What are the advantages to do business or invest through a corporation vs in personal name?

by Quatro Legal Corporate Team | Dec. 10, 2023 | Article, Corporate

I will go on a limb and say that ninety eight out of one hundred of our expat clients create their own corporation to do business or buy real estate in Costa Rica. Along with that, there is always a couple of lovely souls that meet a guy at a bar while having a beer and are told it is not the right way to go and decide against it. Outside of that we feel comfortable advising to incorporate for the benefits it creates to our foreign clients.

There is a lot of value in creating at least one corporation for all things Costa Rica. We are not to high or agree with the advice of many lawyers or law firms of having a corporation for every single thing that is done or owned as corporate structures shall be reserved for those cases that truly require it due to complexity, ownership composition, or contingency assessment. We think this is a plot to sell companies and make easy money, so it is important to be aware of it and make sure your counsel is able to fully explain why a company may be needed but more importantly why several companies may be needed.

Some of the reasons to do business or invest through a corporation in Costa Rica are:

 

Separate patrimony

Costa Rican Law considers corporations to be separate entities from their representatives, owners or stockholders and, as such, have separate patrimony. If a claim is filed against the corporation, the personal assets of the representatives or stockholders may not be pursued and vice versa, except for very specific situations, such as criminal cases or family disputes. Companies add and create a layer of protection to their owners from personal liabilities and allows them to operate without the concern of assets and investments being attached or affected by personal problems.

 

Operate your company remotely

From a practical standpoint, for foreign owners who do not reside in the country or who may reside in Costa Rica but travel constantly, corporate operation and decision-making can be done by proxy. Therefore, it is not necessary for stockholders to travel to Costa Rica to make corporate decisions, execute agreements, purchase property or close on transactions. When foreign nationals who do not reside in Costa Rica or who need to travel often to do business or invest in the country, a major concern is whether or not to appoint a local representative to ensure the corporate operation moves forward smoothly and without delay. From a practical standpoint, if you do business or invest through a Costa Rican corporation, corporate operation and decision-making should not be a problem, as it can be done by proxies. Proxies allows to make corporate decisions, execute agreements, purchase property or close transactions; therefore, it is not necessary for the stockholders or corporate representatives to be physically present in Costa Rica.

Under corporate law, a proxy is a person designated and authorized by a stockholder to represent him or her and to act on his or her behalf at a stockholder meeting. A duly granted proxy authorizes voting and participation of a third party in formal corporate meetings. Proxies can be revoked at any time or can be granted for a limited period of time. Under Costa Rican commercial legislation, proxies are simply special powers of attorney granted for participation in specific meetings. They need to be made in writing and must include the respective legal stamps. Additionally, they must be executed by the stockholder and authenticated by a notary public or endorsed by two witnesses. The issuance of a proxy as explained above permits making decisions in meeting to grant the necessary powers of attorneys or take the proper decisions to guarantee the continuance of the corporations operation.

 

Estate planning

A company is a great vehicle to do estate planning for the local assets held in Costa Rica and to secure your assets and belongings under one legal entity. It also facilitates probate and reduces procedures and costs related with the distribution of assets upon someones death. Many of our expat clients under our advice and their foreign lawyers create a local holding company and have it connected to the a will, trust or another company.

If you want to know more about the benefits of incorporating for estate planning purposes or need advise on the proper estate planning structure for you, please fill out the courtesy e-meeting form at the bottom. We will be glad to assist you!

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