LLCs: on the up

Article

Historically, the most utilised form of legal entity in the Republic of Panama has been the sociedad anónima (corporation). However, the limited liability company (LLC) is becoming an increasingly popular type of legal entity. It offers individuals interested in conducting business in the Panama a different organiational structure, while still providing similar benefits to those offered by corporations.

Despite numerous similarities, there are some key differences between a corporation and LLC. On the one hand, unlike corporations, the law that regulates LLCs requires the name of the members and their capital commitments be made public. The information must be disclosed at the time its corporate charter, and any relevant transfer of membership quotas, are filed with the public registry.

For both legal structures, there is no minimum or maximum capital contribution requirements. This is very appealing for foreign startups, but LLCs need to have at least two members.

Likewise, as with corporations, the revenue generated by an LLC overseas is not taxable in Panama. Regarding the governance of LLCs, the members are entitled to designate one or more individuals to act as managers, to represent them and the entity. These managers need not be members of the LLC. As with Panamanian corporations, LLCs may designate one or more officers or attorneys-in-fact to exercise specific roles in the day-to-day operations, as established in the articles of incorporation.

Another advantage of using an LLC is that they offer the possibility of establishing the corporate domicile in a foreign country (conforming to that jurisdiction’s requirements). It is also possible to transform the structure of an LLC into a corporation, thereby offering the possibility for individuals to modify the respective structures based upon their specific, or changed, needs.

All of these advantages, coupled with the overall improving Panamanian economy, make LLCs an interesting corporate structure when investing in Panama.