Company formation in Puerto Rico is possible for both onshore and offshore purposes, therefore foreign investors can find here a flexible system regardless of the manner in which they plan to do business (our team provides full legal representation during the setup of a local business form – you can request our services regardless of the field you plan to invest in).
The registration process follows the same steps in both cases, only that the offshore incorporation entails the fact that investors will start a business in Puerto Rico whose operations will be carried out with entities located outside the country.
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Tax advantages when starting a business in Puerto Rico
The modality of carrying business activities as a legal entity registered in Puerto Rico has direct consequences on the tax system applicable to the company.
For instance, companies in Puerto Rico exporting services outside the country are taxed with a corporate income tax of only 4% (as opposed to companies selling their services/products in Puerto Rico, which are charged with a standard corporate income tax of 18.5% plus an additional surtax charged on the net income – there are 6 different tax rates ranging from 5% to 19%).
Investors can also benefit from exemptions on the payment of withholding taxes on dividends and interest. Other tax benefits that can be of interest for foreign investors are stipulated under the Act 60, known as the Incentives Code – our consultants specialized in company formation in Puerto Rico may provide further guidance on this matter.
Our consultants can advise businessmen on the legal entities available for incorporation, the conditions that must be met, the tax obligations arising from each business structure, etc., so do not hesitate to address our team.
What are the basic registration steps ?
After investors have decided on the legal entity they want to incorporate in Puerto Rico, they must register the company with the Registry of Legal Entities, a process all business forms must complete. The procedure is done online, however it is recommended to receive legal assistance during this initial stage so that you can be sure you have complied with all the requirements.
It is also required to register for taxation, a procedure completed with the Puerto Rico Treasury. Companies hiring workforce must also take the necessary steps in order to register their employees with the Puerto Rico Department of Labor.
Legal entities will be issued with an Employer Identification Number (EIN), that will be used in the relationship with the aforementioned institution, for tax purposes and payroll. Another obligation companies have is to set up a corporate bank account.
Investors who will opt for offshore company formation can open an offshore bank account at a local commercial bank.
Our consultants can represent clients in connection with the bank institution selected by the client. Please know that it is not mandatory to be present in person when completing this step, as our team can offer legal representation through the power of attorney.
Depending on the bank, clients may also have the possibility of setting up the bank account online (this is possible in Puerto Rico, but we advise you to address our team in order to find out which banks offer this service).
Legislation on Puerto Rico company formation
Puerto Rico provides a wide range of legal entities that can be incorporated by local and foreign businessmen, in accordance with the applicable law. In the list below, our consultants present some of the highlights of the local commercial law:
- the main rule of law is the General Corporations Act – Act No. 164 of 2009;
- according to the Department of State, there are 27 types of entities that can be registered here (based on their general purpose, such as for profit, non-profit, financial institutions, etc.);
- one of the most common ways to start a business in Puerto Rico is by registering a corporation (11 types), regulated by the same law mentioned above, Act No. 164 of 2009;
- businessmen can also register a limited liability company (LLC), following the rules of Act No. 164 of 2009 and Act No. 154 of August 1996.
According to the law, a corporation may engage in most of the business activities regulated in Puerto Rico, with the exception of real estate (buying or selling). For those who are interested in Puerto Rico LLC formation, it must be noted that this structure has the same limitations as the ones imposed to a corporation.
Foreign investors can also opt to register partnerships or, if they are interested in starting a small business in Puerto Rico, it is possible to incorporate a sole trader. The legal entity selected is highly influenced by the field of activity, the size of the company, the investment plans, capital, etc. For instance, for a startup in Puerto Rico, businessmen are advised to register an LLC.
Please contact us for further information on the process of company formation in Puerto Rico, for onshore and offshore company setup.