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Panama is a very attractive place for business for many reasons. It is an ideal location for business owners seeking business, financial or personal privacy. Panama is known for its international companies and attractive tax system. The government of Panama strives to encourage and support foreign investment - there are no restrictions on foreign capital. Also, Panama has the fastest growing economy in Central America.

Doing business in Panama has many advantages. First of all, Panama is an independent jurisdiction with a high level of data protection. If you incorporate your business in Panama, you are exempt from all local taxes on income earned outside of Panama. In addition, Panama has a well-developed professional infrastructure and financial services industry. It should be emphasized that Panama also has an excellent telecommunications system and having your business located in this fabulous country gives you easy flight access to North and South America. All these factors have contributed to the increased presence of international companies in recent years. There are specific legal forms for companies in Panama, which are described below.

The Limited Liability Company (sociedad anónima) is the most popular corporate form in Panama and the most common choice for offshore operations. Only one shareholder is required to form a company, but a minimum of three directors must be appointed before the company can transact business. A major advantage of the stock corporation is that there are no deposit requirements and no minimum capital requirements. Shares in a sociedad anónima may be bearer or registered, with or without value, and may be of different classes. Strict regulations apply to bearer shares: Registered Agents are obliged to place the bearer share certificate in authorized custody. After paying capital tax (minimum $60) and an annual registration fee ($300), the Public Registry Office registers the corporation. All industrial and commercial companies should have an "operating display" costing 2% of the company's net worth.

A limited liability company (sociedad de responsabilidad limitada) should have at least two and no more than twenty partners. There are no restrictions on the nationality of the partners, but their first and last names and personal data must be registered with the public registry, as well as the amount of capital paid into the company by each partner. The articles of association must contain the following information: name and address of the partners, duration of the company, address, general purpose of the company, authorized capital and named resident representative (law firm or lawyer). If the number of partners is fewer than five, the Society is not required to hold meetings, but in general the partners should hold a meeting at least once a year. This particular legal structure requires $2,000 to $500,000 in capital. There are no special requirements for the filing of annual accounts or financial statements.

A general partnership (sociedad en nombre colectivo) is another option in Panama. The members of a sociedad en nombre colectivo have unlimited liability, which means that each member can be held liable and sued if another member acts fraudulently or negligently while conducting business on behalf of the general partnership. Of course, all partners are jointly and severally liable for business debts. Open partnerships do not have to pay taxes on income they receive from outside of Panama (even if that income is deposited in the country). In addition, they should not pay local capital taxes, although they are subject to local taxes if they operate a business or own real estate in Panama.

The simple limited partnership (sociedad en comandita simple) is basically a mixture of a partnership and a corporation. This special legal form requires at least one shareholder. It is also known as a simple partnership and the partners are liable up to a percentage equal to what they brought or invested in the company. The main advantage of this type of company is that income earned outside of Panama is not taxed. The sociedad en comandita simple is rarely used these days.