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Colombia

Why create a company in Colombia?

Creating a local company in Colombia offers benefits for entrepreneurs looking to reduce business expenditures for their existing business through offshoring, and also those seeking to conduct business operations in Colombia itself.
The Wandering Investor is an official partner of the Go-For-Gold Sierra Leone CBI program
https://www.youtube.com/watch?v=3Jugr25FN-o

Business Formation, Offshoring, and Residency

By opening and operating a local company, you will be eligible for temporary residency in Colombia. This is a practical pathway for those who want to settle in Colombia and also operate their own local business.

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Should I open a company to purchase real estate in Colombia?

Many real estate investors ask if they should purchase real estate in Colombia using a local LLC.

If you are looking to structure your real estate purchase, there is certainly the option to purchase property using a local company. However, this is not the most tax-efficient method, and it can also lead to inconvenient bureaucratic hurdles.

If you are looking to take advantage of the benefits of owning real estate via an entity, it is recommended to register a foreign company such as an LLC or a corporation. This still gives you limited liability and the ability to sell ownership interests, but will avoid some of the complications you would face by doing it using a Colombian company.

It is worth noting that Colombia is far less litigious than the United States or Canada, for example. It is unlikely that problems related to owning assets in your own name in Colombia should lead to legal action here.

Using Colombia as an offshoring destination

Colombia is not a low-tax jurisdiction. Colombia’s main competitive advantage is low labor costs relative to the quality of human capital. An entry-level, English-speaking, college-educated employee can be hired for $1,000 – $1,200 a month.

Your foreign company can contract your local Colombian company to provide business services such as a call center or support activities. This is powerful leverage for North American companies who want to increase their margins without sacrificing quality.

Using offshore labor in Colombia is advantageous for North American companies who want employees who are more culturally in tune with their clientele, as opposed to talent from India or the Philippines. Colombia being in the same time zone as the US and Canada also helps with coordination and team-building.

Getting residency in Colombia through company formation

By opening a local company, you can get a migrant visa to Colombia that will lead to residency in the country.

My Colombian attorney Alan can help you open a company in Colombia

How do I open a company in Colombia?

My attorney Alan can help you open a company in Colombia. His firm has many informative brochures that will help you navigate the process. You can get in touch with him using the contact form below:

Contact Alan to open a company in Colombia and get the free brochures

Services in Colombia:

Articles on Colombia:

Transcript of “Why Create a Company in Colombia?“

LADISLAS MAURICE: Hello everyone, Ladislas Maurice of The Wandering Investor. So today I’m in Colombia with my Colombia based attorney Alan and we’ll be discussing the use cases of creating a local Colombian company. So Alan, I’m sure you have a lot of people you help people with their real estate transactions, get residency, all of that.

Creating a company to purchase real estate in Colombia

LADISLAS MAURICE: Sure, you have a lot of people, especially North Americans, typically Europeans don’t ask this question, but should I create a local company to purchase real estate?

ALAN: Got it. So, um, we get this question all the time. So, the answer is you can certainly start a local company that would be the owner of the local property. But we have found that it’s probably not the most tax efficient way to invest. I don’t want to get too into the weeds, it just makes things much more expensive and unnecessary. So, if you’re looking to get the benefits from owning via an entity, you might want to consider registering a foreign entity, right? So maybe an LLC, some Inc, Canada, even in Europe can work. You can have that foreign entity buy the property in Colombia, you can therefore gain all the benefits of ownership, limited liability, uh, you can sell ownership interest fairly easily, uh, you know, on and on and on, uh, and avoid some of these complications in Colombia.

Real estate liability and litigiousness in Colombia

LADISLAS MAURICE: Cool. And I think what’s important to understand, especially for North Americans, is that you’re a lot less likely to be sued if something goes wrong in your rental property compared to the US. So if someone’s drunk, falls off the balcony, you know, if someone tries to sue you over this, it’s probably not going to get them very far. So the the fact of the matter is there… it’s a lot less risky to own assets in Colombia in your own name than in the US than in Canada.

ALAN: Yeah, just I’m from New York. We’re super litigious and and what I do in my business, I mean, those of our us who are American, you know, we use litigation as our business strategy, or at least a component of business strategy. That doesn’t happen in Colombia that often. You know, it’s not a very litigious uh society.

LADISLAS MAURICE: And generally speaking, Colombia is quite bureaucratic and the taxes are relatively high. So you don’t create a company in Colombia as in, you know, offshore company. You don’t, you just don’t do this. You create a company here in Colombia when you want to move to Colombia and you want to conduct actual business in Colombia, and that’s a way for you to obtain residency. But there’s an increasingly interesting use case for which people create companies in Colombia that a lot of your clients have been going through.

Offshoring labor to Colombia

ALAN: The way I see it is that, um, every jurisdiction has its sort of strengths. So, so places like Panama are places where, uh, financial instruments and financial investment and offshore companies make sense, right? But in Colombia, that strategy doesn’t make sense. There’s just, uh, regulartory from a tax perspective, it just, it makes no sense. But there’s one huge strength in Colombia, and that is the low cost of labor.

So, that’s the reason, and not just, it’s not even recent, it’s it’s been going on for for decades now. A lot of foreign companies from the states, from Canada, they’re looking to places like Colombia to start a company where they hire local talent, and that talent is exported to their businesses in the US, for example. The example I always use could be, you know, tech development, it could be, you know, any number of these businesses that rely on foreign talent. The whole point there is a call center. Which is a call center, exactly. The whole point there is where you have a US-based entity, for example, you’re marketing to your clients, you’re selling services to your clients, you’re booking profits locally. You’re not booking profits in Colombia. You don’t want to do that. You want to be in a position where you minimize the activity that you engage in Colombia so that you’re tax efficient.

Uh, so all that stuff is happening, for example, in the US, in the UK, in Europe. But what you’re doing is you’re hiring your local company to provide services to your foreign company. And if you structure it in a certain way, because of the low cost of labor, suddenly your margin shoots up. So if, if you’re making $200 a month and your fixed expenses are $100, if you plan it right, if you structure it correctly in Colombia, you can bring that $100 fixed expense down to maybe 20. And suddenly, your margin goes way up. So that’s been a really popular way for foreign investors to, number one, obviously, take advantage of getting a visa, right? So this export of services format lends itself probably better than than starting a local business to getting a visa. But number two, if you have an existing business, you can just take advantage of this to actually make even more money.

Getting residency in Colombia through company formation

ALAN: I would say a good portion of our clients come to us saying, I need a visa. And we explain this and they go, really? And then six months from then they’re like, wait a minute, I’m actually now enjoying a better business situation, but that wasn’t my main focus. Does that make sense? Like they come for one thing and then suddenly they’re in a much better uh business situation because they restructured the way they actually uh manage their business.

LADISLAS MAURICE: So they get a free visa or residency out of it. Yeah. Um, they save a lot of money, they get to spend time in Colombia. I mean, it’s it’s just 360 all around good.

ALAN: Oh, yeah, yeah, absolutely. And it’s not that expensive. Like overall, like the setup is not, I mean, it’s not expensive. So, so it’s it’s a really good situation for clients.

Call center labor costs in Colombia

LADISLAS MAURICE: So, give us an example of approximate labor cost. So let’s say I want someone just for a service, call center, um just to answer customer queries that speaks English really well. Right. That’s been to university. How much should I expect to pay per month roughly?

ALAN: Right. So, uh, in terms of expenses for a profile of, you know, someone who has university, a university degree, is fairly bilingual, maybe starting out, you’re probably looking at maybe just over $1,000, $1,200, the total cost of the company per employee. Now you compare that to what it would be in the states, to hire someone, Canada, whatever, like it’s not even close. All right. And then again, we’re using the this example, but you know, we have clients who manage accounting companies. We have law firms in the states where we’ve set up their export of services company in Colombia and they hire local attorneys to provide part of the services that they offer in the states, for example. So, it runs the gamut.

Advantages of offshoring in Colombia

LADISLAS MAURICE: And look, it may be more expensive than India or the Philippines, but there are a few advantages. One, culturally, Colombians are quite attuned uh to North American culture, so they they understand clients a lot more. So that’s one. Um, two, especially when you’re in in client focused businesses, the people don’t really really get triggered by the accent, which is which is an issue in a lot of other jurisdictions. Three, the time zone is the same, so you don’t have employees that you’re making work in the middle of the night, like in the Philippines. And then four, whenever you want to do team building, come and meet your team, well, guess what, it’s a short flight away from North America. So, you know, you may save three, $400 by going to India or the Philippines, but it’s probably not worth it. Plus you get a visa. This is all an entire structure, an edifice that gets you so many benefits. Uh, that’s the reason uh at this point probably 30% of our business is focused on this because it it’s it’s literally everything we just talked about.

So, tell us about the brochures on this topic that you have.

Guide to starting a company in Colombia

ALAN: Sure. So, we have very comprehensive brochures that explain the process not only of starting a local business that sells into the Colombian market, but also this particular structure, which is exporting services, which is its own sort of structure, its own sort of edifice. Just nooks and crannies of things that have to kind of be focused on uh to make it work. And we have a ton of materials about how to hire employees, employee obligations, OSHA for us, for those of us who are American, in other words, Occupational Health and Safety Obligations are becoming bigger in Colombia. We have probably over 12, 13 brochures just on on on how to make this work. So, we can certainly provide those uh to any of your clients.

How to contact Alan

LADISLAS MAURICE: Fantastic. Thank you, Alan. So there’s a link below. You can get in touch with Alan and then he’ll send you all of the brochures. Alan, thank you.

ALAN: Good to see you, man. Absolutely. And good to see you guys.

LADISLAS MAURICE: Make sure to download my free ebook, 12 Mistakes to Avoid When Investing in International Real Estate, which you can find on my website link below, and feel free to follow me on Instagram @thewanderinginvestor. I look forward to hearing from you.