Checklist to Starting a Business in Costa Rica
We previously discussed the best time to start a business during or after the COVID-19 crisis, if you missed it, click here. Let’s now talk about how to start a business in Costa Rica. Even though the
We previously discussed the best time to start a business during or after the COVID-19 crisis, if you missed it, click here.
Let’s now talk about how to start a business in Costa Rica.
Even though the process of starting a business has a bad reputation within the country, it seems to us that this is just an urban myth. Moreover, it could be an easy task compared to other countries.
Costa Rica is a country undergoing constant development and with plentiful opportunities to build an empire. It is not just us telling you this, experts are too:
- Santa Ana won the “City of the Future” award from the Financial Times: FDI Intelligence, certifying it as the best “city for economic potential and cost effectiveness in America” during two consecutive years (2017/2018).
- In 2018 the World Bank named Costa Rica the #1 exporter in Latin America of high tech and high research and development intensity goods.
- Global Cities of the Future ranked San Jose in the Top 5 cities in the world for the cost-benefit of doing business in 2018 and 2019.
- According to CINDE: 7.6% GDP is invested in education, 9.9% GDP is invested in healthcare, we have no army which provides us with strong stability, plus we have 5% of earth’s biodiversity (did you say tourism?).
- According to the Global Competitiveness Report 2018 from the World Economic Forum, 83.05% of leaders in Latin America are Costa Rican, but that’s not all…
- Same report suggests that Costa Rica ranks #1 in LATAM in skills of graduates, secondary-education and university graduates, as well as skills of current and future workforce.
- We are mostly bilingual per the Educational Testing Service that places the country as number 1 in TOEIC and TOEFL IBT tests among the region. No competitors around!
The list goes on and on, but since this is not what the article is about, we are going to leave it here for now.
An investment process is difficult when you start fresh in a new country, having to deal with a language barrier, different laws and culture. This is where we come in the picture: you make this process easier with the right experts on your side so let’s get started.
Once you have thought about the type of company and whether it will be a small, medium o big business, the investment perspective could change a little. Nevertheless, the correct business vision would come along with the right research, preparation, paperwork formalization, correct development and stability.
The following checklist will help you define the right track to begin your endeavor:
Phase 1: land your idea
- Raise money: if you do not have the means, you can ask friends and family for help, “angel” investors will always be the best option.
- Total Addressable Market: check if market is big enough for what you are looking to accomplish.
- Set the right legal structure: by defining the type of business or model that best works for you (corporation, limited liability company or personal name, other options provided by the law).
- Review corporate and tax obligations before launching.
Phase 2: set up the legal structure
Once you are ready, an attorney will help you to set up a very straight forward process that only requires a signature from you (we attorneys take care of the bureaucratic job):
- Articles of incorporation: which contain all basic clauses for the creation of the company such as name, address, number shares, initial Capital of the company (monetary value), appointment of Directors (for S.A.s) or Managers (for S.R.L.s), purpose or objective, founding shareholders, term, and other.
- Legal Books: these will vary depending on the legal structure, but do not worry, we will get them for you.
Phase 3: tweak all corporate and tax obligations
As soon as the National Registry provides a Corporate ID number, you are ready for the next stage:
- Open a bank account for the business. For this you will need the following:
- A certificate of Good Standing.
- A notarized certification of Share Ownership.
- A projection of income from a CPA.
- Get registered with the Revenue Service (Ministerio de Hacienda).
- If applicable, register the employer and employees with the CCSS (Social Security office) and INS Insurance (This is a different kind of insurance for work risk insurance).
- If applicable, obtain all necessary additional permits to operate such as licenses, sanitary permits, patents, etc.
At this point you will be up and running, the overall duration of the process could go from a couple weeks to three months depending on the location and complexity of the business you are setting up.
Phase 4 (optional): ethics and marketing
According to experts, the most important thing when you are doing business is ethics. According to Warren Buffet, you can build an empire in years, but destroy it in seconds if you do not exhibit the proper levels of integrity.
Also, you should contemplate investing in technological tools and marketing to keep up in a fast-paced business environment.
The investor should have a forward-looking vision that includes digital technologies. A project will take 6 months to start surviving on its own, but up to 7 years to break through, so you need to have an immediate vision at the outset and a long-term vision once out there.
Our added value:
Not only can we provide guidance on phases 2 and 3, but we can also add the following:
- Provide tailored guidance at the early stages of the process.
- Set up and provide all paperwork required to get your project up and running.
- Assist investors throughout the legal procedures to set up or even buy an existing corporation.
- Perform background checks and health-checks on corporations.
Contact us to learn about the process and take advantage of the cost-effective advantages the coronavirus is creating for those who undertake entrepreneurship.
Collaborated for this article: Karen Ulate and Sebastián Alvarado.