Setting Up in Colombia, Part 1: Entity Setup

Colombia is catching the eye of international businesses—and not without reason.  

With a strategic location connecting two continents, a rising middle class and a fast-growing services sector, Colombia offers a practical launchpad for companies eyeing regional growth. According to the Global Innovation Index, Colombia is not only one of the most innovative middle-income economies globally—it also leads in business sophistication across LATAM. 

But while Colombia is open for business, setting up isn’t always straightforward. According to the World Bank’s latest Business Ready Index, Colombia ranks high on market entry—but low on cross-border operations. In other words: starting a business might be straightforward on paper, but what about sustaining and scaling it? That’s where it can get complicated for international businesses.  

In this post, we walk you through how to set up a legal entity in Colombia. We explore the structures available, what to expect and why doing it right the first time matters. 

Step one: choose the right business entity for Colombia

Colombia offers a menu of legal entity options but, by and large, most international companies go with the SAS (Sociedad por Acciones Simplificada). This popular option is basically a simplified stock company. It is flexible, fast and doesn’t require jumping through too many bureaucratic hoops.  

That said, each structure has its advantages—and the right choice depends on your business model, growth plans and operational needs.

Here’s a snapshot of your options: 

Checklist for setting up an entity in Colombia

Colombia’s registration process looks clean on paper. But like many things in LATAM, execution matters. 

Here’s the high-level flow: 

• Pick Your Structure: Don’t default to the SAS—start by aligning your structure with your goals. 

• Check Your Company Name: The Chamber of Commerce keeps this registry. 

• Draft Your Bylaws: This governs everything from shareholder rights to decision-making processes. Get this wrong, and you’ll regret it during your first internal dispute. 

• Get a Pre-RUT Certificate: This is your entry pass to get a Tax ID (Número de Identificación Tributaria – NIT). 

• Register With the Chamber of Commerce: There’s a 0.7% registration tax, plus document review. 

• Apply for Your NIT: Once approved, your business is legally recognized. But there’s still more to do.  

• Request Billing Authorization: Without it, you can’t legally issue invoices. 

• Register Your Corporate Books: Yes, physical book registration is still a requirement here.  

• Open a Corporate Bank Account: Bring your full document pack—and patience. 

• Enroll in Social Security and Compensation Funds: If you’re hiring employees, this step is non-negotiable. 

The total timeline is at minimum about three to four weeks, assuming your paperwork is complete and no one is on vacation at the Chamber of Commerce. You can generally do it remotely using a power of attorney. This option is handy for companies with no feet on the ground yet. 

Tax, compliance and foreign investment regulations in Colombia

Colombia’s corporate income tax is 35% and VAT is 19%. If you’re selling goods or services locally, you’re in the VAT game—no exceptions. 

Foreigners can own 100% of a company in Colombia. No local partner is required. But there’s a catch: all foreign investment must be declared through the Colombian Central Bank. If a single investor owns more than 50%, you’ll need to file additional disclosures under SIRE (Sistema de Información de Registro de Extranjeros). 

As for visas, business owners may need a visitor (V-type), migrant (M-type) or digital nomad visa. This will depend on your local presence and role in operations. 

Even if a local partner is not required, having a trusted local representative on the ground is highly recommended. Tasks like opening a corporate bank account or dealing with local authorities often require in-person coordination—and local know-how can make a major difference in navigating the administrative maze. 

Set up right—or set yourself back

Too many companies wade into Colombia thinking entity setup is a one-and-done exercise. It’s not. It’s a foundational move—one that affects tax liability, hiring ability banking access and your long-term strategy. 

What goes wrong most often? Here are the most common pitfalls: 

• Picking the wrong entity structure 

• Failing to appoint a qualified legal rep 

• Overlooking social security registration 

• Misunderstanding VAT obligations 

• Neglecting foreign investment reporting 

Colombia isn’t intentionally difficult—but setting up shop here is detail-heavy compared to some other countries. If you skip a step, you likely won’t get a slap on the wrist. You’ll be blocked from issuing invoices, hiring staff or even opening a bank account. One mistake can become very costly down the line.  

This is not a country where you want to learn as you go. 

Final thoughts: commit to doing it right

Colombia is a dynamic, opportunity-rich market—but it doesn’t reward companies that cut corners. The country’s regulatory framework is designed to test your commitment. If you’re serious about scaling, then getting entity setup right isn’t optional—it’s strategic. 

Choose a qualified global business solutions partner who not only understands the local terrain but can also support your operations end-to-end—from entity setup and compliance to recruitment, HR, payroll, tax and accounting. From bylaws to bank accounts, the right support can save you weeks—and protect you from months of headaches. 

In Colombia, speed isn’t everything. Precision is. 

Contact us today to learn how our cross-border Entity Solutions can support your global business goals.