Panama is a very attractive place for business for many reasons. It is an ideal location for business owners looking for corporate, financial or personal privacy. Panama is well known for its international companies and appealing tax regime. The government of Panama is keen to encourage and support foreign investment — there are no restrictions on foreign capital. Also, Panama has the fastest-growing economy in Central America.

There are many advantages to doing business in Panama. To begin with, Panama is an independent jurisdiction with high levels of privacy protection. By basing your company in Panama, you will be exempt from all local taxes on income received from outside Panama. Furthermore, Panama has a well-developed professional infrastructure and financial services industry. It should be emphasised that Panama also has an excellent telecommunications system, and if your business is located in this fabulous country you will have easy air access to North and South America. All these factors have contributed to the increased presence of international companies in recent years. There are special legal structures for companies in Panama, described below.

The corporation limited by shares (sociedad anónima) is the most popular company type in Panama and the most common choice for offshore operations. Only one shareholder is required to set up a company, but at least three directors must be appointed before the company can engage in business. One great advantage of the corporation limited by shares is that there are no paying-up rules and no minimum capital requirements. Shares in a sociedad anónima can be bearer or registered, with or without value, and can be of various classes. In terms of bearer shares, there are strict regulations: registered agents are obliged to place the bearer share certificate in authorised safe custody. After capital tax ($60 minimum) and an annual registration fee ($300) have been paid, the Public Registry Office registers the corporation. All industrial and commercial businesses should have a “notice of operations”, which costs 2% of the company’s net worth.

A limited liability company (sociedad de responsabilidad limitada) should have at least two and no more than twenty partners. There are no restrictions concerning the nationality of the partners, but their names, surnames and personal details must be registered with the Public Registry Office, as well as the amount of capital paid into the company by each partner. The following information should be specified in the partnership agreement: the names and addresses of the partners, the duration of the company, its address, the general purpose of the company, its authorised capital and its designated resident agent (a law firm or lawyer). If the number of partners is less than five, the company is not obliged to hold meetings, but generally partners should have a meeting at least once per year. Capital of $2,000–$500,000 is required for this particular legal structure. There are no special requirements for the filing of accounts or annual reports.

A general partnership (sociedad en nombre colectivo) is another option in Panama. Partners in a sociedad en nombre colectivo have unlimited liability, which means that every partner can be held liable, and can be sued, if another partner engages in fraudulent or negligent action while conducting business on behalf of the general partnership. Of course, all partners are jointly liable for business debts. General partnerships are not required to pay tax on income received from outside Panama (even if this income is deposited in the country). Furthermore, they should not pay any local taxes on capital, although they will be subject to local taxes if they operate a business or own real estate in Panama.

The ordinary limited partnership (sociedad en comandita simple) is in basic terms a hybrid between a partnership and a corporation. This particular legal structure requires at least one partner. It is also called a simple partnership, and partners are liable up to a percentage equivalent to what they put in or invested in the company. The main advantage of this type of company is that income earned outside Panama is not taxed. The sociedad en comandita simple is rarely used nowadays.

Trusts in Panama should be established by written agreement. The trustee, beneficiary and settlor should be citizens or residents of Panama. There is no minimum capital required for trusts. A trust must pay taxes in Panama if it receives income in the country.