PROCEDURE TO OPEN A COMPANY IN COLOMBIA

TYPES OF COMPANIES AND NUMBER OF PARTNERS

In Colombia there are two main types of companies, these are Limited Liability Companies and the Stock Corporations. In order to create the first one, it is necessary minimum 2 and maximum 25 associates. On the other hand, the number of shareholders needed to create a Stock Corporation is minimum 5 associates. There is no requirement of nationality of the shareholders, they can be foreigners.

STEPS FOR THE COMPANY TO START OPERATING

STEP 1. PUBLIC DEED
The first step is to prepare and submit to a Public Notary Office a draft public deed (articles of incorporation) containing the company's by-laws. Such public deed must be signed by each of the founding shareholders, personally or by proxy.

However, it is important to take into account that if any of the founding shareholders is a company, the documentation must include an original Certificate of Existence and Legal Representation recently issued by the Chamber of Commerce, showing that the person who will sign the articles of incorporation is duly authorized to do so.

STEP 2. REGISTRATION WITH DIAN – PRE-RUT
Once the company's articles of incorporation are formalized through a public deed, it is necessary to register the company before the National Tax and Customs Office (DIAN). The document resulting from this prior registration is known as a "pre-RUT". This document is requested via Internet, through the following procedure:

• Log on to DIAN's web page (www.dian.gov.co).
• Go to the RUT request link ("solicitud de RUT").
• Go to the RUT inscription-new merchants link ("inscripción RUT - nuevos comerciantes") for businesses that still do not have a NIT and which require a business registration.
• Complete the information required by the form.
• Print two forms.

Once printed, the two forms must be signed by the company's legal representative. The legal representative must personally appear before a Public Notary.
The original of this Pre-RUT document, signed personally before a Public Notary by the company's legal representative or proxy must be attached to the documents to be submitted in order to register the company with the Chamber of Commerce of the city where the company will be domiciled.

STEP 3. REGISTRATION AT THE BUSINESS RECORD
After completing the previously stated steps, the following documents must be submitted to the Chamber of Commerce of the city where the company will be domiciled:

• A copy of the public deed containing the company's articles of incorporation;
• The registration forms furnished by the Chamber of Commerce, duly completed and signed;
• Original or notarized copy of the Pre-Rut, upon personal appearance;
• Letters of acceptance of the appointed persons to hold positions in the company (for example: members of the board of directors and manager);
• A copy of the I.D. Document of the legal representative or proxy who signed the company's registration documents;

If the Chamber of Commerce finds that the documents filed meet all legal requirements, it will issue a Certificate of Existence and Legal Representation of the newly created company.

STEP 4. NIT (TAXPAYER'S IDENTIFICATION NUMBER ISSUED BY DIAN)
Once the company is registered in the business record at the Chamber of Commerce, the company's legal representative must request a Taxpayer's Identification Number (NIT) for the company, upon registering it in the Single Tax Record (RUT).
Three days after the certificate of existence and legal representation is issued, the company's final RUT is obtained at the DIAN's Office for Companies (address: Cra. 6 No. 15-32).

Nevertheless, it is worth bearing in mind that depending on who makes the procedure, there are different documents required.

STEP 5 COSTS
The incorporation of a company generates the following costs and expenses:

• Notary fee, at a rate of 2.7 per thousand of the amount of the assigned capital;
• The Notary fee generates a 16% VAT. Additionally, the Public Notary office charges a small extra fee for notary paper and issuance of copies;
• The registration of a company in the business record is subject to the registration tax, at a rate of 7 per thousand of the subscribed capital. Furthermore, the Chamber of Commerce charges additional inscription and registration fees, which increase proportionally to the company's capital;
• Finally, the foreign investment must be registered with the Central Bank (Banco de la República).
  

STEP 6 GENERAL REQUIREMENTS FOR A FOREIGN INVESTMENT

Once the investment is made, that is, once the initial capital assigned to the company is registered, any subsequent capital increases must be registered with the Central Bank.
According to the foreign exchange legislation, the following are considered to be foreign exchange operations and are required to be funneled through the foreign exchange market:

• Imports and exports of goods;
• External debt operations involving residents, including the financial yield of such operations;
• Foreign capital investments in Colombia, including the corresponding yield;
• Colombian capital investments abroad, including the corresponding yield;
• Endorsements and guaranties in foreign currency;
• Derivative-based operations.
  

It is worth pointing out that by registering the investment with the Central Bank, the foreign investor becomes entitled to the following foreign exchange-related rights:

• Remitting abroad the proven net profits yielded periodically by the investment;
• Reinvesting the profits or retaining as surplus any non-distributed profits with drawing rights; and
• Capitalizing any sums with drawing rights, when derived from investment-related obligations, and remitting abroad the foreign currency obtained from the sale of the investment inside the country, or from the company's liquidation or capital reduction.

The general rule for the registration of foreign direct investment is that registration is automatic upon submitting the Foreign Exchange Report for International Investments on Form No. 4 to a foreign exchange market intermediary or, if the foreign currency is funneled through clearing current accounts, by electronically submitting such Form No. 4 when the funds are credited to the account. Form No. 4 may be signed by the foreign investor, by his proxy or by whoever represents his interests.