Starting a Business in Panama as a Foreigner: Complete Guide

Yes, foreigners can own 100% of a Panamanian company with no local partner required, Panama actively encourages foreign entrepreneurship with virtually no ownership restrictions. The process takes 2-4 weeks and costs $700-$2,050 total (legal/incorporation fees $500-$1,500, registration $100-$300, tax ID $50-$100, annual registered agent $50-$150). No residency or physical presence required to own and operate a company, and no minimum capital requirement. Two main structures: Limited Liability Company (S.R.L., 2+ partners minimum, $500-$1,500 formation cost) or Corporation (S.A., 1+ shareholders, 3 board members, $1,500-$3,000 formation cost). Key advantage: territorial tax system means you only pay taxes on income earned or sourced within Panama, foreign business income is not taxed. Timeline: choose structure, select company name, prepare documents (passport, apostilled criminal record), hire registered agent lawyer, register with Public Registry, obtain Tax ID (RUC), open bank account, get business licenses.

The Good News: Panama Welcomes Foreign Business Owners

As a business consultant who has helped dozens of foreigners establish companies in Panama, I can tell you this: the government actively encourages entrepreneurship and doesn't discriminate based on nationality. Unlike many countries, Panama imposes virtually no ownership restrictions on foreign investors, you can own 100% of a Panamanian company with no local partner required.

Panama's Business Advantages

Before diving into the mechanics of company formation, here's why Panama is attractive for business:

• Territorial tax system: You only pay taxes on income earned or sourced within Panama. Your foreign business income is not taxed.
• No minimum capital requirement: Depending on your business structure, you may need no capital at incorporation.
• Fast incorporation: Companies can be fully registered and operational in as little as two weeks.
• No physical presence required: You don't need to be in Panama during or after incorporation to own and operate a company.
• International hub: Panama's strategic location, free trade zone, and banking infrastructure make it ideal for regional business operations.

Company Structure Options for Foreigners

Panama offers several business structures. The two most popular for foreigners are:

Limited Liability Company (S.R.L. - Sociedad de Responsabilidad Limitada)

An LLC is ideal for small to medium-sized enterprises and is the most commonly chosen structure by foreigners.

• Partners required: Minimum of 2 partners (can be individuals or legal entities)
• Liability: Partners' liability is limited to their capital contributions
• Capital: No minimum capital requirement; funds can be in any currency and not fully paid at incorporation
• Maximum partners: Up to 20 partners allowed
• Privacy: Partners are listed publicly in the articles of incorporation
• Formation cost: Generally USD $500-$1,500 including registration and legal fees

Corporation (S.A. - Sociedad Anónima)

A corporation is better if you plan significant growth, need privacy, or want to issue bearer shares.

• Shareholders required: Minimum of 1 shareholder (can be any nationality)
• Board of directors: Must have a minimum of 3 board members (don't need to reside in Panama)
• Officers: Requires a President, Secretary, and Treasurer
• Liability: Shareholders' liability limited to their shareholdings
• Shares: Can issue bearer shares (unregistered shares) for maximum privacy
• Maximum shareholders: Up to 50 shareholders
• Formation cost: Generally USD $1,500-$3,000 including registration and legal fees

Key Requirements for Foreign Business Owners

No Residency Requirement

Contrary to what many believe, you do NOT need to be a resident of Panama to own and operate a company. You can incorporate and run a business entirely from abroad. However, if you want to work in Panama (beyond managing a business), you'll need a work permit, which requires residency.

Identity Verification

You'll need to provide:

• A copy of your valid passport
• An authenticated (apostilled) copy of your criminal record from your home country
• Proof of your identity through official documents

Registered Agent

Every company must have a registered agent in Panama, this must be a lawyer or authorized legal firm. The agent receives legal notifications and maintains institutional records. This typically costs USD $50-$150 annually.

Solvency Demonstration

Depending on your business type, you may need to demonstrate financial solvency and capacity to operate the business. This is especially important for regulated industries like finance, insurance, or real estate.

Restricted Professions

Not all professions are open to foreigners, even with a company registration:

• Medical or veterinary doctors
• Attorneys and legal practitioners
• Engineers and architects (unless they meet specific licensing requirements)
• Real estate agents (unless you've been a resident for at least 10 years)
• Insurance brokers (unless you've been a resident for at least 10 years)

However, you can own a company in these fields, you just can't personally practice the profession unless you meet residency and licensing requirements.

Step-by-Step Company Formation Process

Step 1: Choose Your Business Structure

Decide between an LLC or Corporation based on your needs. Most small to medium businesses choose an LLC for simplicity and lower costs.

Step 2: Select Your Company Name

Choose a unique name and verify its availability. The name must include a legal entity designator (S.R.L. for LLC or S.A. for Corporation).

Step 3: Prepare Documentation

Gather required documents including your passport copy, apostilled criminal record, and any business plans or proof of solvency if applicable.

Step 4: Work with a Panamanian Lawyer

Hire a registered lawyer to serve as your registered agent and to prepare your articles of incorporation. This typically costs USD $500-$1,500 depending on complexity.

Step 5: Register with Public Registry

Your lawyer will submit your articles of incorporation to the Public Registry (Registro Público). This is where your company becomes officially registered.

Step 6: Obtain Tax ID (RUC)

Register with the General Directorate of Income (DGI) to obtain your Tax Identification Number (RUC). This is required for doing business and managing financial accounts.

Step 7: Open a Bank Account

With your company registration and RUC, you can open a corporate bank account. Most foreign business owners use Panamanian banks, though some maintain international accounts through Panama-based branches.

Step 8: Obtain Business Licenses

Depending on your industry, you may need specific business licenses. These vary by sector (import/export, services, manufacturing, etc.).

Timeline and Costs

Typical timeline: 2-4 weeks from start to finish

Typical costs:

• Legal and incorporation fees: USD $500-$1,500
• Registration fees: USD $100-$300
• Tax ID registration: USD $50-$100
• Registered agent (annual): USD $50-$150
• Bank account setup: Usually free or minimal fee
• Total estimated cost: USD $700-$2,050

The Entrepreneur Visa Option

If you want to establish residency while starting a business, Panama offers an Entrepreneur Visa. Requirements:

• Minimum investment of USD $160,000 in a Panamanian business
• Must be used for commercial activity for profit within Panama
• Granted through your duly constituted Panamanian company
• Provides permanent residency upon approval

Common Mistakes to Avoid

Mixing Personal and Business Finances

Keep your company and personal funds completely separate. This maintains your liability protection and prevents tax complications.

Neglecting Compliance

File annual reports and maintain proper accounting records. While Panama is business-friendly, regulatory compliance is still required.

Not Using a Registered Agent

Your registered agent is crucial. They ensure you receive legal notifications and help maintain compliance. Don't try to save money here.

Ignoring Work Permit Requirements

Owning a company doesn't automatically allow you to work in Panama. If you plan to work there, you need a work permit and residency.

A Consultant's Take

Panama's business environment is genuinely one of the most foreigner-friendly in Latin America. The process is straightforward, costs are reasonable, and the tax advantages are real. Whether you're starting a regional business, managing international operations, or establishing a legal entity for asset protection, Panama delivers.

The key is working with a reputable local lawyer and understanding your specific business needs. The rest follows naturally. I've helped entrepreneurs from dozens of countries establish successful operations here, and the common thread is always the same: Panama rewards those who follow the rules and take advantage of the opportunities the system provides.

Related Panama City Resources

• Panama City Complete Guide
• Legal and Professional Services in Panama City
• Panama Company Structures: LLC vs Corporation
• Panama City Cost of Living
• Add Your Business