In 2018 after studying Spanish for several years I took the decision to do entrepreneurship in Colombia. This was a move that caused me a lot of stress, but which also gave me a lot of joy and useful experience when it comes to operating in foreign, and especially, emerging markets.
In this article I will try to give you an overview of the process in case you have been thinking of creating a startup in Colombia, as well as important aspects which I have found that many other guides on this topic do not cover.
Your business idea when doing entrepreneurship in Colombia
The very first thing you should think about when doing entrepreneurship in Colombia is the actual business idea. I know that many will emphasize talking to a lawyer first or checking with the migration offices. I would however first urge you to create a very detailed business plan and examine which skills and resources you have in order to create something in the Colombian environment.
The reason for this is that many foreigners choose to make an FDI only because they wish to live in the country and oftentimes they haven’t even got a clue about what kind of business they wish to actually run. Don’t do this! Authorities are increasingly cracking down on people who only use their FDI in order to get a visa when they in reality don’t know what they wish to accomplish.
There have also been cases, especially in conjunction with the Venezuelan migration crisis, where people forge documents and bribe accountants in order to remain in the country. Authorities are then understandably cracking down on such misuse since the intended purpose of a business visa is just that – to actually create a business.
Besides, would it not be an interesting endeavour to actually create something in the country you are interested in living in? And to reach another level in your entrepreneurship experience and forge good business relations which can be of use in the future.
That being said there are a few different ways you can run a business in Colombia. The first one is to make an investment and let someone else run it for you, which has its ups and downs. The positive side is that you won’t have to deal with the visa process and a local, or foreigner with adequate experience, can run it for you.
The negative side with this is of course that you will have less insight, which entails a risk that the people, if not sufficiently trustworthy, might scam you to varying degrees (or just find loopholes in order to use your trust in legal ways). Another negative side is that you won’t be there that much in order to see your creation grow.
Myself I like to have an active hand in whichever venture I’m doing, but this is a matter of personal choice of course. Be aware that it might be a good idea to improve your Spanish in order to do this.
Let’s get going…
Now if you choose to actually be there and run the company yourself you will need a business visa (in Spanish called socio visa). In order to get this you will have, but not limited to, the following things:
- An investment of 100 minimum salaries (100 salarios minimos) is required to do entrepreneurship in Colombia. The minimum salary changes at the beginning of each calendar year based on, among other things, the inflation rate of the Colombian peso. I would say that we, at the time of writing this, are talking about roughly 25 000 usd. Also keep in mind the exchange rates, which can make a huge difference.
- A statement from your Colombian bank that you have invested the said funds from your personal account to your Colombian corporate account.
- A statement from your corporate accountant saying basically the same thing as the previous point. I would say that this is another level of security which the authorities are looking for, in order to diminish the risk of for example forged documents. The accountant needs to be licensed. Also keep in mind that the stock company is the only type of company you can get a visa for. A company of the type persona natural (where your personal funds are tied to the company) no longer makes you eligible to get the visa.
The chicken and the egg problem of entrepreneurship in Colombia
Now let us return to the discussion about your business plan. During earlier years you only needed to show that you had invested the said money and that would be it in order to do entrepreneurship in Colombia and get the visa approved. Due to the misuse of the visa done by many foreigners things have now changed a bit.
It is still true that you need to show the things mentioned in the points above, but the government official CAN and often times WILL want to have a bit more thorough information about your plans and they often want to see that there is already activity in the company. This however causes a bit of a chicken and the egg problem; if you wish to operate the company in Colombia yourself then you can not do much before you get the visa, since you would be working illegally, but if you haven’t been able to start working then it is kind of difficult to show activity.
How do we solve this? Well you can for example show contracts made with your local or foreign clients in order for the official to see that there is activity going on. It is good if the documents are apostilled, but this MIGHT not be necessary; it can depend on the official you are dealing with and how trustworthy he deems you to be. That’s why I’m saying that you should have your business plan (including clients) well thought out in advance.
I have seen several examples of blogs and heard personal stories where the person got rejected and was simply clueless to why even though the person in question didn’t have a developed business plan (read any indication of what activity the person wishes to do in the country).
Another idea, which I did, can be to invoice your clients for a work in advance before they actually make the payment to your corporate account. I already had some clients which I was working with through a company that I had started up in Sweden, and then I just started invoicing them through the company in Colombia in order to get a smooth transition and to get the company on its feet rather quickly. That is why I think it’s always good to do remote work regularly. You won’t have to bootstrap your next startup, or at least not that much.
Be authentic
Be honest about what you plan to do; in the end it will serve you better, it will be better for the country and it will also not give the rest of us foreigners who actually are interested in doing real business a bad name. In the end it will just cause the authorities to crack down even more on entrepreneurs, which is a huge source of stress, something that I unfortunately also had to go through myself during my own process.
Before I go further I have a little disclaimer for you. There are some areas/activities where you definitely are not allowed to perform as an entrepreneur in the country. These are:
- Weaponry/arms
- Things related to national security
The healthcare industry in Colombia is not forbidden per se if you are going to conduct entrepreneurship in Colombia, BUT there are quite a few regulations when it comes to this area, who is allowed to do what and so on, in order to counteract quacks and snake oil salesmen, so you might run into some trouble here.
I would recommend you to just stay away from this area in general as an entrepreneur in Colombia. I knew for example one British guy who tried to start up an acupuncture firm which failed right away due to, for him, unfavorable legislation in regards to who is allowed to perform what and so on. It’s just too much bureaucracy.
I heard about some other guy from the US that brought people from the states to Colombia for plastic surgery (huge industry in Colombia, surprise surprise…) and was making quite a lot of money out of it. I’m guessing he had less bureaucratic hassle as well since he wasn’t performing the procedures himself and instead just working as a mediator/middleman.
I feel that this sounds a bit risky though. There is a risk of being sued in two different countries if things go wrong, even though it might not be your fault. It is rare, but people do die from plastic surgery all over the world due to faulty implants, chemicals, bad narcosis etc. Huge red flags here if you ask me.
Your local chamber of commerce and the bank
Now when you have thought out your business plan, including your revenue stream, you will need to do three things in order to continue with your entrepreneurship in Colombia:
- Register your company at the chamber of commerce situated in the Colombian city where you wish to operate. Use a recommended lawyer in order to do this. A lot of people who start up firms in Colombia will tell you that you can just go to the chamber of commerce yourself to register. While this is certainly true I myself found this to be wayyy too much paperwork and bureaucratic details which entails a risk of problems further down the line.
- Find a good accountant who knows what he or she is doing and who also seems honest (it’s good to have referrals) in order to avoid both intended and unintended errors when it comes to the accountancy. In any case I recommend against letting the accountant manage your bank account. Get the instructions from the accountant but do the actual transfers and payments yourself. Otherwise this can entail a huge risk if you happen to hire the wrong person. Myself I had to fire my first accountant who I later realized did not really know what he was doing. Keep yourself well informed about the quality of work which the people you hire do for you, and if they do it in a timely manner etc.
- Get a corporate bank account at a Colombian bank. In order to do this your accountant needs to provide you with a cash flow projection. Banks don’t like paper companies either that do not bring in cash. Here you will of course need to instruct your accountant in regards to which cash flow you are expected to have in order for him or her to create this document. When you get the corporate account you most likely will also get a personal bank account at the same bank, since the bank will now know where you get your money from. Due to the country’s history they take a lot of measures against money laundering.
The banking system will probably be your biggest headache when doing entrepreneurship in Colombia
The banking system will probably be your biggest issue when doing entrepreneurship in Colombia. At least that is how it was for me. Since most of my clients were located outside of Colombia this meant that I had to provide a lot of documentation and jump through quite a few hoops every time I wanted to bring that money into the country.
Also note that there is only, at the time of writing this, one bank that you can use in order to transfer funds from paypal to your corporate account in Colombia, and that is one called Davivienda. I didn’t have that one, which had both positive and negative sides. The negative side is of course that I could not transfer directly from paypal to my bank.
The positive side of not having an account with this bank is that it is rather small, and I personally try to avoid smaller banks, since they might be more risky during financial downturns and bear markets. But anyway, if your clients are international and pay you through paypal, this might then need some pivoting. Be aware of this.
Whichever bank you chose you will however most likely be exposed to a lot of bureaucracy when your clients are going to make international payments to your corporate account, which involves phone calls, filling in forms online, getting “properly formatted” invoices from your accountant and so on. All of this is very time consuming and it can take some time before you understand this process correctly, when you should do what and how etc. A major source of stress if you are working with international clients.
Also make sure that you have informed the manager of the local bank that you will be working with international clients before signing the papers. I knew one Australian couple who ran into problems due to this, which likely was caused by the manager not having stipulated the activities correctly in the original contract signed with the bank. More bureaucracy.
A few final words…
Now after establishing the bank account you need to transfer your funds and then get the documents above mentioned under the visa section. It will in my opinion be easier if you pay your lawyer to prepare documents for you which you then bring to the migration office in Bogota. They do have an online service for this, but unfortunately it is many times faulty.
You will also have a better opportunity to clear any doubts the government official has and also it will give you an opportunity to better explain your business idea and possibly ask the official for some advice in regards to your specific case. If your entrepreneurship in Colombia activity gets approved by the official, he will hand you a receipt for you to pay at a nearby bank. Then bring back proof of the payment to the same official at the migration office, and he will then issue the visa so that you can start working with your entrepreneurship in Colombia.
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