Starting a business in Puerto Rico: LLC or corporation, registry, EIN and permits

Disclaimer: Informational content only. Not legal, tax, financial or investment advice. Always verify with a licensed professional in Puerto Rico. Data comes from each firm's public website and may change.

LLC or corporation

Both are created under the General Corporations Act (Act 164-2009). A corporation is formed with a certificate of incorporation; a limited liability company (LLC) with a certificate of organization, and its name must include "Limited Liability Company", "Compañía de Responsabilidad Limitada" or an abbreviation such as LLC or CRL (art. 19.02). Both must keep a registered office and a resident agent in Puerto Rico (arts. 3.02 and 19.04).

The ongoing duties differ. According to the Department of State, corporations must file an annual report by April 15 with a statement of their financial condition, audited by a Puerto Rico-licensed CPA when business volume exceeds $3 million. LLCs do not file that report; they pay an annual fee of $150 by April 15. Missing either leads to penalties and can end in cancellation of the entity.

Taxes usually decide the choice, and they depend on who the owners are and where they live. One point that surprises mainland owners: for U.S. federal tax law, a "domestic" corporation is one organized in the United States or under the law of a State, and "United States" there means only the States and D.C. (26 U.S.C. § 7701(a)(4) and (a)(9)), so an entity organized under Puerto Rico law is not domestic for those purposes. Ask a CPA and an attorney before you file.

Step by step

1. Name and filing. Check the name and file the certificate online in the Department of State's Registry of Corporations and Entities. You will name the resident agent; corporate services firms offer resident agent services if you do not have one.
2. EIN (IRS). The IRS issues the employer identification number online, immediately and for free, if the principal place of business is in the U.S. or a U.S. territory such as Puerto Rico and the responsible party has an SSN or ITIN. The IRS warns about websites that charge for it and recommends forming the entity first.
3. Merchant registration (Hacienda). Businesses register in Hacienda's merchant registry through SURI and receive a Merchant Registration Certificate, which must be displayed where the public can see it at each location. Hacienda's registry guide asks for the application at least 30 days before starting operations. If you sell taxable items or services, this is also where the sales and use tax (IVU) comes in.
4. Permits (OGPe). Permits to operate a business or use a property are processed by the Permits Management Office (OGPe) through the Single Business Portal (SBP), where the Permiso Único groups permits, licenses and certifications. Launched in 2018, the SBP replaced the older SUI system that permit laws still mention.
5. Municipal license (patente). Under the Municipal Code, anyone doing business for profit in a municipality pays a municipal license tax (patente) and files a yearly business volume declaration with that municipality. Each municipality handles its own process.
6. Bank account. Banks usually ask for the formation documents and the EIN; requirements vary, so ask the bank for its list before you go.
7. Employees and insurance. Hiring brings federal and Puerto Rico employer registrations (the IRS explains U.S. employment tax in Puerto Rico in Topic 903); a CPA or payroll provider can set them up. Ask an insurance agent what coverage your activity and lease call for.

Incentives

Act 60 decrees (for example, for export services) are optional and granted by DDEC under their own requirements; read our Act 60 guide and talk to an Act 60 advisor before planning around one. If you are relocating, the Relocation Center and the San Juan CPAs page are good next stops.