Business entities in Puerto Rico in 2023
There are five main corporate vehicles available to multinational Clients in Puerto Rico. By far the most popular among international entrepreneurs is the limited liability company (LLC). Other popular structures are i) the Puerto Rico corporation ii) a Puerto Rico partnership iii) a sole proprietorship and iv) a Puerto Rico trust. Read below for more details of each entity.
|Compare different Puerto Rico entities||LLC||Corporation||Partnership||Trust|
|How soon to invoice Clients?||1 month||1 month||1 month||1 month|
|How soon can you hire staff?||2 weeks||2 weeks||2 weeks||2 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week|
|How long to supply corporate bank a/c?||2 months||2 months||2 months||3 months|
|How long to supply co. reg / tax numbers? (can be done online, automatic approval )||1 week||1 week||1 week||1 week|
|Average total business set up costs?||US$11,840||US$17,300||US$31,115||US$16,500|
|Average total engagement period?||2-3 months||2-3 months||2-3 months||3-4 months|
Puerto Rico limited liability company (LLC)
- The Puerto Rico LLC is the preferred corporate vehicle used by entrepreneurs setting up small-sized businesses in Puerto Rico. An LLC has no minimum paid-up share capital requirement. Puerto Rico LLC set up requires at least one director, who must be an individual, and at least one shareholder. The shareholders may be individuals or corporate bodies and are not required to be ordinarily resident in Puerto Rico. The director and shareholder can be any nationality.
- Puerto Rico LLCs are not required to submit annual financial statements to the local tax authorities. However, they are required to pay an annual statement fee and all reports and fees are submitted to the Department of State of Puerto Rico. The annual statement fee is US$150. The company’s accounts must be annually audited if annual turnover is US$3 million or more.
Puerto Rico corporation
- For US income tax-related purposes, a Puerto Rico corporation is considered a foreign entity. However, a corporation that is incorporated under Puerto Rico’s laws is considered a domestic corporation.
- A Puerto Rico domestic corporation is taxed on its worldwide income. The standard corporate income tax rate is 18.5%, but can be as high as 37%.
- A Puerto Rico corporation requires at least one shareholder and one director.
Puerto Rico partnership
- A Puerto Rico partnership generally is not subject to tax because the income (loss) is passed through to its partners. Therefore, both partners typically account for their distributive share of the partnership’s taxable income (loss).
- A foreign entity that does not have business in Puerto Rico and is also the seller of a partnership is subject to 15% income tax.
Puerto Rico sole proprietorship
- A Puerto Rico sole proprietorship follows the normal requirements for a starting a business. However, it does not have juridical rights. In other words, it cannot sue, be sued or enter into a contract (as a legal entity).
- The owner of a Puerto Rico sole proprietorship is taxed at an individual rate from 7% to 33%.
Puerto Rico Trust
- In Puerto Rico, the surviving spouse of a deceased individual that is in a retirement plan trust will have absolute rights to all the trust benefits.
- A Puerto Rico trust is generally not subject to tax.
- Information on the beneficiaries of a Puerto Rico trust is not available to the public.