There are lots of people that dream of opening a business in a tropical paradise where they can retire into a beautiful bungalow by the sea, running a small business to take care of their expenses. This is, indeed, a good dream. However, there is a lot that goes into making it a reality, and some of that is unglamorous. You’ll have to deal with lots of paperwork and there will be the investment of money, time, and energy into the business before it gets stable and can cruise on autopilot.
One of those tropical paradises where expats love to go to open their small businesses is Costa Rica. But what does it take to start a business in Costa Rica? Well, we’re going to take a closer look at that today. Here are the steps you should take.
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Start by considering your Immigration Status
So, for example, you would have to make a capital investment of $200,000 in your business, or you would have to buy a home worth at least $200,000, or other investments that total to $200,000. Other alternatives include marrying a Costa Rican national and so on. Without any of that, you will have to go for the short term visa. For this reason, most foreigners who own businesses in Costa Rica are actually perpetual tourists.
As a perpetual tourist, you will be leaving the country every 30 to 90 days to renew your visa and then coming back. The number of days your visa lasts depends on the country your come from. The most privileged are those from North America and Europe, who get 90-day stamps on their visas.
Another thing you should take note of is that, even if you own your business, you’re still not allowed to do work in it that a local could do. That would be considered taking a job away from a local. The main idea here is that foreigners are being allowed to start businesses in the country in order to create jobs for locals, not take them away. If your business needs a waiter, or a casher, or someone else in the physical location, then you have to hire a legal employee. Of course, you can still digitally operate your business or just have an office and manage your business. In fact, if you are the business, such as an architect, photographer, designer, and so on, there is no problem with working for your business. However, the lines can be blurry and you are advised to talk to a local lawyer.
Hire a Lawyer to help you Structure your Business
It’s important to determine what kind of business structure you want to have when you start a business in Costa Rica. For this, you need a lawyer familiar with Costa Rican law. There are lots of legal structures you could choose, ranging from general partnerships to corporations. It all depends on what you’re looking for. However, one particular structure of interest is the corporation.
There are two types of corporations you can register in Costa Rica: The Sociedad Anonima (S.A) and the Sociedad de Responsibilidad Limitada (S.R.L). The S.A is the most common for small businesses because it offers a lot of the benefits of a European or North American corporation. Your lawyer will recommend the best legal structure for you.
Once you choose which corporation to start, you should choose a unique name for it, which the lawyer will check against the public registry to see if it is available. If it is, the paperwork will be written and presented to the Public Registry for approval. A notice will then be published in the La Gaceta, the local Costa Rican newspaper. Once you’re registered, you’ll be a given a tax number. This should cost anywhere between $300 and $1000.
Open a Bank Account for your Business
The truth is that opening a bank account in Costa Rica will demand a lot of your patience and will take a lot of paperwork. There are lots of prerequisites and the whole process can feel frustrating and overwhelming, especially for someone who is used to better customer service, less paperwork, and more efficiency. You can choose from private banks and public banks. Some of the popular international banks in Costa Rica include Scotiabank, HSBC, and Citibank, among others. These will at least have English speaking tellers and shorter lines.
Get an Accountant
This is necessary in Costa Rica since you can’t do your own accounting there. The accountant’s first order of business will be to create a projection of the cash flow from your first year based on your estimates. While this may be difficult for a new business, it is necessary when opening a bank account so the bank can determine what kind of account you will have and how it will be used. Once you have this, the accountant will register you as a taxpayer and give you the necessary documents to help you open a bank account.
You will also need the accountant to help with keeping records and paying taxes. They will make visits to the tax administration on your behalf if you want and file all the paperwork. A good accountant is easily a money saving strategy in the long run, so find one as soon as you can. They rank right up there in importance with lawyers.
Get a Business Permit
Once you’ve got everything sorted and you’re ready to start a business, you need to get a business permit. This typically means getting a “Uso de Suelo” from the local municipal office. You will also need other documents, including insurance, health certificates, social security system, and so on, depending on what kind of business you want to have and whether you plan on hiring employees.
The legal process itself should cost you about $1,000. How long it takes depends on how quickly things move along and also your own proactiveness. You’ll need to do lots of checking in and be motivated to finish all the steps. The whole process requires a good knowledge of Spanish, so it’s important to get someone who knows English and Spanish to help you out. Your lawyer or accountant are probably your best choice here, so be prepared to pay them extra, said John O. from twiftnews.
It is important to realize that opening a small business in Costa Rica takes time, money, and energy. It will probably cost you more than you planned for. To start with, supplies come into the country on mountain roads that are both long and narrow. Mass purchasing isn’t viable because of the country’s 4.5 million strong population. Important foods, furniture, technology, and construction materials will also attract a premium.
Costa Ricans also have a different work culture than what you might be used to. The construction workers, in particular, have a penchant for being late or not showing up at all. Even when you set a date and time and they assure you countless times that they will be there, they are still likely to show up in their own time. Ultimately, if you’re going to succeed as a business owner in this country, you will have to strike a balance between being ambitious with your work ethic, and being just as laid back as the locals in your dealings with them. It’s all pura vida here.