Limited Company vs. Entrepreneurial Society: Everything You Need to Know

La SA in Panama it is a traditional legal figure widely used by established companies that seek flexibility to operate in various sectors. It is regulated by the Law 32 of 1927 and requires certain elements, such as initial capital and resident agents, for its constitution.

In contrast, the Entrepreneurship Society, introduced by the Law 186 of 2020, is designed to facilitate processes for small and medium-sized companies, offering lower entry barriers, preferential taxation and fewer requirements in terms of corporate structure.

Both figures serve different purposes, so it's critical to understand their key components before deciding which one is right for your business.

Incorporation Requirements for a Limited Company

• Minimum share capital: There is usually no fixed amount, but a minimum of $10,000 is recommended as a base.
• Shareholders: At least two shareholders are needed, who can be individuals or companies.
• Resident Agent: It is mandatory to have a Panamanian lawyer or law firm registered as an intermediary.}
• The Shareholder: It is mandatory to have at least one shareholder for the registration of a public limited company.
• The Board of Directors: It is mandatory to have at least three directors for the registration of a public limited company in Panama.
• The tax address: It is necessary to register an address in Panama to obtain a single taxpayer registration, called RUC in Panama.

Incorporation Requirements for an Entrepreneurial Company

• Initial Capital: It can be as low as $0, eliminating financial barriers for new entrepreneurs.
• Shareholders: It must consist of at least two shareholders
• The tax address: It is mandatory to register an address in Panama for the registration of an entrepreneurial company.

The choice between these two will depend on factors such as your initial budget, the type of business, and your short and long-term goals.

When analyzing tax obligations, the differences between a Public Limited Company and an Entrepreneurial Company are notable:

SA

• Subject to corporate income tax of 25% on operating profits if you generate income within Panama.
• Additional dividend payments, depending on whether this income is from local, international, or exempt sources.

Entrepreneurship Society

• Initial tax exemption for the first few years, depending on the sector in which it operates.
• Reduced rates during its initial stages as an incentive to entrepreneurship.

If you're looking to optimize your taxes, an Entrepreneurial Firm can be a powerful tool for reducing initial operating costs.

Advantages of a Public Limited Company

• Greater flexibility in the issuance and transfer of shares.
• International recognition and strong reputation in global markets.
• Possibility to operate both inside and outside of Panama without significant limitations.

Disadvantages of a Limited Company

• Higher initial and annual costs due to legal requirements.
• Higher tax burdens compared to the Entrepreneurship Company.

Advantages of an Entrepreneurial Company

• Ease and speed for its creation.
• Low operating costs, ideal for entrepreneurs with limited resources.
• Significant tax benefits in their early years.
• You don't need a resident agent, helping to reduce operational costs.

Disadvantages of an Entrepreneurial Firm

• Limitations on the amounts of annual income allowed.
• Less formal structure, which may not be ideal for certain highly regulated sectors.

At Limitless Legal, we understand that choosing a legal structure can be a complex decision. Our team of experts is ready to analyze your business and tax needs, guiding you every step towards the correct formation of your company.

We specialize in personalized legal services, from the incorporation of public limited companies to advanced advice for entrepreneurs. By choosing Limitless Legal, you choose trust, experience and a commitment to the success of your business.

Ready to get started? Contact our legal advisors today!