LEGAL OBLIGATIONS FOR S.A.S. IN COLOMBIA
According to TM Group’s Corporate Complexity Index 2023, Colombia ranks among the most challenging countries for business operations due to extensive regulations and requirements. This complexity makes it essential to understand the key aspects of business formalization, especially in establishing a Simplified Joint Stock Company (SAS), a commonly used corporate structure in Colombia. This article aims to clarify the obligations associated with SAS in Colombia and the benefits of choosing this business model.
Why formalize your business?
Business formalization entails legally registering your company with the Chamber of Commerce and meeting various fiscal and legal requirements. This process offers several advantages, including access to financing, the ability to secure contracts with large companies, and tax benefits. Law 1780 allows young people between 18 and 35 to register their business at no cost, fostering entrepreneurship within this age range.
When operating as a sole proprietor, however, the entrepreneur’s personal assets are tied to the business’s obligations. This means that if the business incurs debts or faces lawsuits, personal assets (homes, vehicles, etc.) may be at risk of seizure. Creating an SAS can help mitigate this risk, as it separates personal and business assets.
Advantages of a simplified joint stock company (SAS)
Opting for an SAS offers several significant advantages:
Separation of personal and business assets: By establishing an SAS, entrepreneurs protect their personal assets from business liabilities; only the invested capital is at risk.
Flexible organizational structure: SAS bylaws can be adapted to the business’s needs, allowing shareholders to define operational and administrative rules.
Ease of attracting investors: The SAS structure facilitates the addition of new investors, as shareholders can sell or transfer shares without altering the corporate structure.
Clear tax regime: SASs have defined tax obligations, simplifying tax planning.
While an SAS offers multiple benefits, there are also some requirements to consider:
- Administrative costs: Establishing and maintaining an SAS entails additional expenses compared to sole proprietorships. These include hiring an accountant, paying taxes, and submitting financial reports.
- Legal and fiscal obligations: SASs must comply with various tax, labor, and administrative regulations, such as registration with DIAN and the Chamber of Commerce, filing tax returns, and paying taxes like the Industry and Commerce Tax (ICA).
Accounting and Tax Obligations for an SAS
Upon formalizing an SAS, certain accounting and tax obligations must be met, including: Simplified Stock Companies (SAS) in Colombia must comply with various accounting and tax obligations to ensure regulatory compliance and proper financial management. The main responsibilities include:
- Annual income tax return: SAS companies must file their income tax return each year according to their tax regime.
- Industry and Commerce Tax (ICA): Depending on the business activity and the municipality where the company operates, it is mandatory to declare and pay ICA.
- Bookkeeping and accounting records: Companies must maintain organized and up-to-date accounting records, following the generally accepted accounting principles in Colombia.
- Use of accounting software: In many cases, businesses are required to use appropriate accounting software to manage financial data and comply with electronic invoicing regulations.
- Exogenous information report: Depending on the company’s income level and activity, it may be necessary to submit exogenous information reports to the Colombian Tax Authority (DIAN).
- Other specific obligations: Additional requirements may apply depending on the nature of the business, such as financial reports, audits, or special contributions.
These are just some of the general obligations SAS companies must fulfill. Since specific requirements may vary based on the company’s activities and financial status, it is essential to seek expert accounting advice to ensure full compliance with your obligations as an SAS in Colombia.
Commercial registration and renewal
Commercial registration is the process by which the company obtains a Chamber of Commerce certificate, formalizing its legal existence. This registration must be renewed annually within the first three months of the year by submitting financial statements and paying a fee based on company assets.
When is a statutory auditor required?
A statutory auditor is essential for companies with significant assets or income. This individual, a certified public accountant, reviews and audits the company’s financial statements to ensure compliance with legal standards. In addition to SASs meeting specific thresholds, other entities such as corporations and foreign branches are also required to have a statutory auditor.
Implementing SAGRILAFT
SAGRILAFT is mandatory for companies that, as of December 31 of the previous year, report assets or income exceeding 40,000 minimum wages (approximately 52 billion pesos).
This system aims to prevent money laundering and terrorism financing and is overseen by the Superintendency of Corporations. Companies in specific sectors, such as construction or legal services, are also required to implement this system if they reach a threshold of 30,000 minimum wages.
Business formalization in Colombia, especially through an SAS, is a strategic decision that offers multiple benefits but also involves significant legal, tax, and accounting responsibilities. Choosing this model can protect your personal assets and support your business growth, provided you comply with current regulations.
If you’re considering formalizing your business or need specialized guidance, Nexo Legal is here to support you every step of the way. Our team of specialized attorneys and accountants is ready to provide the solutions your business needs. Contact us today!
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Get started with a free case assessment
What will happen after you fill out this form?
After submitting the form, your case undergoes a comprehensive review by our team of specialist to assess its viability. Providing clear and concise information about your objectives accelerates this process.
Subsequently, a specialist will be assigned to your case, reaching out to you within a day to clear up details about your case and outline the next steps to help you achieve your goals.