense for their business while also focusing on implementing proper oversight over local Legal Representatives (see the Preliminary

Considerations section of our “Registering a Company in Colombia” publication for more information regarding Legal Representatives). Options are often tied to the actual ownership structure that is chosen for the local business entity:

  • Local Subsidiary: Many foreign businesses organize a local board of directors with members of their own foreign management team serving as local directors. Alternatively, foreign businesses can bypass the need for a board and instead vote their shares in the local business entity when making corporate decisions. The local Legal Representative would then act consistent with the decisions taken by either the local board of directors, the local shareholders or both.
  • Direct Ownership: While foreign investors can certainly act via a local board of directors or as shareholders, many choose to make decisions as Legal Representatives, particularly where they are sole shareholders and are physically in Colombia on a regular basis.

This post is being published for general informational purposes only and it is not intended to provide specific legal and/or tax advice.  It should not be used as a substitute for competent legal/tax advice from a licensed attorney and/or accountant in your jurisdiction.