How to Open a Company in Panama: Legal Steps and Business Types Explained

To open a company in Panama, a foreigner needs to work with a licensed local agent, choose a legal structure like a Sociedad Anónima (SA), and register the company with the Public Registry.

Starting a company in Panama is a popular strategy for both local and foreign entrepreneurs due to the country’s business-friendly policies, tax advantages, and strategic location. There are no nationality or residency requirements for owners.

Below, we answer key questions and outline the essential steps involved in setting up a business in Panama.

This guide discusses:

• How to establish a company in Panama
• How much does it cost to register a company in Panama?
• What are the benefits of Panama offshore company?
• What type of companies are in Panama?

My contact details are hello@adamfayed.com and WhatsApp +44-7393-450-837 if you have any questions.

The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.

Can a foreigner own a business in Panama?

Yes, foreigners can legally own 100% of a business in Panama.

There are no nationality or residency restrictions on company ownership under Panamanian law, specifically the Panama Commercial Code and Law 32 of 1927 (which governs corporations).

This legal framework makes Panama one of the more accessible jurisdictions for foreign entrepreneurs.

However, certain regulated sectors are restricted.

For example, retail trade, domestic wholesale, and some licensed professions (like law, medicine, or engineering) are reserved for Panamanian citizens or those with permanent residency.

As long as your business doesn’t fall under these exclusions, full foreign ownership is permitted.

Why do people open companies in Panama?

People choose to open companies in Panama for a combination of fiscal, legal, and practical advantages.

One of the biggest draws is its territorial tax system, which means income earned outside Panama is not subject to local taxes.

This makes the country especially appealing to international entrepreneurs, digital nomads, and offshore investors looking to legally reduce their global tax burden.

Beyond tax efficiency, Panama offers a business-friendly environment characterized by:

• Political and economic stability – Panama has a stable democracy and consistent economic growth, giving business owners confidence in long-term planning.
• U.S. dollar-based economy – Panama uses the U.S. dollar as legal tender, which simplifies international transactions and reduces currency risk for foreign investors.
• Robust banking and financial sector – Panama is home to a well-developed banking system with a range of services suitable for corporate needs, including multi-currency accounts and international wire capabilities.
• Simple and fast incorporation process – With the help of a local attorney or service provider, companies can typically be registered within 1 to 5 business days.
• Favorable corporate privacy – Panama has strong corporate confidentiality laws. Shareholder and director information is not made public, and nominee services are available for added discretion.

What are the types of companies in Panama?

Panama offers five main business structures: the Corporation (SA), Limited Liability Company (SRL), Private Interest Foundation, Sole Proprietorship, and Branch of a Foreign Company.

1. Sociedad Anónima (S.A.) – Corporation

• The most common entity used for offshore business.
• Allows full foreign ownership.
• Requires at least three directors and one shareholder.
• Ideal for international trade, holding assets, or setting up a subsidiary.

2. Sociedad de Responsabilidad Limitada (SRL) – Limited Liability Company

• Fewer formalities than an S.A.
• Requires 2–20 members (individuals or legal entities).
• Members’ liability is limited to their capital contributions.
• More suitable for small or family-owned businesses.

3. Private Interest Foundation

• Used primarily for asset protection and estate planning.
• No shareholders or owners; managed by a Foundation Council.
• Must have a minimum capital endowment (commonly US $10,000).
• Cannot engage in commercial activities, though it may own companies.

4. Sole Proprietorship (Empresa Individual)

• Owned and operated by a single individual.
• Simpler to register but offers no legal separation between the owner and the business.
• Mostly used for small-scale local operations.

5. Branch of a Foreign Company

• Allows a foreign company to operate in Panama without creating a separate legal entity.
• Requires registration with the Public Registry and local representative.
• Must provide documentation from the home jurisdiction.

How to open a Panama company

While many steps apply across different company types, some requirements differ, particularly regarding ownership, governance, and disclosure.

Additional steps may include opening a corporate bank account, registering for social security if hiring employees, and complying with industry-specific regulations.

How to open a business account in Panama

Opening a corporate bank account typically requires:

• Certified copies of company documents (Articles of Incorporation, Public Registry certificate, tax ID)
• Valid identification (passport or national ID) for all shareholders, directors, and authorized signatories
• Proof of address for company owners and officers (utility bill or bank statement)
• Source of funds documentation (bank references, contracts, or proof of business activity)
• Business plan or description of operations, including projected transaction volume and key markets

Due to strict KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, banks may request personal interviews, additional documentation, or background checks.

Foreign-owned companies especially those with no physical operations in Panama, often face stricter scrutiny.

How long does it take to open a business in Panama?

Company registration can take as little as 5 to 10 business days if all documents are in order.

Opening a bank account may take a few additional weeks depending on the bank’s due diligence process.

How much does it cost to set up a company in Panama?

The setup cost varies depending on the service provider, but generally includes:

• Legal fees: Around $1,000–$1,500 for drafting the Articles of Incorporation, appointing directors, and filing with the Public Registry (Panamanian law requires a licensed attorney to incorporate a company).
• Government fees: Roughly $300–$500, covering the registration with the Public Registry and obtaining the corporate tax ID (RUC).
• Registered agent: Mandatory under Law 2 of 2011, with annual fees typically ranging from $200–$400.

Optional costs (such as nominee directors, virtual offices, or commercial licenses) can add to the total.

Renewal fees for annual maintenance including the tasa única (annual corporate government fee of $300) should also be budgeted each year.

Is Panama a good place to start a business?

Yes, especially for international businesses and service providers.

The best areas to set up a company include:

• Panama City: The country’s capital and financial center, offering world-class infrastructure, access to skilled labor, and proximity to government institutions and banks. It’s ideal for legal, tech, financial, and consulting businesses.
• Colón Free Zone: The second-largest free trade zone in the world, offering tax exemptions and logistical advantages for import/export, wholesale, and re-export businesses.
• David and Santiago: Emerging urban hubs in Chiriquí and Veraguas provinces, respectively. These areas offer lower startup and operational costs and are ideal for local services, agriculture-related ventures, and regional trade.

What are the disadvantages of offshore companies in Panama?

• Increasing international pressure on offshore jurisdictions:
  Panama has faced growing scrutiny from global regulatory bodies like the OECD and FATF. As a result, there are more compliance obligations and transparency requirements than in the past. This affects both service providers and foreign clients.
• Difficulty opening bank accounts due to compliance hurdles:
  Many Panamanian and international banks apply strict Know Your Customer (KYC) and anti-money laundering (AML) checks, especially for offshore entities. Foreigners may face delays, document requests, or even rejections when trying to open a corporate bank account.
• Perception issues due to association with tax havens:
  Despite legitimate uses, Panama-based companies may trigger red flags in international transactions or business relationships particularly in jurisdictions sensitive to tax avoidance. This can affect credibility or lead to extra audits.
• Additional reporting obligations for citizens of high-tax countries:
  Nationals from countries like the United States, Canada, or EU member states may have to report foreign-held companies and accounts under rules like FATCA (U.S.), CRS (OECD), or similar transparency regimes. Non-compliance can result in steep penalties.

Conclusion

Panama offers a flexible, tax-efficient, and business-friendly environment for both local and international entrepreneurs.

With straightforward incorporation procedures, full foreign ownership, and a territorial tax system, it’s an attractive jurisdiction for global business operations.

However, due diligence, legal compliance, and awareness of sector restrictions remain essential.

Always consult a qualified advisor to ensure your setup aligns with your goals and legal obligations.

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