How to Start a Business in Panama

What You Need to Know Before Starting a Business in Panama

Panama offers many opportunities for foreign business entrepreneurs. You can start a bar, restaurant, retail shop, hotel, bed & breakfast, provide tour-guides or professional services.  There are no laws preventing foreigners from owning businesses here, the only restrictions are placed on foreigners working here.

Maybe you are thinking about opening a new business full time? Or, you are retired and thinking of passing the time by engaging in a part-time business.

Open a Business in Panama

Open a Business in Panama

Whether you are looking to embark on a full- or part-time business venture, you need to understand and comply with Panamanian laws. You must also be prepared to understand that opening a business in Panama is different to in another country and you will need to be patient!   The following information will be useful for every reader who is thinking about starting a business in Panama.

Legal Business Structure in Panama

The first step when opening a business in Panama is deciding what type of business structure to use.

There are 3 normal business entities here in Panama:

  • Sole Proprietor where you and your spouse & family operate a business as sole owners.
  • Partnership where you team up with one or more persons in running the business.
  • Corporation where you register with the government as a company issuing stocks, having a Board of Directors and corporate officers.  This is the most common business structure in Panama.

While a sole proprietorship can be an oral agreement between close family members, the other two entities need the assistance of a Panamanian lawyer. That’s because legal documents need to be prepared forming a Partnership or Corporation. If they are wrongly prepared, they will be legally null and void causing a business legal nightmare for its members.

Let’s examine the different legal structures here in Panama:

Corporation (Sociedad Anonima)

Corporations are formed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5).

A Panamanian corporation is formed by two persons (called Subscribers) or Nominees (who act on behalf of absent foreigners) who execute legal documents called the Articles of Incorporation. Those documents are filed with the Panama Public Registry office. After the corporation is formed, only one shareholder will be required.

Corporate shares are issued which can be of various classes, can have par value or not, may be officially registered, or can be discreet Bearer shares.

The Panamanian corporation must have a resident Registered Agent (Panamanian lawyer).

There must be at least three Directors whose names must be in the Articles of Incorporation. Any changes of Directors must also be filed with the Public Registry. Unless the Articles are changed or the corporation merges or dissolves there will be no other filing requirements.

Panama's Public Registry

Panama's Public Registry

Foreign Corporation

If you already have a corporation in another country, it can do business in Panama by filing the following documents at the Public Registry Office:

1. A notarized Spanish translation of the Articles of Incorporation;

2. Board of Directors minutes authorizing the Panamanian registration;

3. Copies of the most recent financial statements;

4. A certificate from a Panamanian Consul confirming that the company is organized according to the laws of its place of incorporation;

5. Notification of the transfer of capital to the Panamanian operation.

General Partnership

General Partnerships are permitted in Panama. As with most countries, the partners will have unlimited civil liability. That means every partner can be sued even if only one of them commits an error in the course of business.

Limited Partnership

Limited Partnerships (called Sociedad de Responsibilidad) are also permitted in Panama. They are governed by the Commercial Code and Law No. 24 of 1966.

There may be from 2 to 20 partners with no restrictions as to their nationalities or domicile. Their Capital must be at least $2,000 up to $500,000. The names of the partners must be registered with the Public Registry Office including the amount of Capital each contributed. Each partner’s civil liability for the Partnership’s debts is limited to the amount subscribed to but unpaid. If the Partnership appoints an independent administrator, his/her name must also be registered. No meetings are required if the Partnership has 5 members or less. Otherwise, a meeting must be held at least once a year. There are no requirements for annual returns or filing of any accountings.

An alternative to a Sole Proprietorship is to create an Individual Limited Proprietorship (Empressa Individual de Responsibilidad Limitada). This is set up in the same manner as a Limited Partnership except having only one member. The individual transfers his/her assets to the business. Business civil liability is limited to the amount of the committed assets.

Civil Partnership

A Civil Partnership (Sociedad Civil) is allowed by the Commercial Code and Law No. 24 of 1966. The liability of the partners is unlimited. This type of partnership is often selected by professionals such as lawyers and accountants.

Commandite Company

The Commandite Company (Sociedad en Commandita) is a hybrid partnership and corporation also governed by the Commercial Code and Law No. 24 of 1966. At least one partner must have unlimited liability, while the liability of the limited partners is limited to the amount of capital subscribed. This type of legal structure is seldom used in Panama.

Government Licenses and Permits

Once you have either formed a Panamanian Corporation, or a Partnership, or are acting as a Sole Proprietor, you will need to register your business with the government before opening for business.

The 6 steps provided below are the requirements for registering your business with the national and local governments:

1. Income Tax Registry

This is called “Registro Fiscal” with the Panamanian government.

The Panamanian government has a website explaining what is necessary to register in Spanish. Find out more at the website.  This organization is the equivalent to the IRS in the USA – the government Revenue Service where your company receives its income tax id number called the Direccion General de Ingresos.

You will need to keep records of income and expenses and file an annual income tax (or corporate tax) return and pay any taxes owed.

2. Commercial License

Another Panama government website will give you information regarding getting a commercial license in Spanish at:

This Ministry is called the MINISTERIO de COMERCIO e INDUSTRIAS, translated as the Ministry of Commerce & Industry.

This is otherwise known as your Business License. Every business in Panama is required to have one.

3. Municipal Taxes

After getting your Panamanian government licenses, you need to register with your local municipality in order to pay your municipal taxes.

4. Social Security Number

Then you must go to the Registro Patronal de la Caja de Seguro Social (CSS) to get a Social Security number for your business and for yourself.

5. Sanitary Permit

If your business deals with food or beverages, you will need to get Permisos Sanitarios with the Ministerio de Salud.

That translates as a Health Certificate from the Ministry of Health for permission to operate a sanitary business.

Every employee (including owners & management) who prepare or serve food or beverages (or are in the vicinity of food or beverage preparation or service) must obtain two different Permits. One requires a medical & dental examination at a public hospital. The other is issued after attending a two day health & safety course.

6. Fumigation Certificate

Every business which is open to the public must be fumigated. You will need to hire a private fumigation company every four months to fumigate against ants, roaches, and other bugs.

You must then present a receipt from the fumigation company and obtain a Fumigation Certificate from your local municipality. This must be publicly displayed at your business entrance.

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