How to Register a Business in the US from Colombia

Step 1: Benefits of starting your US business from Colombia

Starting a US-based business from Colombia can offer a myriad of advantages, most notably the expansive market access and economic stability that the United States provides. For Colombian entrepreneurs, the barriers to entry are lower than ever, thanks to numerous online resources, supportive legal structures, and bilateral cooperation between the two countries. This allows for smoother navigation through compliance requirements and easier access to funding and investment opportunities, giving Colombian businesses a competitive edge. Additionally, leveraging the robust US consumer market can lead to significant revenue growth and brand recognition on an international scale.

Furthermore, operating a US business from Colombia allows entrepreneurs to take advantage of cost efficiencies inherent in working from a country with a lower cost of living. This translates into reduced overhead costs, allowing for more capital to be redirected towards core business operations such as marketing, research, and development. These financial benefits are supplemented by the ability to hire local Colombian talent skilled in various fields for a more cost-effective workforce. Consequently, a Colombian entrepreneur can build a sustainable and profitable business model that maximizes both local and international opportunities, ensuring the long-term success and growth of their venture.

Step 2: How to start your US business from Colombia

Starting a US business from Colombia involves several important steps. To begin, you need to choose the type of business entity that suits your needs, such as an LLC (Limited Liability Company) or a Corporation. Research the advantages and limitations of each to make an informed decision. The next step is to select a unique name for your business that complies with US naming regulations. Once your name is chosen, you should register it with the state in which you plan to operate.

One crucial requirement for foreign entrepreneurs is obtaining an EIN (Employer Identification Number) from the IRS. This number functions similarly to a Social Security number but for your business. You will also need a US business address, which can often be arranged through a registered agent service. Additionally, it's important to be aware of and comply with local, state, and federal regulations, including obtaining any necessary licenses and permits. While the process may seem daunting, numerous online resources and professionals specialize in assisting foreigners with these steps, ensuring a smoother entry into the US market.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Colombia

Understanding Compliance Requirements for Running a US Business in Colombia

Running a US business in Colombia can offer numerous opportunities for growth, but it also requires a thorough understanding of local compliance requirements. Ensuring compliance helps avoid legal issues, financial penalties, and helps build trust with local stakeholders. Here are some key considerations to keep in mind:

Legal Structure

Choosing the right legal structure is fundamental for your business. In Colombia, the common options include:

• Corporation (Sociedad Anónima or S.A.) - Suitable for larger businesses with multiple shareholders.
• Limited Liability Company (Sociedad por Acciones Simplificada or S.A.S.) - Flexible and suitable for small to medium-sized businesses.
• Branch Office (Sucursal) - An extension of your US entity, but subject to Colombian laws.

Taxation

Understanding the tax obligations in Colombia is critical for compliance. Key taxes include:

• Corporate Income Tax - Varies but is generally around 31% (as of 2023).
• Value Added Tax (VAT) - Standard rate is 19%.
• Withholding Taxes - Applicable on dividends, interest, and royalties paid to non-residents.

Employment Regulations

Colombian labor laws are employee-centric and cover various aspects including:

• Work Contracts - Must be in writing and can be indefinite or fixed-term.
• Minimum Wage - It's regulated and periodically updated by the government.
• Social Security Contributions - Both employer and employee must contribute.
• Termination - Fair reasons and proper compensation are required for termination of employment.

Accounting Standards

Accounting practices in Colombia must align with International Financial Reporting Standards (IFRS). Ensure accurate record-keeping and timely submission of financial statements to stay compliant.

Permits and Licenses

Depending on the industry, various permits and licenses may be required. Some common sectors requiring specific permits include:

• Construction - Building permits and environmental licenses.
• Food and Beverage - Health and safety inspections, and sanitary permits.
• Retail - Commercial registry and operational permits.

Intellectual Property

Protecting your intellectual property (IP) is important. Ensure that trademarks, patents, and copyrights are registered with Colombia's Superintendence of Industry and Commerce (SIC).

Conclusion

Successfully running a US business in Colombia involves understanding and adhering to local laws and regulations. Consult with local legal and tax experts to ensure full compliance and smooth operations. Proper planning and adherence to regulations will support long-term business success and growth in Colombia.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Colombia

Understanding Tax Obligations for Running a US Business in Colombia

Expanding your US business into Colombia can be a lucrative opportunity, but it’s essential to understand the tax obligations to ensure compliance and avoid potential penalties. Below are crucial considerations to keep in mind when managing tax responsibilities in Colombia.

Corporate Income Tax

In Colombia, corporate income tax (CIT) is levied on the worldwide income of companies that are considered tax residents. Non-resident companies are taxed only on their Colombian-source income. As of 2023, the corporate income tax rate stands at 31%, with a gradual reduction to 30% for subsequent years.

Value Added Tax (VAT)

VAT in Colombia, known as Impuesto sobre las Ventas (IVA), is applicable to the sale of goods and services. The general VAT rate is 19%. Some goods and services may benefit from reduced rates or exemptions.

Withholding Taxes

Colombian tax law requires withholding taxes on different types of payments to both residents and non-residents. This includes:

• Dividends: Withholding tax varies depending on whether the dividends are paid out of profits that were taxed at the corporate level or not.
• Interest: There is a withholding tax on interest payments to foreign entities, typically ranging from 15%-20%.
• Royalties: Royalties paid to non-residents are also subject to withholding tax, generally at a rate of 20%.

Tax Compliance

Foreign businesses need to register with the Colombian tax authorities and obtain a Tax Identification Number (NIT). Additionally, companies must comply with various filing requirements, including annual income tax returns, monthly VAT returns, and payroll tax filings.

Bilateral Tax Treaties

Colombia has entered into several tax treaties to avoid double taxation and prevent tax evasion. These treaties can affect withholding tax rates and provide guidelines on which country has the taxing rights over specific types of income.

Transfer Pricing

Colombian tax law includes comprehensive transfer pricing regulations. Companies must ensure that transactions between related parties are conducted at arm's length and may need to maintain documentation justifying their transfer pricing policies.

Legal and Accounting Advice

To navigate the complexities of Colombian tax obligations, it is highly advisable to seek legal and accounting advice from professionals who are well-versed in both US and Colombian tax laws. This can help ensure compliance and optimize tax positions.

Understanding these key areas will help your US business successfully manage its tax obligations while operating in Colombia, thereby minimizing risks and improving overall business efficiency.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country