How to Start a Business in Puerto Rico Checklist:
Download our free checklist in PDF format to stay on track when starting your business in Puerto Rico.
Download NowHow to Start a Business in Puerto Rico:
A place that's been repeatedly struck by natural disasters may not be the obvious choice to set up shop, but there are a few good reasons to start your new business on the Island of Enchantment.
To do business in Puerto Rico and to qualify for their various tax benefits, you must first become a bona fide resident of Puerto Rico by satisfying the presence test, tax home test, and the closer connection test.
Business and tax registrations can be completed online, and various permits can be obtained via the Unified System of Internal Revenue (SURI).
Thinking of building your empire in Puerto Rico? Continue reading to learn how.
Form your business.
Review Puerto Rico formation options.
Puerto Rico offers seven ways of forming your business, which we cover in detail below. Review these closely and pick the one that fits your business best.
Perform a name availability search.
Once you have an idea of what you'd like to call your business, conduct a name availability search to ensure your preferred name is available.
Read this Puerto Rico business search article which includes guidelines and tips on how to brainstorm name ideas, use a name generator, complete an online business search, reserve a name, and more.
Register your business in Puerto Rico.
Start the online registration process.
After establishing name availability, you can start the online registration filing process (also known as the creation filing) or reserve your name to complete registration at a later date.
To initiate the creation filing process, visit the Puerto Rico Department of State's website.
Some businesses, considered special entities, can only be registered at the San Juan Department of State offices. These include entities in the following categories: insurance companies, cooperatives, banks, and international banking centers.
Special entities that may be registered online include those in the following categories: trusts, municipal enterprises, and those sponsored by municipal corporations.
Navigate to the Puerto Rico Department of State's website.
Select "Create / Authorize" from the right-hand block.
If you've reserved a name, click on "Click here" where it says "Do you have a name reservation?" Alternatively, enter the class, name, and designation of your business, then click "Perform Name Availability Search."
If your name is available, accept the terms and conditions, then click "Next" to continue with the online registration process. You may also complete the registration at a later date once you've reserved your name.
Continue the online registration process.
Provide general information about your business by filling in all the basic information about the entity you wish to register, including the type, jurisdiction, and purposes.
Next to the "Type" field, select "For Profit" or "Non-Profit," depending on your type of business.
In the "Jurisdiction" field, select "Domestic," "Foreign," or "Foreign - NON US."
In the "Purposes" text box, provide a description of the products and/or services you will offer.
Select "Yes" or "No" in the field below to indicate whether you are a U.S. war veteran.
Choose a date when your business entity should become effective from. Click on either "Immediately" or "Becomes Active On." If you select the latter, click on the calendar beside the small text box and choose your date.
Decide when your business entity should remain effective until. Click on either "Forever" or "Becomes Expired After." If you select the latter, click on the calendar beside the text box to choose your date.
Once all the fields have been filled, click "Next."
Enter the filer's details.
Select the type of business entity you are creating, and then enter the details of the person completing the registration of the corporation, otherwise known as the "filer." When you are done, click "Next."
Enter the first, middle, and last names of the filer.
Provide the filer's street address, contact number, and email address.
Provide a business address.
Complete the fields for the street address and mailing address of your designated office in Puerto Rico, then click "Next."
If the street address is the same as the filer's address, check the appropriate box.
If your mailing address is the same as the street address, check the appropriate box.
Enter the details of the resident agent (RA).
Fill in the required fields with the RA's information.
If the registered agent is the same as the filer, check the applicable box. This will fill out the form automatically. If not, check either the "Individual" or "Entity" checkbox.
Enter the RA's first name (if an individual) or the company name (if an entity).
Enter the RA's street address. If their street address is the same as the main office address, check the applicable box.
Enter the RA's mailing address. If their mailing address is the same as the street address, check the applicable box.
Enter the RA's contact number and email address. Then, click "Next."
Provide the authorised person's details.
Fill in the details — full name, street and mailing addresses, and email — of the person who will be responsible for filing your Articles of Incorporation, otherwise known as the incorporator. When you are done, click "Save/Add New" in the bottom right-hand corner. Repeat the process to add another incorporator, or click "Next" if you are done.
If the incorporator is an entity, select this option and fill out the relevant details.
Once you have saved an incorporator, their details will appear in a gray bar at the bottom of the screen. You'll be able to change or remove incorporators' details by clicking on the "Edit" and "Delete" buttons, respectively.
Provide administrators' details.
Enter each administrator's information in the relevant fields. In the event that the faculties of the incorporators continue after the corporation has been formed, click on "Faculties will not end upon presentation of this Certificate," then click "Next."
If the faculties of the incorporators come to an end after the Articles of Incorporation have been filed, click on "Specify Officers."
Select the title, and enter the names, street and mailing address, as well as the email address of each officer.
Under "Term Expiration" select "Indefinite" or enter a date.
Click "Save/Add New" when you have entered all the details. You can now add another officer's details, or click "Next" if you are done.
The details of each officer should appear in a gray block at the bottom of your screen. To change or remove them, click on the "Edit" and "Delete" buttons, respectively.
Upload supporting documentation.
Depending on the type of business entity you are forming, this may be an optional step. Ensure that the file is in PDF or TIF format and that the size does not exceed 7 megabytes.
If you have no supporting documents to upload, simply click "Next" to move on.
Before uploading any documents, ensure that they are free from personal information such as tax identification or social security numbers.
A Certificate of Good Standing is an example of a supporting document you may want to upload.
Click on the calendar to select the date of issue.
Choose the document type from the drop-down menu.
Click on "Choose File" and select your file to upload.
Click on "Upload" to attach your chosen file.
When you are satisfied, click "Next" to complete your document upload.
Review filing information.
Carefully read through all the particulars you've provided, ensuring that the general information and the details of the filer, designated office, resident agent, incorporators, and officers are correct. You can click on the "Edit" button if you need to make changes to any section(s).
When you are satisfied, check the yellow box at the bottom of the page to verify that all information provided is correct, then click "Next."
Add your signature.
Check the box next to your name to add your signature to the Certificate of Incorporation. Then check the yellow text box beneath it to sign the Statement Under Penalty of Perjury, and click "Next."
Complete your payment.
To complete the creation filing, fill in all the fields including your first and last names, address, and credit card details. Select "Process Payment" to complete the transaction.
Filing fees differ depending on the type of entity you are registering.
Register your business for taxes.
Obtain an employer identification number (EIN).
Nearly all businesses will need to register for federal taxes by applying for an EIN. Puerto Rico employers are required to pay taxes imposed by the Federal Insurance Contributions Act (FICA) as well as the Federal Unemployment Tax Act (FUTA). Before you can file these employment tax returns, you must have an EIN.
Download a Spanish version of Form SS-4PR as well as the instructions to help you fill out the form. Send the form through by fax or email.
You can apply for an EIN online.
Whether you choose to email, fax, or post your EIN application, make sure you choose only one method to avoid receiving multiple EINs for a single entity.
Satisfy the bona fide residency tests.
Before you can enjoy the tax benefits of Puerto Rico, you must first meet three tests known as the presence test, tax home test, and the closer connection test. Once you meet the requirements to be a bona fide resident of Puerto Rico, you must notify the IRS by filing Form 8898.
For a comprehensive tax guide and to learn more about becoming a bona fide resident of Puerto Rico, visit the IRS's website.
Read the instructions then complete Form 8898 to nofity the IRS that you've become a bona fide resident of Puerto Rico.
File the completed Form 8898 at the Department of the Treasury, Internal Revenue Service Center, Philidelphia, PA 19255-0549.
Create an account on the Unified System of Internal Revenue (SURI).
All business owners in Puerto Rico need to register with the Puerto Rico Department of Treasury. Ensure that you complete this registration at least thirty days before you commence business operations. You can use SURI for all tax-related matters, including tax estimates, tax payments, evidence of returns, discrepancies, and more.
Visit the SURI home page.
The default language of the website is Spanish, so select "English" in the top right-hand corner, if required.
On the left-hand side of the page, below the heading "Registration," click on "Create SURI Logon."
Click "Filing Returns for the First Time" on the left-hand side of the page.
To register a business entity, click "Register Business Account," or to register as a sole proprietor, click "Register Sole Proprietor Account."
Enter your taxpayer information, including your ID type and ID number. Click "Next."
Fill in the attributes of your business, including the entity type, date, country, and more. Click "Next."
Enter your business name, physical address, and mailing address. Validate your addresses, then click "Next."
Enter your accounting period and your method, then click "Next."
Check the appropriate boxes under "Attributes." Click "Next."
A message will appear on-screen, specifying the type of tax account you will be registered for, as well as the form you'll be expected to file. Click "Next."
Complete the questionnaire, then click "Next."
Upload a letter from the IRS to serve as proof of your EIN. Click "Add" in the middle right of the page to attach a file. Select "Keep," then click "Next."
Fill in all the fields for your information, login information, authentication code, and correspondence. When you're done, click "Next."
Review all information, making a special note of next steps to take. Click "Submit" when you are ready.
Enter your email address to sign the declaration and complete the registration process. Click "OK" when you are done.
Carefully read through all the information on the confirmation screen and keep an eye out for an email with all the login details of your SURI account. Click "Printable View" to print this information, or "OK" to return to the tax registration page.
To complete registration, click on the link in the email verification you will be sent.
Obtain additional certificates.
Apply for a Certificate of Existence.
Also known as a Certificate of Good Standing, you may need to order this certificate if you require evidence that your business is registered with this Puerto Rico Department of State.
Fees for your Certificate of Existence vary depending on the class, type, and jurisdiction of your business entity.
Before ordering a Certificate of Existence, ensure that you meet the following requirements:
- The status of the entity is "active."
- The effective and formation dates for the entity are known.
- The home state or country for foreign and foreign non-U.S. corporations is known.
Limited liability partnerships (LLPs) may not apply for a Certificate of Existence since they renew their registration each year.
Visit the Puerto Rico Department of State's website to order a Certificate of Existence.
Click on "Order Existence" towards the end of the menu on the right.
Enter the registration number or corporation name and select "Search Active Entities Only" or "Search All Entities."
Choose the business entity from the search results.
Confirm the certificate's cost.
Enter the filer's details.
Process your payment.
Validate your Certificate of Existence.
You may validate your certificate an unlimited number of times until it expires. The expiration date can be found at the bottom of the certificate, above the validation number.
Your Certificate of Existence expires one year from its date of issue.
Visit the Puerto Rico Department of State's website.
Hover over "Certificates" in the menu bar, and click on "Validate Certificates."
Enter your Certificate Validation Number in the empty field, then click "Validate."
Obtain the necessary permits and licenses.
Create a Single Business Portal (SBP) Account.
SBP is an online platform that allows users to complete applications for permits, incentives, location approvals, and more. Simply set up your account to get started.
Visit the Single Business Portal.
Select "Apply Now" in the center of the page.
Click on "Create your Project Profile here" on the following page.
In the login box, enter your email address and a password, and select "Create Account."
Enter your account information, including your email address, password, citizenship, identification type, and identification number. Click the search icon once you have filled out all the fields.
Complete the personal information section, including your name, date of birth, contact number, etc.
Read the acknowledgement at the bottom and agree to the terms by ticking the checkbox. Click "Create" once you've verified all the details.
A verification email will be sent to the email you've provided. Follow the hyperlink to verify your SBP account.
Select your permit application.
Log in to your account and click on the orange "Permit Applications" icon on your dashboard. From the drop-down menu, choose one of the following options:
- Construction Permit.
- Unique Permit.
- Unique Incidental Permit.
- Urbanization Permit.
- General Permit for Other Works.
- Land Crust Permit.
- Export Permit for Land Crust Materials.
- Maintenance Permit for Public Infrastructure Works.
- Uses Permit (Residential).
- Automatic Use Permit.
- Permit for Storage of Used Oil.
- Electricity Generators Permit.
- Permit for the Installation of Signs and Ads.
Once you select a permit, you will be taken to a page with all the information including the permit description, required documents, filing cost, and application submission deadline.
Select the "Unique Permit" option to apply for a Single Permit which entails one application that covers the Use Permit, Sanitary License, Fire Prevention Certificate, and the Categorical Exclusion.
From your dashboard, click on "Permit Applications."
Select the desired application from the drop-down list.
From the drop-down menus, select the "Application Type" and "Application." You may need to translate these pages.
At the bottom of the page, select "+Create Project."
Fill in all the fields and click on "Create" at the end of the page.
Why Start a Business in Puerto Rico?
Puerto Ricans enjoy lower tax rates than citizens in mainland U.S. and business owners who have Puerto Rico (PR) as their main place of residence are exempt from paying federal tax.
Some of the tax benefits that Puerto Rico's tax incentive program stipulates include:
- 0% tax on profit distribution or dividends,
- Between 0% and 1% tax on income generated from authentic products made in Puerto Rico,
- 60% tax exemption on municipal taxes,
- 90% tax exemption on property taxes, and
- no capital gains tax.
Business owners in Puerto Rico enjoy access to cheaper skilled labor and professional services, as the median annual income in Puerto Rico is $20,296 compared to $61,937 in the U.S.
Because Puerto Pico falls under U.S. jurisdiction, business owners operating in Puerto Rico don't have to relinquish their US citizenship to reap the business-related benefits that Puerto Ricans enjoy, but they are still protected under U.S. law.
How to Start a Business in the Virgin Islands
Puerto Rico Business Types:
1. Limited Liability Company (LLC):
Puerto Rico LLCs need to file articles of organization with the Department of State where they may be viewed by the public. LLCs need to maintain a registered office in Puerto Rico and require a resident agent who may be a Puerto Rican resident, a domestic corporation, or a foreign corporation authorized to operate in Puerto Rico.
LLCs are taxed the same way as corporations but can file Form 6045 to be taxed as partnerships. The cost for a certificate of authorization is $250.00.
2. General Partnership:
A general partnership is based on an agreement between two or more individuals who are engaged in a joint venture for profit. This agreement may be privately filed or available for public viewing. General partnerships are pass-through entities, which means profits pass directly to owners, who are then individually taxed.
General partnerships in Puerto Rico typically follow the same rules as general partnerships in the U.S.
3. Limited Liability Partnership (LLP):
Two or more individuals may form a limited liability partnership in Puerto Rico. An LLP can be registered by filing a certified copy of the constituent deed with the Department of State for $100.00. Registration must be renewed annually by filing a renewal application.
The name of a partnership must include "limited liability partnership," "LLP," "S.R.L," or "L.L.P." Partners typically have limited liability and are not personally responsible for debts related to the business, but they may be held liable for any obligations that arise due to their own negligence or incompetence.
4. Limited Partnership (LP):
Limited partnerships comprise limited partners who are passive investors and managing partners who take care of the affairs of the partnership and are responsible for any debts and obligations related to the partnership.
5. Sole Proprietorship:
Sole proprietorships may operate under trade names and are owned and controlled by individuals who reap all the profits and losses. Sole proprietorships are not taxed separately, but all income passes down to the owner, who is then taxed at the individual rate.
In Puerto Rico, there are no special legal requirements to form a sole proprietorship, but owners need to obtain an EIN from the IRS and register for taxes using the Puerto Rico Department of Treasury's SURI portal.
6. Joint Venture:
Joint ventures are taxed the same way as partnerships. They are formed when two or more parties form a business and share the control, expenses, profits, and losses. Joint ventures may be an ongoing business relationship or they may be established for a single project.
7. Corporation:
Puerto Rico allows for the formation of for-profit, nonprofit, close, foreign, and professional corporations. Any lawful business may form a corporation, which can be organized by one or more persons or judicial entities.
Corporations are distinct entities, separate from shareholders, officers, and directors, and enjoy continuity of life irrespective of death or ownership transfer. An annual report must be filed electronically for $150.00.
Registration Costs:
Entity Type | Filing Fee |
|---|---|
For Profit Corporation | $150.00 |
Nonprofit Corporation | $5.00 |
Limited Liability Partnership | $110.00 |
Close Corporation | $150.00 |
Professional Corporation | $150.00 |
Foreign Corporation (Certificate of Authorization to do business in Puerto Rico) | $150.00 (CF) / $5.00 (SF) |
Cost of Certificate of Existence:
Class | Type | Jurisdiction | Cost |
|---|---|---|---|
Corporation | For-profit | Domestic | $10.00 |
Corporation | For-profit | Foreign | $10.00 |
Corporation* | Nonprofit | Domestic | $2.00 |
Corporation* | Nonprofit | Foreign | $2.00 |
Professional | For-profit | Domestic | $10.00 |
Close Corporations | For-profit | Domestic | $10.00 |
Special Corporation for Municipal Development | Nonprofit | Domestic | $2.00 |
Sponsored by Municipal Corporation | Nonprofit | Domestic | $2.00 |
Special Employee-Owned Corporations | For-profit | Domestic | $10.00 |
Limited Liability Company | For-profit | Domestic | $30.00 |
Limited Liability Company | For-profit | Foreign | $30.00 |
Banks | For-profit | Domestic | $10.00 |
Banks | For-profit | Foreign | $10.00 |
International Banking Center | For-profit | Domestic | $10.00 |
Trusts | For-profit | Domestic | $10.00 |
Savings & Credit Cooperatives | Nonprofit | Domestic | $2.00 |
Consumer Cooperatives | Nonprofit | Domestic | $2.00 |
Youth Cooperatives | Nonprofit | Domestic | $10.00 |
Insurance Company | For-profit | Domestic | $10.00 |
Insurance Company | For-profit | Foreign | $10.00 |
*Religious, educational, donation, and fraternal nonprofit corporations do not pay fees to obtain a Certificate of Existence.
The Presence Test:
To qualify for Puerto Rico tax benefits, you need to satisfy the presence test, which entails meeting one of the following conditions for the tax year:
- Being present in Puerto Rico for a minimum of 183 days during the tax year.
- Being present in Puerto Rico for a minimum of 549 days in a 3-year period, including the current tax year and the two previous tax years. For each year during this period, you must be present in Puerto Rico for at least 60 days.
- Being present in the U.S. for a maximum of 90 days during the tax year.
- An earned income (pay for services performed, which includes wages, salaries, and professional fees) in the U.S. of no more than $3,000 and being present for more days in Puerto Rico than the U.S. for the tax year.
- No significant connection to the U.S. during the tax year.
The Significant Connection: Another way to satisfy the presence test is by evaluating the significance of your connection to the U.S. You can meet the presence test if you have no significant connection to the U.S. during the tax year.
You are regarded as having a significant U.S. connection if you:
- Have a permanent residence in the U.S.
- Are registered to vote in the U.S.
- Have a child younger than 18 or a spouse whose main home is in the U.S.*
*Except if that child is in the U.S. because their parents are divorced or legally separated and they are residing with the custodial parent under a custodial decree or a multiple support agreement, or if the child is in the U.S. as a student.
**The term "spouse" does not include partners from whom one is legally separated under the decree of divorce or separate maintenance.
The Tax Home Test:
If you do not have a tax home outside of Puerto Rico for the tax year, you meet this requirement. A tax home is your principal place of employment, irrespective of where you reside. If you have no regular place of work, your tax home is wherever you live. If you don't fit either of these categories, you are an itinerant, and your tax home is your place of work.
Exceptions: This applies to certain individuals such as students, government officials, seafarers, and those moving from one territory to another during the tax year.
The following days are not taken into account when determining whether there is a tax home outside the relevant territory:
- Days individuals were temporarily in the U.S. as students.
- Days individuals were in the U.S. as elected territory representatives, or carrying out duties as elected or appointed government officials of that territory or its political subdivisions.
Seafarers are not considered to have a tax home outside Puerto Rico simply because they are employed on a vessel that is used in local or international waters. For seafarers to have a tax home outside of Puerto Rico, the total amount of time spent in international waters and waters within 3 miles of Puerto Rico, must exceed the total time spent in territorial waters.
The Closer Connection Test:
To satisfy the closer connection test, you should not have a closer connection to the U.S. or any foreign country except Puerto Rico. You'll need to have maintained stronger contacts in Puerto Rico than the U.S. or another foreign country. Some aspects that will be examined to determine this include:
- Your home's permanent location.
- Your family's location.
- The location of personal belongings such as vehicles, clothing, jewelry, and more, owned by you or your family.
- The location of your bank.
- The place where you conduct business.
- The location of the jurisdiction where you hold a driver's license.
- The location of the jurisdiction where you vote.
- The location of the charities you support.
- The country of residence you include on official forms and documents.
- The types of forms and documents that you have to file, like Form W-8BEN or Form W-9.
