Why You Should Have Your Property in a Corporation
Forming a corporation entity to purchase and manage your property holdings in Costa Rica makes sense and will make things safer for you, plus it is easy to do.
There are no restrictive regulations for foreign citizens to fully own their own Corporation according to Costa Rican law. With your corporation, you will be able to sign contracts, purchase and sell its assets, open bank accounts and enter into business in its own name.
The legal system allows for several specific corporate entities from which to choose. The two most attractive and commonly used forms are the Sociedad Anonima, generally abbreviated S.A., and a less elaborate form of the first, called Sociedad de Responsabilidad Limitada, known as S.R.L. or Ltda.
Both the S.A and the S.R.L. are limited liability corporations, meaning that its owners are only responsible for the corporation’s debts with their own personal assets up to their initial participation in the social capital, which in practice can be insignificant.
The two may be used to conduct the same type of activities as regulations do not require for you to select one or the other depending on what you plan on doing. Each corporate type is different and you should select the one that vest suits your needs. For instance, the initial set up and administration of the S.A. is more complex than the S.R.L. The S.A. must be managed by a board of directors, that is, at least three different individuals occupying the positions of president, secretary and treasurer, plus a fourth person acting as a comptroller. In the S.R.L. a single manager is sufficient to conduct all corporate business according to the law.
Forming a corporation is Costa Rica, whether an S.A. or S.R.L., is a simple and formal procedure. A corporation may be formed by as few two individuals with legal capacity, by executing a formal ariticle of incorporation deed prepared and submitted to the national registry by a Costa Rican Notary Public. Such deed will establish the name of the corporation, indicate the names of those people appointed to represent and act on behalf of the corporation, outline the activities and by-laws of the corporation and outline the initial capital investments and corporate stock ownership structure among the partners, if any.
The incorporation deed will also need to be filed for registration at the Commercial Section of the Public Register. All information contained in it becomes of public access, meaning anyone can look it up.
The two may be used to conduct the same type of activities as regulations do not require for you to select one or the other depending on what you plan on doing. Not withstanding this, there are differences between them, and you should select the one that best suits your needs. For instance, the administration of theS.A.is more complex than such of the S.R.L. The former must be managed by a board of directors, that is, at least three different individuals occupying the positions of president, secretary and treasurer, plus a fourth person acting as comptroller. In the S.R.L on the other hand, a single manager is sufficient according to the law.
The incorporation deed will also need to be filed for registration at the Commercial Section of the Public Register. All information contained in it becomes of public access, meaning anyone can look it up. Future changes to these by-laws must equally be recorded at the Register.
In contrast, share transfer that take place after the incorporation remain in the private sphere of the company, and must only be recorded in its shareholders registry book, well kept by the corporation and only available to third parties holding a Court order.
More generally, land ownership through a Costa Rica corporation is highly recommended as future transactions are rendered considerably easier. Ownership through a corporation allows greater flexibility and predictability concerning land and property management, including tax and estate planning, and representation.
Costa Rican law allows you to use a corporation to own land, even when this entity does not conduct actual business in the country. There are advantages when proceeding in this way, and, although it may not be the best solution in all cases, most of the time ownership through a corporation can save you money and, perhaps more importantly, spare you unnecessary headaches when it comes time to either sell or pass on the property to your heirs.
Four types of Corporations:
- Corporation (Sociedad Anonima or “S.A.”)
- General Partnership (Sociedad en Nombre Colectivo)
- Limited Partnership (Sociedad en Comandita)
- Limited Liability Partnership (Sociedad de Responsabilidad Limitada)
Of these, the most common is the Sociedad Anonima, or S.A., pronounced “essay-ah.” The initials S.A. follow the company name, similar to the abbreviations Inc. or LLC (Limited Liability Corporation) in the United States.
To open a corporation in Costa Rica you will need to submit a public document to the Mercantile Registry; this will begin the process of registering the company and obtaining the corporate identification number, known as the cedula juridica. After opening the corporation, you will be required to register with the Public Registry (Registro Publico), obtain operational permits and any import/export permits required.
Corporations are very helpful for limiting liabilities in Costa Rica, and therefore many people own several – one for each vehicle or property they own, and also to keep business transactions separate from personal finances. Expect to pay upwards of $400 to register your own corporation. To speed up the process, you may want to purchase a pre-registered “shelf” corporation; they cost about the same as a new S.A., but you cannot choose a custom name.
Requirements for a new Corporations:
- Submit a notarized document to the Mercantile Registry requesting a corporate identification number. At least two individuals must sign the articles of incorporation documents
- The notary public who drafts the request must verify with the Public Registry that the proposed trade or commercial name for the company is not already registered
- The notary public who drafts the request must also prepare a study of the Registry in the case that contributions of personal property or real estate are registered as part of the capital stock.
- Publish in Costa Rica’s legal newspaper, La Gaceta, an announcement of the corporation’s formation. The announcement must appear for a total of eight days. A notary public or corporation applicant may complete this step
- Pay all due revenue stamps and registry rights at any Banco de Costa Rica branch office. A notary public or corporation applicant may complete this step
- Once the above requirements have been completed, present all paperwork to the Mercantile Registry: public documents, a paid receipt for revenue stamps and/or registry rights, and a notarized document with newspaper coupon number as proof that the corporation notice has been published in La Gaceta
The following information must be included in your articles of incorporation:
- Date and place of incorporation
- Type of corporation
- Corporation purpose, or the company’s mission statement
- Residence of the corporation
- Name, nationality, residence and marital status of the shareholders
- Name of officers on the corporation’s Board of Directors. There must be at least three members on the Board of Directors – usually a president, treasurer, and secretary
- Corporation duration and possible extensions. The duration of the corporation may be between 99 years and 100 years, beginning on the date that it is formed
- Capital stock amount. This may be in dollars or colones, and must be for a nominative amount. Most commonly, stock is issued for 1,000 CRC – for example, 10 shares worth 100 CRC each. All shares are indivisible
- Method of capital stock division amongst the shareholders
- Enumeration of powers
- Allocation of profits and losses
- Procedure for corporation dissolution or liquidation
- If the corporation is domiciled outside of Costa Rica, a registered agent must be named. This individual will be responsible for receiving the service of process