Do I Need a Corporation in Costa Rica?

This is a recurring question among expats. We are going to address this issue from two perspectives: a business perspective and an expat perspective.

Business Perspective

Corporations have two primary purposes:

• To amass capital from different investors or partners for the furtherance of common business goals

• To separate the personal assets of the investors or partners from the business assets

A corporation is commercial in nature, as its purpose is to further business activities. From this perspective, the answer is quite simple: you need a corporation if you are planning on doing business.

Business Structures Available Under Costa Rican Law

The Commercial Code of Costa Rica allows for five principal business structures:

Sociedad en Nombre Colectivo (Section 17 a)

This is the equivalent of a general partnership, where partners retain full, shared liability among them. Partners are liable not only for their own actions but also for the business debts and decisions made by other partners. Personal assets of all partners may be used to satisfy the partnership’s debts.

Sociedad en Comandita (Section 17 b)

This is the equivalent of a limited partnership, formed by two types of partners: one or more general partners who manage the business and are jointly and severally liable for debts, and one or more limited partners whose liability is limited to the amount of equity paid in.

Sociedad de Responsabilidad Limitada (SRL) – Section 17 c

This is the equivalent of a limited liability company (LLC) and is appropriate for companies with a small number of investors. It combines limited liability with operational flexibility. The owners are referred to as cuotistas. Unlike some U.S. jurisdictions, SRLs in Costa Rica must be formed by at least two members. SRLs do not have a board of directors and are administered by one or more managers.

Sociedad Anónima (SA) – Section 17 d

This is the equivalent of a corporation. An SA is an independent legal entity owned by shareholders and held legally liable for its actions and debts. It requires a board of directors elected by shareholders and an annual general assembly. SAs involve more complex administration and higher legal and maintenance costs and are generally suited for larger or more established businesses with multiple shareholders.

Empresa Individual de Responsabilidad Limitada (EIRL)

This stands for Individual Limited Liability Company and is designed for a single owner. It is suitable for individuals conducting business on their own without partners.

There are also other business structures created by specific laws outside the Commercial Code, such as professional partnerships and cooperatives.

Registration of a Company

To register a company, it is required to hire a notary public. If you are planning to do business with partners, all founding members must appear before the notary public to draft and sign the articles of incorporation.

Once signed, the notary public files a certified copy (testimonio) with the Mercantile Section of the National Registry of Costa Rica. Additionally, a public notice (edicto) must be published in La Gaceta. After publication and payment of taxes, the registration is completed and a corporate ID number (cédula jurídica) is issued.

Summary of Required Steps

• Meeting of the founding members with the notary public

• Signing of the articles of incorporation

• Payment of applicable taxes

• Filing of the edicto with La Gaceta

• Filing of the articles with the Mercantile Section of the National Registry

Currently, notaries may register SAs and SRLs using an electronic signature system, often completing registration within a week. Other structures—such as EIRLs, partnerships, and cooperatives—must still be processed through physical filings.

Business Licenses and Permits

Registering a company is only part of starting a business. You must also obtain the appropriate licenses and permits, which may include:

• Patente Municipal: A business license from the local municipality

• Permiso de Salud: A health permit issued by the Ministry of Health

• Environmental Permit: When required, approval from SETENA

• Tax Registration: Registration with the Dirección General de Tributación Directa

Additional permits may be required depending on the industry, including transportation, fishing, hospitality, education, medical services, retail, import-export, insurance, food and beverage, and alcohol-related activities.

As the saying goes: Prior planning prevents poor performance. Proper research, corporate structuring, and licensing are essential components of any viable business plan.

Expat Perspective

Neither the Commercial Code nor the Constitution prevents foreigners from creating, owning, or managing corporations in Costa Rica. Likewise, there are no constitutional or civil law restrictions preventing foreigners from owning property, vehicles, or other assets.

Many expats ask whether they need a corporation not to operate a business, but simply to function in Costa Rica. The answer is no. You do not need a corporation to own a home, purchase a car, open a bank account, or obtain a cell phone plan.

A common sales argument suggests placing assets into a corporation for liability protection. In practice, adequate insurance coverage achieves this purpose more effectively. In many cases, the promotion of unnecessary corporations has been driven by legal fees rather than client need.

A particularly risky practice involves appointing unrelated third parties to corporate boards—often justified as a legal requirement—which has historically facilitated property fraud. This risk is most evident with SAs, which require three board members. SRLs and EIRLs avoid this issue by allowing ownership without unrelated participants.

Practical Guidance

• If you want to buy a house, buy a house

• If you want to buy a car, buy a car

• If you want to open a bank account, open a bank account

• If you want to open a business, register a company

If your attorney cannot distinguish between these situations, it may be time to seek different legal counsel.

Feel free to reach us with your questions or comments.