How to Register a Business in the US from Costa Rica

Step 1: Benefits of starting your US business from Costa Rica

Starting a US business from Costa Rica offers a unique blend of economic and lifestyle advantages. One of the most compelling benefits is the significantly lower cost of living in Costa Rica, which translates to reduced operational costs for your business. Office space, utilities, and labor are often more affordable compared to the United States. This cost-efficiency allows entrepreneurs to allocate more resources towards growth and innovation. Additionally, a variety of coworking spaces and business hubs are available, fostering a vibrant community of like-minded professionals and potential collaborators.

Another key advantage is the high quality of life that Costa Rica offers. The country is known for its beautiful landscapes, friendly people, and excellent healthcare system. This makes it an attractive location for entrepreneurs seeking a balanced lifestyle. Furthermore, Costa Rica's strategic location in Central America provides convenient access to both North and South American markets, enhancing business opportunities. The stable political environment and favorable tax regime also contribute to a business-friendly atmosphere. With reliable internet connectivity and modern infrastructure, operating a virtual or remote business from Costa Rica is seamless and efficient, making it an ideal base for entrepreneurs aiming to tap into the US market while enjoying the perks of a tropical paradise.

Step 2: How to start your US business from Costa Rica

Starting a US business from Costa Rica involves several steps that you need to follow to ensure compliance with both US and Costa Rican regulations. First, you'll need to decide on the type of business entity you wish to form, such as a corporation or an LLC. Each type has its advantages and disadvantages, so it's important to choose the one that best suits your business goals. After deciding on the type of business, you will need to choose a state in which to register your business. Delaware, Nevada, and Wyoming are popular choices due to their business-friendly laws.

Next, you will need to obtain a US-based address, as this is a requirement for registration. Many services offer virtual addresses and mail forwarding to help international entrepreneurs. After securing an address, you'll need to appoint a registered agent, who will handle legal documents on behalf of your business. Once these steps are completed, you can file the necessary formation documents with the chosen state’s Secretary of State office and pay the applicable fees. Finally, it's essential to obtain an Employer Identification Number (EIN) from the IRS and open a US business bank account. This will enable you to legally conduct business and manage finances efficiently from Costa Rica.

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 Costa Rica

Understanding Compliance Requirements for Running a US Business in Costa Rica

Expanding a US business into Costa Rica can be an exciting opportunity, but it is crucial to understand and comply with local regulations to avoid legal issues and ensure smooth operations. Here are some key considerations:

1. Business Structure

Choosing the right business structure is essential. Most foreign companies choose between forming a corporation (Sociedad Anónima) or a limited liability company (Sociedad de Responsabilidad Limitada). Each structure has its legal implications, tax responsibilities, and operational flexibility.

2. Registration and Permits

Every business must register with the National Registry (Registro Nacional) and obtain a Tax Identification Number (Número de Identificación Tributaria, NIT). Depending on your business type, you may need additional permits from local municipalities and sector-specific authorities.

3. Employment Laws

Costa Rican labor laws are comprehensive and favor employee rights. Considerations include:

• Minimum wage regulations
• Mandatory contributions to social security (Caja Costarricense de Seguro Social, CCSS)
• Severance pay and termination procedures
• Compliance with workweek hours and overtime pay

4. Tax Compliance

Understanding the tax landscape is critical for financial planning and compliance. Key taxes include:

• Corporate Income Tax
• Value Added Tax (Impuesto al Valor Agregado, IVA)
• Withholding taxes on dividends and interest

Employing a local tax advisor can help navigate these complexities and ensure compliance.

5. Environmental Regulations

Costa Rica is known for its commitment to environmental sustainability. Businesses must adhere to environmental regulations, which may include obtaining environmental impact assessments and adhering to waste management protocols.

6. Intellectual Property Rights

Protecting your intellectual property (IP) is crucial. Register trademarks, patents, and copyrights with the National Registry to safeguard your business assets from infringement.

7. Local Partnerships and Cultural Considerations

Building relationships with local partners can facilitate smoother business operations. Understanding cultural nuances and business etiquette is also vital for successful integration into the local market.

By addressing these key areas, US businesses can navigate the complexities of the Costa Rican regulatory environment and establish a compliant, thriving operation in this dynamic market.

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 Costa Rica

Understanding Tax Obligations for Running a US Business in Costa Rica

Operating a US business in Costa Rica involves navigating a different set of tax laws and regulations. Understanding these tax obligations is essential to ensure compliance and avoid potential legal issues.

Corporate Taxes

Costa Rica imposes corporate income tax on businesses operating within its jurisdiction. The tax rates are progressive and depend on the company's gross revenue:

• Small businesses with annual revenues up to CRC 5,015,000 are taxed at a rate of 5%
• Medium-sized businesses with annual revenues between CRC 5,015,001 and CRC 14,525,000 are taxed at a rate of 10%
• Larger businesses with annual revenues exceeding CRC 14,525,000 are taxed at a rate of 15% on the first CRC 14,525,000, and the amount exceeding this threshold is taxed at 30%

Note that Costa Rica’s corporate income tax rates are generally lower than those in the US. However, businesses must be diligent in reporting accurate revenues to ensure they are taxed appropriately.

Value Added Tax (VAT)

Costa Rica implemented a Value Added Tax (VAT) to replace the previous Sales Tax. Currently, the VAT rate is 13%. This tax applies to most goods and services, and businesses are responsible for collecting and remitting this tax to the authorities. Understanding VAT implications is critical for pricing strategies and cash flow management.

Permanent Establishment (PE)

A US business operating in Costa Rica could be recognized as having a Permanent Establishment (PE) if it maintains a physical presence such as an office, branch, or significant operations. A PE in Costa Rica will subject the business to local corporate taxes. It is advisable to seek local tax consultation to determine if your operations qualify as a PE.

Employee-Related Taxes

Employing staff in Costa Rica introduces additional tax responsibilities:

• Income Tax Withholding - Employers must withhold income tax from their employees' salaries based on progressive rates.
• Social Security Contributions - Both employees and employers contribute to Costa Rica's social security system (Caja Costarricense de Seguro Social). Employers contribute approximately 26.5% of the employee's salary, while employees contribute around 9.34%.

Understanding these obligations is crucial for correct payroll management and compliance.

Double Taxation Agreements (DTA)

To avoid being taxed twice on the same income, the US and Costa Rica have a Double Taxation Agreement. This agreement helps mitigate the tax burden for businesses operating in both jurisdictions. Familiarize yourself with the DTA provisions to leverage tax credits or exemptions where applicable.

Tax Filing and Deadlines

Businesses must comply with Costa Rica’s tax filing deadlines:

• Annual Corporate Tax Returns must be filed by March 15th of the following year.
• VAT filings are typically required on a monthly basis, due by the 15th of the following month.
• Employee-related taxes follow specific schedules for withholding and remittance.

Timely and accurate filings are essential to avoid penalties and maintain good standing with tax authorities.

Professional Advice

Given the complexities of operating a US business in Costa Rica, it is advisable to seek professional tax advice. Local tax experts can provide guidance tailored to your specific business circumstances to ensure thorough compliance and optimized tax strategies.

Understanding these tax considerations will not only help in meeting legal obligations but also contribute to the sustainable and successful operation of your business in Costa Rica.

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