A company is a distinct legal personality from its owners (also known as shareholders) in the country. Corporations, which may be for-profit or nonprofit, provide their owners with several advantages, including limited liability protection, the capacity to acquire money via the sale of shares, and the possibility of tax benefits. It is essential to remember that firms in the country are subject to some local and federal laws, including tax laws and standards for corporate governance. To conduct your company lawfully and stay out of trouble with the law, you must abide by these rules.
Characteristics of the corporation in Puerto Rico
A corporation business form has the following essential characteristics:
Limited protection against liability
A corporation’s capacity to provide its owners with limited liability protection is one of its key advantages. Thus, the debts and responsibilities of the company are not individually owed by the stockholders.
Capital raising capacity
Companies may raise cash by issuing stock, which shareholders can buy and sell. This may be a practical method for companies to finance development and growth.
Possibility of tax savings
C corporations or S corporations may be used to tax corporations. C companies are subject to corporate taxation, and any gains that are paid out as dividends to shareholders are subject to further individual taxation. S companies, on the other hand, pay individual tax rates, which may save the company and its stockholders money on taxes.
Needs for corporate governance
Corporations must abide by certain corporate governance laws and regulations, which include having annual shareholder meetings, choosing a board of directors, and maintaining accurate records of all financial and economic dealings.
Filing specifications
Businesses must submit yearly reports to the Department of State and pay yearly franchise taxes. Additionally, they may need to submit tax returns to the Internal Revenue Service (IRS) and the Treasury Department of Puerto Rico.
Set up a corporation business form in Puerto Rico
To establish a company in the country, you must do the following actions:
Select a company name
You must first decide on a name for your company. The name must be original and distinct from that of any existing Puerto Rican companies. Any of the following legal terminators—”Corporation,” “Incorporated,” “Corp.,” “Inc.,” “Sociedad Anónima,” “S.A.,” “Compa” or “Ca”—must be used after a corporation’s name. These ends serve to identify a company as a corporation, which is a distinct legal entity from its owners (shareholders).
Publish your articles of incorporation
Articles of incorporation must be submitted to the country’s Department of State. The name of the company, its mission, the names and addresses of the directors, and the total number of shares of stock that the business is permitted to issue should all be included in the articles of incorporation.
Acquisition of a federal tax identification number
You must request a federal tax identification number from the Internal Revenue Service (IRS) (commonly known as an Employer Identification Number, or EIN). For tax reasons, your firm is identified by this special number.
Join the Puerto Rico department of treasury’s database
You must register with the Department of Treasury of the nation and get a sales tax identification number. You may trace your sales tax payments using this number.
Obtain all required authorizations and permissions
You may need to apply for some licenses and permissions from the Puerto Rico Environmental Quality Board and the Department of Consumer Affairs, depending on the nature of your company.
Open a business checking account
For your company, you must open a separate business bank account. This will make it simpler for you to maintain your company and personal accounts separately and keep track of your business costs.
Create bylaws
Bylaws that describe the policies and procedures for managing your organization must be adopted. The bylaws should provide information about the corporation’s governance, meeting procedures, and decision-making processes.
