Company formation

If you are still deciding on a location, this section and our Resources section offer a host of information to help you make an informed decision for your offshore needs. If you have decided on Panama as the location for your offshore company, you will need to consider the following:

  • Available Entities
  • Incorporation
  • Annual Maintenance
  • Meetings
  • Redomiciliation
  • Dissolution

1. Available Entities

Prior to the formation of your offshore company, you will need to decide on one of the following commercial entities existing under the Panamanian Commercial Code:

  • Corporation
  • General partnership
  • Limited partnership, (operates similar to a U.S. Limited Liability Company, or «LLC»)
  • Stock issuing limited partnership
  • Cooperatives
  • Single proprietorship
  • Limited single proprietorships

Most business enterprises, however, are conducted in the Republic of Panama in the form of corporations. Almost without exception, foreign-base operations are also conducted through corporations.

2. Incorporation

Panamanian corporations may be organized by two or more persons of legal age (who can be Panamanian or foreigners) as well as juridical entities, for any lawful purpose (or purposes) whereby the incorporators subscribe to at least one share each of the capital stock of the corporation under formation. In practice, two persons or juridical entities from the incorporating attorney’s office act as incorporators and immediately upon incorporation the two persons endorse (in blank) their subscription rights, thus the total authorized capital remains intact and may be issued to the beneficial owner(s) in full. The authorized capital of a Panama corporation does not have to be fully subscribed or paid up.

The incorporating attorney, or his law firm, generally acts as the statutory Resident Agent of the corporation, a legal requirement in Panama.

Traditionally a yearly fee of US$150.00 to $250.00 is charged by the resident agent. The Resident Agent does not have to file any reports to the Panama Government; he is the liaison between the corporation and the Panama Government.

The following details are required to incorporate a Panama company:

  • The name of the corporation. It must end in any of the following words or abbreviations: Corporation (Corp.), Incorporated (Inc.), or Sociedad Anónima (S.A.). Names in a foreign language are permitted. Availability of names must be cleared for use by the Public Registry. Name(s) available may be reserved, if desired, for a renewable period of 30 days at a cost of US$40.00 each.
  • The specific objectives of the corporation. Usually broad general objectives are listed; however, mention is also made in the corporate charter of certain specific objectives for which the corporation is organized, if desired.
  • The amount of authorized capital, stating also the number of shares and their respective par values (If no par value shares are used, then the government values each share at US$20.00 for purposes of computing registration fee on authorized capital).
  • The type of shares – Nominative and/or bearer, common and/or preferred, and the class of shares – class A or class B (when applicable), voting or non-voting, as well as any rights and/or restrictions applicable thereto.
  • The law requires a minimum of three (3) directors, which may be natural persons or juridical entities. For natural persons, the full names (initials are not acceptable) and addresses are required. For juridical entities, complete official name(s) and address(es) accompanied by a notarized and apostilled certification (or Panamanian Consul authentication) from the regulatory body or registrar of the corresponding jurisdiction(s), indicating that the entity is validly existing and who is its legal representative are required. If so desired, the services of directors and/or officers are provided for a yearly fee by local attorneys and management companies.
  • The full names of the first officers: president, secretary and treasurer. Vice President(s) and other officers are optional. One person may hold two positions, but the president should not be the secretary as well, for practical reasons. Directors may also act as officers. Directors and officers need not be shareholders, Panamanian, or local residents or entities.
  • Duration of the corporations, which may be in perpetuity.
  • Name and address of the Resident Agent (a local attorney or a law firm).
  • Domicile of the company (Registered address).

The formation of a Panama company takes from 3 to 5 working days and it costs about US$550.00. If a Panama company does not operate locally (having an office in Panama through which international operations are directed, which does not constitute «doing business in Panama» under Panamanian income tax law), such company can maintain its books of accounts in any manner desired and anywhere in the world. Companies operating locally must maintain here all records and books; which may be kept manually, mechanically or electronically. A company not physically engaged in business locally (although it might have an office in Panama to direct international business activities) does not require a commercial license.

Panama’s corporation law allows natural persons or juridical entities of any nationality and place of residency to act as directors and officers of Panama corporations. There are no restrictions imposed by law or local regulations which would not permit Panama companies to do business in or with any particular country. It follows that Panama corporations, whatever their capital, pay no Panama income tax on net earnings, if the income is earned from foreign sources or consists of interest earned on local time deposits or savings accounts.

The use of a corporate seal is not a requirement by Law in Panama; its use is optional.

A Certificate of Good Standing may be obtained from the Public Registry at the time that the incorporation of a company is registered, if desired, at an additional fee. A Certificate of Incorporation is not available in Panama.

The memorandum «FORMING YOUR PANAMA COMPANY» is available upon request.

3. Annual Maintenance

There is an annual franchise tax levied by the government to maintain a company in good standing, amounting to US$250.00 for the first year and US$300.00 every year thereafter. Late payment is subject to a US$50.00 surcharge. After a second consecutive overdue payment is missed, a fine of US$300.00 is imposed. Payment of the tax will be due on June 30th if the date of anniversary of incorporation falls in the first half of the year, and on December 31st if the date of anniversary of incorporation falls in the second half of the year.

Annual fees of the Statutory Resident Agent mentioned previously are US$150.00.

Annual fees for providing nominee directors and/or officers are usually US$200.00 each. Therefore, annual maintenance charges for a Panama corporation, may range between US$400.00 and US$1000.00, depending on the number of nominee directors and/or officers.

4. Meetings

Shareholders’ meetings, Board of Directors’ meetings, or meetings of liquidators may be held by telephone, telefax or other electronic media.

Written minutes detailing how the communication was made and the resolutions adopted must be drawn and signed by all involved.

Also, decisions of shareholders, directors or liquidators adopted by consent are allowed, even though the document may show signatures at different places and dates.

5. Redomiciliation

Redomiciliation to Panama of foreign corporations is allowed, regardless of provisions in this respect in the country of origin.

Redomiciliation of Panamanian corporations to other jurisdictions accepting such redomiciliation, is also allowed, if it is so stipulated in the articles of incorporation.

6. Dissolution

A formal voluntary dissolution of the company is allowed at any time. It requires the approval of the shareholders at a meeting duly convened for such purpose. Cost for this procedure is US$550.00, including all fees and expenses.
In this case, a certificate of dissolution must be obtained and subsequently published in a local newspaper and the Official Gazette.

Specific liquidators may be appointed for the purpose of winding up the affairs of the corporation during the three years liquidation period stipulated by Law, which is desirable for companies with offshore operations. Otherwise, the directors on record will act as fiduciaries for liquidation purposes.