Establish Your Business


Business Models

Start Your Business

Starting a business can be difficult. Equally difficult is expanding or relocating an existing business to another location. From financing requirements to legal considerations, it is important you educate yourself on the necessary steps you must follow in order to comply with local regulations and improve your chances for success.

In order to facilitate your entry to Puerto Rico, we have provided the basic information needed to start doing business in Puerto Rico. While we believe the information provided can be of great help, we strongly encourage you to contact a legal expert to help you during this transition.

There are three alternatives in doing business:

  • New Business: develop your own business structure and concept.
  • Buy Existing Business: once the acquisition is completed, business operation continues. A thorough analysis must be made of existing financial data, accounting, receivables, and inventory are some of the information needed to verify the business has a good track record.
  • Buy Franchise: needs a cost/benefit analysis of the franchise as well as the requirements that vary between different franchises. Seek advise with a franchise consultant, if needed.

Legal Business Entities

We recognize that in order to have a successful business, investors and business owners must have the flexibility to decide which business model makes sense for them. That is why we offer investors a wide array of options that optimize insurance coverage, liability shields, and tax treatment.

  • Sole Proprietorship
  • Partnership
  • Corporations
  • Limited Liability Company
  • Business Trusts
  • Joint Ventures
  • Cooperatives & Unions
  • International Financial Entities
  • Insurance Companies
  • Real Estate Investment Trusts
  • Registered Investment Company
  • Public Private Partnerships

Although here are multiple ways to organize your business, we will detail the most common ones in the section below. However, we recommend that you seek professional advice on the requirements that must be met for each business structure.

  • Individual (Sole Proprietorship)
  • Corporation
  • Partnership
  • Cooperatives & Credit Unions

Individual (Sole Proprietorship)

Individual business that is established when a person decides to do business on their own and without any association with other persons.

  • The main advantage of a sole proprietorship is that it is the easiest and least expensive form of ownership to organize
  • A variant of a sole proprietorship is known as “d/b/a” (“doing business as”).

Corporation

  • A Corporation is a business structure in which the company is seen as its own legal entity apart from its owners with a legal, public or private purpose, and given rights and liabilities similar to those of a person.
  • Corporations are able to buy and sell property, do contracts, bring lawsuits, and must pay taxes. In the event of bankruptcy or a lawsuit the company, not the owners, is held liable.
  • The major advantages of a corporation are that the personal liability of the owners is limited, and that the corporation can go on indefinitely.
  • The main disadvantage is that money earned by the corporation is taxed twice: once when the company itself claims the income and again when the shareholders claim the income.

Corporations in Puerto Rico abide by the General Law of Corporations, as amended. This statute pretends to facilitate corporate procedures and simplify permits as contemplated. The General Law of Corporations provides that a corporation can be created by one (1) person. Different form Public corporations that are created by law, local or foreign corporations, profit or non-profit, only satisfy the purpose for which they were organized or incorporated.

Partnerships

  • A Partnership is a legal instrument that allows becoming partners in a group of persons and dividing profits between them including profits and losses resulting from a business or enterprise.
  • The Civil Code of Puerto Rico defines a partnership as “a contract by which two or more people are obliged to put in common, money or goods, with the intention to divide profits between them.
  • The existence of the partnership created by the Civil Code starts the moment the contract is signed, unless there is another agreement between partners.

On January 2011, Act No. 1, known as the ‘Internal Revenue Code for a New Puerto Rico’ which reformed Puerto Rico’s tax system (referred hereto as the Puerto Rico Internal Revenue Code). Before the enactment of the Puerto Rico Internal Revenue Code partnerships did not necessarily receive pass-through tax treatment. Now, upon the enactment of the Puerto Rico Internal Revenue Code, Puerto Rico partnerships automatically provide pass-through treatment. Partnerships are not subject to tax at the partnership level, instead taxation is at the partner level. Cooperatives & Unions

A Cooperative is a not-for-profit entity founded by a group of private persons with a common social interest. The cooperative will embody the members’ solidarity and efforts to carry out socioeconomic activities to fulfill individual and collective needs. Generally, cooperatives are formed by a group of eight (8) persons, except the cooperatives of workers that only require five (5). For details on how to organize a cooperative, please visit the Commission of Cooperative Development of Puerto Rico: Commission of Cooperative Development of Puerto Rico

Contact us to learn more about the business models available to you in Puerto Rico.