Starting a business in Costa Rica has its own pros and cons. While the economy here is stable, growing steadily every year, and the crime rate is extremely low, the country also suffers a little in terms of unemployment, poor infrastructure, and efficiency of the public sector. However, Costa Rica is one of the most popular countries among investors and business owners.
This is because, for the longest time, Costa Rica relied solely on agriculture as its primary trade and source of income. However, there has been a massive expansion in the types of trades carried out in Costa Rica. Tourism, IT, and exports of medical equipment and electronics are some of the industries that have emerged over the past few years. As these industries continue to grow and new industries emerge, Costa Rica poses various developmental and growth opportunities to new businesses.
Costa Rica is also quite pro foreign investments, and as such, the government is working to revolutionize its policies to make them more favorable and attractive to foreign investors. Since the unemployment rate is nearly 12%, there is also the advantage of finding labor easily for the business, which is quite an important factor contributing to the popularity of this country.
Costa Rica is known for having a business-enabling environment, which makes it a wonderful place to start a business. The policies are quite inclusive and free, which is great for foreign investors. Foreign nationals looking forward to starting a business in Costa Rica do not even have to be residents of the country. There are almost no restrictions on conducting trade here. However, this does not mean that setting up business in Costa Rica is a cakewalk. There are several steps that need to be followed to the T so as to successfully start a business here.
The process of starting a business in Costa Rica, like every other country, consists of multiple steps starting from planning to research and actual execution. With the multitude of processes to undertake, it is better to come up with a checklist and tick off each task.
The first step would be to understand the region. Costa Rica is a unique region with its own customs, laws, and regulations, which translate into its commercial laws and labor laws. For foreign investors and business owners, it is important to get rid of the language barrier either by learning the local language or by hiring a higher-up who is a local in this region. There is also the need to conduct thorough market research and find out the gaps between demand and availability of services or products. This will help in coming up with a creative business idea.
The business idea you come up with for starting a business in Costa Rica must be such that it can actually be profitable in this region. The business idea can be something you have in mind for some time, in which case you can test it out in the market before deciding to start a full-fledged business. Alternatively, it can be something that you find the need for while conducting research about the area. In either case, entrepreneurs need to determine whether that business can be viable in the market and how it can grow over the years.
Creating a business plan is the third step to starting a business in Costa Rica. A business plan is useful for several reasons. Firstly, it would help determine the viability, growth prospects, and profitability of your business idea, and secondly, it would help when looking for investors or trying to get credit from banks. The business plan must contain the intention and vision behind the business, the relevance in the market, whether or not there is an audience, whether there is any competition, how the competitors are performing, how you plan on overtaking the competition, and future plans.
Deciding on the legal structure of the company is the next step when starting a business in Costa Rica. There are different types of legal structures identified in Costa Rica, all of which place different types and levels of responsibilities on the partners and shareholders. The three types of business structures identified in Costa Rica are Limited Liability Company, Joint Stock Company, and Branches of Companies. There are different requirements for the creation of each of these companies, and there are different levels of liabilities placed on the members.
Company Naming is an essential step to starting a business in Costa Rica. Businesses may also need to translate their company name into Spanish if needed. After coming up with a business name, you are one step closer to getting your company registered and up and running. To complete the registration of the company, you would also need to arrange documents, including Power of Attorney documentation and Articles of Incorporation. These documents need to be notarized before submission.
A premise or company address is also required for starting a business in Costa Rica. When setting up an office in Costa Rica, you can choose to either do so on the mainland or in the Free Economic Zones. A company address is required to become eligible for registering as a taxpayer in Costa Rica. Other details like company name and business owner’s name would also be required for the same purpose. Thereafter, the business also needs to be registered for Social Security. This registration is a must for all employers and must be done with the CCSS or Caja Costarricense de Seguro Social.
Upon completing all of these steps, you can start hiring employees for your business as per your needs in the beginning.
Costa Rica surely does have a considerably high unemployment rate. However, despite this, the standard of living here is the highest compared to other South American countries. Employee hiring processes and formalities in Costa Rica have been designed to promote the benefit of both employers and employees. They are in line with the customs of business conduction and the prevailing standard of living of the citizens. With the help of experienced consultants at Zimyo, all local guidelines regarding hiring employees are efficiently taken care of. Thus, to hire employees while keeping in line with the Labor Laws of Costa Rica, employers must observe the following rules, among other criteria:
Vacation time in Costa Rica is set at a minimum of 14 days for every 50 working weeks with the same employer. This number can be increased upon agreement between parties. However, unlike in many other countries, these cannot be carried forward to the next year or exchanged for money. There are 9 paid public holidays every year in Costa Rica. As far as sick leaves are concerned, employees are paid for sick leaves by the employer and the social security fund.
To help determine how easy or difficult it is to conduct business in Costa Rica, the Doing business index created by the world bank comes in handy. This index compares 190 countries in various aspects of starting and conducting business. While there are a lot of factors that contribute to the ease or complexity of conducting business in any region, here are some very important factors that new businesses must look into before investing in costa Rica
There are a lot of business conducting aspects that have been revolutionized and improved in Costa Rica and a lot more that needs to be fixed. The government and all the related agencies are working hard to improve the aspects where it’s lacking. With all its pros and cons, Costa Rica affords a lot of opportunities to new ventures, business owners, and investors to start a marketable and profitable business. Thus, it is one of the best countries to start a business in and one which must be seriously considered by investors, both domestic and foreign.
Zimyo is a leading HR and Payroll management services provider in Costa Rica with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.