| Hundreds of foreigners residing here are
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| | public must be fumigated. You will need
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| starting up new businesses in Panama
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| | to hire a private fumigation company
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| every year.
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| | every four months to fumigate against
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| Panama offers many opportunities for
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| | ants, roaches, and other bugs.
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| business entrepreneurs. You can start a
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| | You must then present a receipt from the
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| bar, restaurant, retail shop, hotel, bed
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| | fumigation company and obtain a
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| & breakfast, provide tour-guides or
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| | Fumigation Certificate from your local
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| professional services.
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| | municipality. This must be publicly
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| Maybe you are thinking about opening a
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| | displayed at your business entrance.
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| new business full time? Or, you are
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| | Hiring Employees
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| retired and thinking of passing the time
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| | Now that you have obtained all of the
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| by engaging in a part-time business.
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| | required government permits and licenses,
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| Whichever you do, Panamanian laws must be
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| | you are now ready to hire employees.
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| understood and complied with. That's why
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| | For those of you thinking of hiring your
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| the following information will be useful
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| | expat buddies, Panama limits a company's
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| for every reader who is thinking about
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| | work force to a maximum of 10% foreigners
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| starting a business in Panama.
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| | (non-Panamanian). Panamanian laws require
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| LEGAL BUSINESS STRUCTURE
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| | that 90% of a company's employees be
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| Your first consideration is to decide
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| | Panamanian citizens, or married to a
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| what type of business structure to use.
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| | Panamanian, or foreign persons residing
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| There are 3 normal business entities here
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| | here for at least 10 years.
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| in Panama:
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| | But, there are exceptions:
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| Sole Proprietor where you and your spouse
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| | 1. Required technical or specialized
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| & family operate a business as sole
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| | staff unavailable in Panama increases
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| owners.
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| | your quota to 15% foreigners. You can
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| Partnership where you team up with one or
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| | also petition the Ministry of Labor for a
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| more persons in running the business.
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| | higher quota.
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| Corporation where you register with the
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| | 2. Companies having less than 10
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| government as a company issuing stocks,
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| | employees can employ 1 foreigner.
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| having a Board of Directors and corporate
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| | 3. Companies can employ foreign Managers
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| officers.
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| | and Supervisors when the company does
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| While a sole proprietorship can be an
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| | business abroad from Panama with prior
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| oral agreement between close family
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| | approval by the Ministry of Labor.
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| members, the other two entities need the
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| | You must obtain a work permit from the
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| assistance of a Panamanian lawyer. That's
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| | Ministry of Labor for every foreign
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| because legal documents need to be
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| | worker.
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| prepared forming a Partnership or
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| | Panama's Labor Laws
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| Corporation. If they are wrongly
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| | The Labor Code of 1971 deals with Labor
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| prepared, they will be legally null and
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| | Relations including the rights and duties
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| void causing a business legal nightmare
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| | of employers and employees.
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| for its members.
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| | "Subordination" is the key concept of the
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| Let's examine the different legal
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| | law. Any relationship where one person is
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| structures here in Panama:
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| | subordinate to another falls within the
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| Corporation (Sociedad Anonima)
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| | law. It makes no difference whether the
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| Corporations are formed under the Law No.
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| | relationship is or is not described as
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| 32 of 1927 and the Commercial Code
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| | "employment".
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| (Decree-Law No. 5 of 1997, Article 5).
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| | There are certain basic employee rights
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| A Panamanian corporation is formed by two
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| | which must be followed:
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| persons (called Subscribers) or Nominees
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| | 1. Written Employment Contract
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| (who act on behalf of absent foreigners)
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| | 2. Minimum Wage
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| who execute legal documents called the
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| | 3. Maximum Hours
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| Articles of Incorporation. Those
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| | 4. Paid Vacation Time
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| documents are filed with the Panama
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| | 5. Firing Employees
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| Public Registry office. After the
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| | Employee Contracts
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| corporation is formed, only one
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| | You must have your employees sign a
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| shareholder will be required.
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| | written employment contract called an
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| Corporate shares are issued which can be
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| | Inscripcion Contratos con trabajadores.
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| of various classes, can have par value or
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| | You must file two copies of the contract
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| not, may be officially registered, or can
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| | with the Ministerio de Trabajo y
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| be discreet Bearer shares.
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| | Desarrollo Laboral.
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| The corporation must have a resident
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| | Employers can easily terminate the
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| Registered Agent (Panamanian lawyer).
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| | employee during the first two years.
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| There must be at least three Directors
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| | After that, employees have greater
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| whose names must be in the Articles of
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| | protection under the law. The law lists
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| Incorporation. Any changes of Directors
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| | "just causes" for dismissal. Unlawful
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| must also be filed with the Public
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| | dismissals can result in minimal
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| Registry. Unless the Articles are changed
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| | compensation payments. Both parties can
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| or the corporation merges or dissolves
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| | contract for "fixed terms".
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| there will be no other filing
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| | Minimum wage levels vary according to the
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| requirements.
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| | employee's seniority.
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| Foreign Corporation
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| | Vacations: There are 11 public holidays
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| If you already have a corporation in
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| | per year. In addition, employees are
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| another country, it can do business in
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| | entitled to a 30 day vacation every year.
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| Panama by filing the following documents
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| | 13th Month: The law also requires a 30
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| at the Public Registry Office:
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| | day paid bonus every year which is known
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| 1. A notarized Spanish translation of the
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| | as "the 13th month". This bonus is
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| Articles of Incorporation;
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| | estimated at one-salary day for every 11
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| 2. Board of Directors minutes authorizing
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| | days of work. The 13 month bonus is paid
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| the Panamanian registration;
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| | in 3 equal installments: April 15th,
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| 3. Copies of the most recent financial
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| | August 15th, and December 15th every
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| statements;
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| | year.
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| 4. A certificate from a Panamanian Consul
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| | Unions
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| confirming that the company is organized
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| | Unions are allowed in Panama. Unions can
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| according to the laws of its place of
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| | collectively negotiate on behalf of the
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| incorporation;
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| | employees. Strikes are lawful under
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| 5. Notification of the transfer of
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| | defined circumstances after a majority
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| capital to the Panamanian operation.
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| | vote of the member employees.
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| General Partnership
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| | Conciliation is mandatory before a strike
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| General Partnerships are permitted in
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| | can occur. However, only around 11% of
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| Panama. As with most countries, the
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| | the private sector employees are
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| partners will have unlimited civil
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| | unionized.
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| liability. That means every partner can
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| | Leasing Office or Business Premises
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| be sued even if only one of them commits
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| | Panama's laws regarding leasing
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| an error in the course of business.
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| | commercial space is similar to most
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| Limited Partnership
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| | English speaking countries.
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| Limited Partnerships (called Sociedad de
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| | 1. It needs to be in Writing.
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| Responsibilidad) are also permitted in
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| | 2. It needs to properly describe the
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| Panama. They are governed by the
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| | location of the pre-mises.
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| Commercial Code and Law No. 24 of 1966.
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| | 3. It needs to address the amount and
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| There may be from 2 to 20 partners with
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| | frequency of the lease payments, length
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| no restrictions as to their nationalities
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| | of the lease period, whether there is a
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| or domicile. Their Capital must be at
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| | Security and/or Damage deposit, who pays
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| least $2,000 up to $500,000. The names of
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| | for gas, water, electricity, and repairs.
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| the partners must be registered with the
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| | It will also contain provisions for late
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| Public Registry Office including the
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| | rent payments, tenant property damage,
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| amount of Capital each contributed. Each
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| | and renewal of the lease term.
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| partner's civil liability for the
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| | 4. It must be signed by the property
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| Partnership's debts is limited to the
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| | owners (or legally authorized
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| amount subscribed to but unpaid. If the
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| | representatives) and the tenants.
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| Partnership appoints an independent
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| | 5. All signatures must be Notarized
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| administrator, his/her name must also be
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| | before a Notary Public.
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| registered. No meetings are required if
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| | There are many more terms and conditions
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| the Partnership has 5 members or less.
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| | which should be included in a standard
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| Otherwise, a meeting must be held at
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| | commercial lease which is why you should
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| least once a year. There are no
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| | consult with a Panamanian attorney before
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| requirements for annual returns or filing
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| | signing one prepared by your landlord.
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| of any accountings.
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| | Business Bank Account
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| An alternative to a Sole Proprietorship
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| | Even if you are a sole proprietor, you
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| is to create an Individual Limited
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| | should never co-mingle your personal
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| Proprietorship (Empressa Individual de
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| | funds with business monies. That is why
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| Responsibilidad Limitada). This is set up
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| | you'll need to open a bank account for
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| in the same manner as a Limited
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| | your business.
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| Partnership except having only one
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| | Partnerships and Corporations definitely
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| member. The individual transfers his/her
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| | need to open separate Business or
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| assets to the business. Business civil
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| | Corporate Bank Accounts.
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| liability is limited to the amount of the
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| | When you open an account for a
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| committed assets.
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| | corporation, partnership, or a business
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| Civil Partnership
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| | most banks require the following
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| A Civil Partnership (Sociedad Civil) is
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| | information and documentation:
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| allowed by the Commercial Code and Law
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| | 1. Most banks require a personal
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| No. 24 of 1966. The liability of the
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| | interview, while some banks may allow a
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| partners is unlimited. This type of
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| | telephone interview.
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| partnership is often selected by
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| | 2. A clear copy of the account's
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| professionals such as lawyers and
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| | Signatory and each corporate Director's
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| accountants.
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| | Passport (must include the photo &
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| Commandite Company
| |
| | personal information page, and Panama
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| The Commandite Company (Sociedad en
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| | entry stamp page).
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| Commandita) is a hybrid partnership and
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| | 3. A clear copy of a second photo id
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| corporation also governed by the
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| | (such as a driver's license or national
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| Commercial Code and Law No. 24 of 1966.
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| | id card).
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| At least one partner must have unlimited
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| | 4. Two bank references for each Director
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| liability, while the liability of the
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| | and account Signatory. These references
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| limited partners is limited to the amount
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| | must entail the satisfactory conduct of
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| of capital subscribed. This type of legal
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| | the account holder and that the banking
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| structure is seldom used in Panama.
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| | relationship had been ongoing for a
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| GOVERNMENT PERMITS & LICENSES
| |
| | minimum of 2 years. It would be helpful
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| Once you have either formed a Panamanian
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| | if the references also confirm the
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| Corporation, or a Partnership, or are
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| | person's residential address. Many
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| acting as a Sole Proprietor, you will
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| | Panamanian banks require the references
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| need to register your business with the
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| | be specifically addressed to that bank's
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| government before opening for business.
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| | branch. Some banks may accept only one
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| The 6 steps provided below are the
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| | bank reference letter (especially if you
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| requirements for registering your
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| | have done all of your banking with only
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| business with the national and local
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| | one bank).
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| governments:
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| | 5. Two professional references for each
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| 1. Income Tax Registry
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| | Director and account Signatory. These
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| This is called "Registro Fiscal" with the
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| | references may be written by one's
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| Panamanian government.
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| | accountant, lawyer, stock broker,
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| The Panamanian government has a website
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| | insurance broker, real estate broker, or
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| explaining what is necessary to register
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| | employer. They should be written on their
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| in Spanish. Go to the govt. website at:
| |
| | company letterhead. These must include
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| This is the government Revenue (Tax)
| |
| | the duration and nature of their business
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| Service where your company receives its
| |
| | relationship with the applicant. Only an
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| income tax id number called the Direccion
| |
| | Original letter will be accepted.
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| General de Ingresos.
| |
| | 6. Proof of Address: You must provide a
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| You will need to keep records of income
| |
| | copy of a utility bill (phone, water,
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| and expenses and file an annual income
| |
| | electricity, cable TV, or Internet
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| tax (or corporate tax) return and pay any
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| | service) which contains your name and
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| taxes owed.
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| | address.
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| 2. Commercial License
| |
| | 7. A "Company Profile" letter must be
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| Another Panama government website will
| |
| | submitted which briefly describes the
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| give you information regarding getting a
| |
| | type of business the account holder will
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| commercial license in Spanish at:
| |
| | engage in. This will include the location
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| This Ministry is called the MINISTERIO de
| |
| | of the business, the products or services
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| COMERCIO e INDUSTRIAS, translated as the
| |
| | you are selling, the nature and expected
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| Ministry of Commerce & Industry.
| |
| | volume of business, the origin of the
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| This is otherwise known as your Business
| |
| | funds to be deposited, an estimate of the
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| License. Every business in Panama is
| |
| | monthly or annual amount of funds to be
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| required to have one.
| |
| | deposited, and the reason for opening a
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| 3. Municipal Taxes
| |
| | bank account in Panama.
|
| After getting your Panamanian government
| |
| | It will help if your Panamanian lawyer
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| licenses, you need to register with your
| |
| | accompanies you to the bank in order to
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| local municipality in order to pay your
| |
| | make sure the process goes smoothly.
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| municipal taxes.
| |
| | Once all of these documents have been
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| 4. Social Security Number
| |
| | received, they will be forwarded to the
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| Then you must go to the Registro Patronal
| |
| | bank's Compliance Officer who reviews the
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| de la Caja de Seguro Social (CSS) to get
| |
| | entire application to insure no money
|
| a Social Security number for your
| |
| | laundering will occur.
|
| business and for yourself.
| |
| | This process will go smoother and may
|
| 5. Sanitary Permit
| |
| | have less required documents if you first
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| If your business deals with food or
| |
| | go to the Panamanian bank where you
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| beverages, you will need to get Permisos
| |
| | already have a personal account as they
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| Sanitarios with the Ministerio de Salud.
| |
| | already know you.
|
| That translates as a Health Certificate
| |
| | Taxes
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| from the Ministry of Health for
| |
| | Now that you are licensed, moved into
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| permission to operate a sanitary
| |
| | your commercial space, hired employees
|
| business.
| |
| | and have a bank account; you need to
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| Every employee (including owners &
| |
| | worry about taxes.
|
| management) who prepare or serve food or
| |
| | Conclusion
|
| beverages (or are in the vicinity of food
| |
| | There are many legal documents,
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| or beverage preparation or service) must
| |
| | government applications, contracts, and
|
| obtain two different Permits. One
| |
| | laws one must comply with in order to
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| requires a medical & dental examination
| |
| | start a business in Panama. That is why
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| at a public hospital. The other is issued
| |
| | you should consult with a Panamanian
|
| after attending a two day health & safety
| |
| | lawyer who is knowledgeable with Panama's
|
| course.
| |
| | Business, Labor, Tax, and Real Estate
|
| 6. Fumigation Certificate
| |
| | laws before going into business.
|
| Every business which is open to the
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| |
|
