Introduction: Your Entrepreneurial Dream Starts with a Solid Legal Foundation
Colombia has positioned itself as one of Latin America's most attractive destinations for entrepreneurs. The country has significantly streamlined the process of starting a business in Colombia, and cities like Medellín have become thriving innovation ecosystems. However, behind the apparent simplicity lie legal decisions that can make the difference between a solid business and one plagued by future problems.
In this guide, we'll explain everything you need to know about how to start a business in Colombia legally and efficiently: the types of companies available, the documents you need, approximate costs, the most common mistakes, and realistic timelines. We'll give you enough information to arrive prepared to make decisions—though, as you'll see throughout this article, many of those decisions depend on the specifics of each case and greatly benefit from professional guidance.
What Does It Mean to Start a Business in Colombia from a Legal Perspective?
To start a business in Colombia from a legal standpoint means formally establishing a legal entity (persona jurídica)—an entity that is legally separate from you as an individual—that can enter into contracts, acquire obligations, hold its own assets, and be accountable to third parties. It's also possible to operate as a sole proprietor (persona natural comerciante) by registering with the commercial registry without creating a company, though this carries different implications regarding personal liability.
The main legal framework governing business formation includes:
- The Commercial Code (Decreto 410 of 1971), which establishes the general rules for commercial companies.
- Law 1258 of 2008, which created the Simplified Joint-Stock Company (SAS), the most widely used company type in Colombia today.
- Law 1014 of 2006 (Entrepreneurship Law), which simplified procedures for small businesses.
- Decreto 2042 of 2014 and DIAN regulations regarding tax obligations.
Key fact: Over 90% of companies formed in Colombia today are SAS entities, thanks to their flexibility and the fact that they can be created with a single shareholder using a private document, without requiring a public deed in most cases.
Who Does This Guide Apply To?
This guide is useful for a wide variety of people and situations:
- Colombian entrepreneurs who want to formalize their business for the first time.
- Independent professionals (consultants, doctors, engineers, lawyers) who want to operate through a legal entity for liability or tax reasons.
- Foreigners looking to invest or start a business in Colombia, whether as residents or from abroad. Colombian law allows foreigners to be shareholders and legal representatives.
- Existing business owners who want to open a new line of business under a separate entity.
- Startups and tech companies seeking an agile legal structure.
Whether your business will be a neighborhood shop, a software company, or an international consulting firm, the fundamental steps are similar. However, the specific details regarding structure, tax regime, and obligations vary depending on your economic activity and personal circumstances. Our team can help you determine which structure is most appropriate for your particular case.
Types of Companies: Which One Should You Choose?
Before diving into the step-by-step process, it's essential to understand the main types of companies in Colombia:
Simplified Joint-Stock Company (SAS – Sociedad por Acciones Simplificada)
Created by Law 1258 of 2008, the SAS is the most popular and flexible company type. It allows a single shareholder, is formed through a private document, limits shareholder liability to the amount of their contributions, and the bylaws can be customized with great freedom. It is the preferred option for the vast majority of entrepreneurs looking to start a business in Colombia.
Limited Liability Company (Ltda. – Sociedad de Responsabilidad Limitada)
Requires a minimum of two partners and a maximum of twenty-five. Partners are liable up to the amount of their contributions, but in certain cases (such as labor and tax obligations), joint liability may apply. Formed through a public deed.
Corporation (S.A. – Sociedad Anónima)
Requires a minimum of five shareholders and is governed through a shareholders' assembly and a mandatory board of directors. Generally used for larger companies or those seeking to be publicly traded. Formed through a public deed.
Limited Partnership (Sociedad en Comandita)
Has two types of partners: general partners (with unlimited liability) and limited partners (with liability limited to their contributions). Less common in current practice.
General recommendation: For most entrepreneurs, the SAS is the best option due to its simplicity, flexibility, and asset protection. However, the choice of company type depends on factors such as the number of partners, the economic activity, growth plans, and specific tax considerations. Our legal team can evaluate which one is most suitable for your project.
Step-by-Step: How to Start a Business in Colombia
Below, we outline the general process for starting a business in Colombia, using the formation of a SAS as the reference, since it is the most common scenario.
Step 1: Define Your Business Model and Legal Structure
Before any paperwork, be clear about:
- What economic activity will you engage in? (This determines your CIIU code—Colombia's version of the ISIC classification.)
- How many partners or shareholders will participate?
- What will the initial capital be?
- Where will the company's principal domicile be?
These decisions influence everything else: the type of company, the tax regime, special obligations, and additional permits you may need.
Step 2: Check Name Availability
Search the RUES (Unified Business and Social Registry) at www.rues.org.co to confirm that the trade name or corporate name you want to use isn't already registered by another company. The Chamber of Commerce will reject registration if there is a name conflict (homonimia).
Step 3: Draft the Company Bylaws (Estatutos)
For a SAS, the bylaws are set forth in a private document that must contain, at minimum (Article 5, Law 1258 of 2008):
- Name and identification of the shareholders.
- Corporate name followed by the letters "SAS."
- Principal domicile and branches, if any.
- Duration of the company (may be indefinite).
- Corporate purpose (may be indeterminate: "any lawful activity").
- Authorized, subscribed, and paid-in capital, with the number and par value of shares.
- Management structure and name of the legal representative.
This document must be authenticated at a notary (shareholders' signatures). If any shareholder contributes real estate, a public deed is required.
Important note: While the bylaws can be straightforward, they are the "constitution" of your company. An error in their drafting can lead to serious corporate disputes down the road. A specialized attorney can safeguard these bylaws to protect your interests.
Step 4: Open a Capital Account (if applicable)
If the subscribed capital will be paid in cash, some banks require opening a capital formation account where contributions are deposited before registration. However, Law 1258 allows the subscribed capital to be paid within a period of up to two years, so it is not always necessary to have all the money available at the time of incorporation.
Step 5: Register the Company at the Chamber of Commerce
Submit the authenticated bylaws to the Chamber of Commerce in the company's principal domicile. Several procedures are completed simultaneously through the CAE (Business Service Center) system:
- Registration in the Commercial Registry (Registro Mercantil).
- Assignment of the NIT (Tax Identification Number) with the DIAN (Colombia's tax authority).
- Registration in the RUT (Unified Tax Registry).
- Notification to the Municipal Treasury for the Industry and Commerce Tax.
Today, many Chambers of Commerce allow this process to be completed entirely online, which has greatly simplified the process of starting a business in Colombia.
Step 6: Obtain the Definitive RUT
The DIAN assigns a provisional RUT at the time of registration. To obtain the definitive RUT, you'll need to visit a DIAN office or complete the process online, presenting additional documentation such as a bank account in the company's name.
Step 7: Open the Business Bank Account
With the certificate of existence and legal representation and the RUT, open a bank account in the company's name. Each bank has different requirements, but they generally request the bylaws, the Chamber of Commerce certificate, the RUT, and the legal representative's identification documents.
Step 8: Register the Corporate Books
You must register the mandatory books with the Chamber of Commerce: minutes book, shareholder registry, and the accounting books required by regulations. This registration can be done electronically.
Step 9: Register with the Social Security System
If you plan to hire employees, you must register the company with:
- An Occupational Risk Administrator (ARL).
- A Health Insurance Provider (EPS).
- A Pension Fund.
- A Family Compensation Fund (Caja de Compensación).
Step 10: Obtain Special Permits and Licenses (if applicable)
Depending on your economic activity, you may need additional permits: health certificates (INVIMA), environmental licenses, INVIMA registration for food or pharmaceuticals, construction permits, and others. Regulated activities (financial, healthcare, transportation, mining) require authorization from specific oversight entities.
The permits you'll need vary significantly based on the type of business, location, and other factors. A professional can guide you on which ones apply to your specific case.
Required Documents to Start a Business in Colombia
Here are the main documents you'll need to gather:
- Colombian national ID (cédula de ciudadanía) or foreigner ID (cédula de extranjería) for all shareholders and the legal representative. If you're a foreigner without a cédula de extranjería, you'll need your passport and a visa that permits the activity.
- Private incorporation document (bylaws) duly authenticated at a notary, with all shareholders' signatures.
- RUES form (Unified Business and Social Registry), available at the Chamber of Commerce or online.
- RUT form (Unified Tax Registry) — completed as part of the process at the Chamber of Commerce.
- PRE-RUT generated on the DIAN website (in some cases).
- Single business cover sheet and commercial registry form.
- Authenticated special power of attorney if someone other than the shareholders handles the process.
- Acceptance of the legal representative position document (may be included in the bylaws themselves).
For foreigners, you may additionally need:
- Apostille or legalization of documents issued abroad.
- Official Spanish translation if documents are in another language.
- Registration of foreign investment with the Central Bank (Banco de la República) if capital is contributed from abroad.
Practical tip: Documentary requirements can vary slightly between Chambers of Commerce and may change over time. Verify current requirements before starting the process, or consult a professional who is up to date with current regulations.
Costs and Fees to Start a Business in Colombia
The costs of starting a business in Colombia depend on several factors, especially the company's capital and the city where it's registered. Here's a general estimate:
Official Costs
- Registration tax (Gobernación): 0.7% of the company's subscribed capital. This is generally the most significant cost and varies directly with the capital amount.
- Chamber of Commerce registration fees: Between approximately 40,000 and 70,000 COP (varies by Chamber).
- Commercial registry form: Approximately 6,500 COP.
- Notarial authentication of signatures: Around 4,000 – 15,000 COP per signature.
- Book registration: Approximately 15,000 – 30,000 COP per book.
- Commercial registration (first year): According to the fee schedule based on the company's total assets.
Professional Costs
- Attorney fees for drafting bylaws and guiding you through the process: These vary widely depending on the complexity of the case, the number of partners, whether foreign investment is involved, and the professional's experience. It's advisable to request quotes and compare.
- Accountant fees: Necessary for initial tax setup and accounting registration. Some accountants offer incorporation packages.
Recurring Costs
Remember that creating the company is just the beginning. Afterward, you'll have recurring costs such as:
- Commercial registration renewal (annual, before March 31).
- Tax filings (income tax, VAT, ICA, withholdings, as applicable).
- Permanent accountant if the company exceeds certain income or asset thresholds.
Exact costs depend on the specific characteristics of each business. We recommend requesting a detailed budget before starting the process.
Common Mistakes to Avoid When Starting a Business in Colombia
1. Choosing the Wrong Company Type
Many entrepreneurs choose a company type based on a friend's recommendation or because "it's what everyone does," without analyzing whether it's the best fit for their tax situation, number of partners, or growth plans. The difference between a SAS and an Ltda., for example, can have significant implications for personal liability.
2. Using Generic or Internet-Copied Bylaws
Using generic bylaw templates found online is one of the most expensive mistakes. Bylaws should reflect the reality of your company: who makes decisions, how disputes between partners are resolved, what happens if a partner wants to sell their shares, and how profits are distributed. The most serious corporate disputes we see in our practice stem from poorly drafted bylaws.
3. Failing to Register Foreign Investment
If you are a foreigner or if the capital comes from abroad, it is mandatory to register the investment with the Central Bank (Banco de la República) under Decreto 119 of 2017 and the Central Bank Board's circulars. Failing to do so can result in foreign exchange penalties and problems repatriating profits or capital.
4. Ignoring Initial Tax Obligations
Many new business owners don't understand that when they start a business in Colombia, they acquire immediate tax obligations: VAT registration (if applicable), Industry and Commerce Tax registration, electronic invoicing, among others. Failing to comply with these obligations from the start can result in penalties from the DIAN and the Municipal Treasury.
5. Not Clearly Defining Roles and Responsibilities
When there are multiple partners, it's essential to establish from the outset who manages the company, who holds legal representation, which decisions require unanimity, and which require a simple majority. Lack of clarity on these points is one of the main sources of corporate disputes.
6. Mixing Personal and Business Finances
Separation between personal and business assets isn't just good practice—it's a legal obligation. If partners use the company account for personal expenses or vice versa, they may lose limited liability protection through what's known as "piercing the corporate veil" (Article 42, Law 1258 of 2008).
7. Failing to Renew the Commercial Registration on Time
The commercial registration must be renewed every year before March 31. Failing to do so can result in fines from the Superintendence of Industry and Commerce and cancellation of the registration, which seriously affects the company's operations.
Timeline and Deadlines
One of the most frequently asked questions about starting a business in Colombia is how long the process takes. Here are approximate timelines:
- Drafting bylaws: 1 to 5 business days, depending on complexity and the number of partners.
- Notarial authentication: Same day or next day.
- Chamber of Commerce registration: 1 to 3 business days if documentation is complete.
- NIT and provisional RUT assignment: Simultaneous with Chamber of Commerce registration (same day in many cases).
- Definitive RUT: 1 to 10 business days, depending on the DIAN.
- Bank account opening: 3 to 15 business days, depending on the bank and client documentation. This is typically the most time-consuming step.
- Book registration: 1 to 3 business days.
In summary: If everything goes smoothly and documentation is complete, it's possible to have the company legally constituted and operational within 2 to 4 weeks. However, documentary complications, additional banking requirements, or special permits can extend this timeline. The exact timeframe depends on the specific circumstances of each case.
Important Legal Deadlines
- Subscribed capital: Must be paid within a maximum of 2 years from incorporation (Article 9, Law 1258 of 2008).
- Commercial registration renewal: Annually, before March 31.
- Foreign investment registration: Within 6 months following the channeling of foreign currency (per Central Bank regulations).
- Electronic invoicing: Mandatory for most taxpayers according to the schedule established by the DIAN.
Frequently Asked Questions About Starting a Business in Colombia
1. Can I start a business in Colombia as a foreigner?
Yes. Colombian law allows foreigners to be shareholders and legal representatives of Colombian companies. You don't need to be a resident, although you will need to comply with additional requirements such as foreign investment registration, obtaining a visa if you'll be conducting activities in the country, and possibly obtaining a NIT for foreign persons. The specific requirements depend on your nationality, visa type, and the nature of the investment.
2. What is the minimum capital required to create a SAS?
Law 1258 of 2008 does not establish a minimum capital for forming a SAS. Technically, you can create a SAS with an authorized capital of one peso ($1 COP). However, the capital should be consistent with the economic activity you plan to develop, and very low capital may generate distrust among banks, suppliers, and potential clients. Additionally, the registration tax is calculated based on the subscribed capital.
3. Do I need an accountant to create the company?
An accountant is not strictly required for the act of incorporation itself. However, the company will need an accountant to comply with its tax obligations. Furthermore, if the company exceeds certain asset or income thresholds (currently 5,000 times the minimum wage in gross assets or 3,000 times the minimum wage in gross annual revenue), it is legally required to have a permanent public accountant under Article 13 of Law 43 of 1990. In practice, it's advisable to have an accountant from the start.
4. Can I create the company entirely online?
Many Chambers of Commerce in Colombia, including the one in Medellín, offer the option to register a company online through their digital platforms. However, notarial authentication of signatures may still be necessary (some cases allow digital signatures), and certain DIAN procedures may require in-person visits or appointments. The level of digitalization depends on the specific Chamber of Commerce and the shareholders' circumstances.
5. What taxes does my company need to pay once it's formed?
The main tax obligations include:
- Income Tax (Impuesto de Renta): General rate of 35% on taxable net income (current rate, subject to legislative changes).
- VAT (IVA – Impuesto al Valor Agregado): 19% general rate, if you sell taxable goods or services.
- Industry and Commerce Tax (ICA): Varies by municipality and economic activity.
- Withholding Tax (Retención en la fuente): As a withholding agent, according to DIAN tables.
- Financial Transaction Tax (GMF): 4x1000 on financial transactions.
Your company's specific tax regime depends on its economic activity, income level, and other variables. An accountant and tax advisor can design the most efficient tax strategy for your situation.
6. Can I create a company with a partner who lives in another country?
Yes. The partner abroad can grant an authenticated and apostilled special power of attorney so that a representative in Colombia can handle the process on their behalf. They can also sign the bylaws abroad and send them with an apostille. It's important to coordinate these steps in advance to avoid delays.
7. What's the difference between a trade name, corporate name, and trademark?
The corporate name (razón social) is the company's legal name registered with the Chamber of Commerce (e.g., "Soluciones Tecnológicas ABC SAS"). The trade name (nombre comercial) is how the business is known in the market (e.g., "TechABC"). A trademark (marca) is a distinctive sign registered with the Superintendence of Industry and Commerce (SIC) that protects names, logos, or slogans. Registering the company with the Chamber of Commerce does not give you trademark protection. To protect your brand nationally, you must file a separate registration with the SIC.
Conclusion: The First Step Toward Your Business Is Taking It with Good Advice
Starting a business in Colombia is a process that has been greatly simplified in recent years, but it still requires legal, tax, and strategic decisions that shape the future of your business. Choosing the right company type, drafting solid bylaws, complying with tax obligations from day one, and protecting your assets are all steps that greatly benefit from professional guidance.
At Legal Diligence Medellín, we have guided dozens of Colombian and foreign entrepreneurs through the process of formalizing their businesses. We know the real obstacles, how long each procedure takes, and the best strategies to ensure your company is built on a solid foundation.
Every case is unique. Contact us for a personalized evaluation of your situation.