Colombia Entity Setup

Partners have subsidiary personal liability, and the partnership board is the highest corporate body. A minimum of 2 partners is required at all times. General Partnerships are closed companies where partners must manage the company themselves or unanimously authorize a third person to do so, as well as unanimously authorize total or partial assignment of participation in the company, or the possibility for partners to carry out similar lines of business on their own.

A hybrid type of company, where partners can either be managing partners or limited partners. Each type of partner has different levels of liability, functions, voting rights and participation in the company. There are also 2 types of limited partnerships under Colombian law. The simple limited partnership, where partner’s contributions are established as participation quota; and the share limited partnership, where partner’s contributions are established as shares.

The limited liability company is a hybrid type of company where partners can limit their responsibility to the amount of their contributions as a general rule, but there are certain exceptions, such as responsibility regarding
taxation, labor regulation or if such extended responsibility is included in the company’s bylaws. Limited liability companies must have a minimum of 2 partners and a maximum of 25.

Shareholders have no personal liability. A corporation must have the Shareholders General Assembly as the highest corporate body, a board of directors, a legal representative designated by the board of directors and a
statutory auditor. A minimum of 5 shareholders is required, and it is generally used for large enterprises or financial institutions that are subject to control and surveillance of the Colombian Superintendence of Finance.

Most recent and flexible type of the commercial entity created under Colombian legislation. Shareholders have no personal liability. A simplified stock company must have a Shareholders General Assembly as the highest corporate body and a legal representative. It can have a board of directors if shareholders require it. A minimum of one shareholder is required and there is no maximum requirement. Colombian law has opened the possibility that,
beginning on June 4, 2020 and up to June 3, 2022 simplified stock companies that issue debt securities, which are offered to accredited investors (segundo mercado), can register them in the National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) and trade them in the Colombian stock exchange.

No minimum capital requirement. A simplified stock company has authorized capital, subscribed capital and paid capital.

There are no specific nationality requirements; however, in the incorporation documents, intended partners of a future entity must state their nationality and domicile.

The shareholders general assembly and, if there is a board of directors, the board of directors can designate officers and legal representatives.

The company must have a legal representative.

A local registered address is a minimum requirement for opening a company in Colombia. 

First, a name for the company is selected. The availability of the company name can be checked in the RUES, the Colombian business register. This will help avoid any unnecessary legal complications in the future. Bear in mind that the name of the legal entity may differ from the brand.

According to the records of the chambers of commerce, today close to 97% of the companies created are S.A.S. which is similar to a Limited Liability Company (LLC) in the United States or a SE (Societas Europea) in Europe.

Shareholders of a corporation may execute a shareholders’ agreement or determine certain provisions in the company’s bylaws, such as certain rights and obligations regarding negotiation of shares, vote right, majorities for decisions, drag-along and tag-along rights, put and call options, deadlock solution procedures, issuance of non-voting shares, etc.

Your company must have a legal representative who can be different from the company owners. This person is responsible for company operations, authorizing tax declarations, and signing all contracts and legal documents.

International companies are required to complete a number of registrations including Chamber of Commerce, Registro Único Tributario (RUT), National Tax and Customs Directorate (DIAN) Registration, employment registrations and the central bank.

The final step is to decide the bank to work with. Colombia has developing banking infrastructure that startups and hyper growth companies alike benefit from. The process of establishing a bank account can be an unexpectedly long process that many companies do not sufficiently plan for. This can include extensive application documents, notarized director documents, KYC documentation and in person signatures. You will need to present the Existence Certificate from the Chamber of Commerce, the Tax ID certificate (RUT), the ID of the legal representative, and the opening balance sheet of the company. Common local banks in Colombia include Bancolombia, Banco de Bogota, Davivienda.

The Chamber of Commerce is responsible for regulating the creation of new companies in Colombia. It ensures that your registration adheres to the current legal structures and policies. It will also provide a certificate that demonstrates the existence and legal status of your company. This certificate will be requested by most private and public entities existing in Colombia once you begin operating your business.

The procedure of getting this unique tax registry is quite straightforward. It can be done online, on the official DIAN website (under ‘solicitud inscripción RUT- Tipo inscripción – Cámara de Comercio’). After applying for pre-RUT, you will have to open a bank account if you don’t have one yet. This RUT form will contain your Colombian Tax ID number known as a Número de Identificacíon de Tributaria (NIT). You will have to take your bank certificate to the DIAN along with a copy of your ID. After you get the NIT, you have to take it to the Cámara de Comercio and update your registration with the definitive tax number.

The Tax Registry is a document that allows the identification of companies and individuals in their fiscal, commercial, or equity relationships. The National Tax and Customs Directorate (DIAN) assigns a Tax Identification Number (NIT) and exercises the administration, control and supervision of your economic activities. If you are establishing a company in Bogota, the full process of getting a Tax ID (Registro Único Tributario or RUT) can be completed in the Chamber of Commerce. However, if you are going to be located in another city, additional steps will be needed. First, you must apply for a provisional RUT, and only after receiving it can you apply for the final RUT before DIAN.

You must register your business with the Family Compensation Fund, the Colombian Family Institute, and the Governmental Learning Service, and fill out a unique form for all these agencies.

According to the Colombian Foreign Exchange regime, local companies may be capitalized by investors abroad through the transfer of foreign currency into the country via the foreign exchange market. When foreign currency is transferred and converted into local currency, the registration of the investment must be filed before the Colombian Central Bank using a foreign exchange declaration (formerly Form 4).