Nothing is as strange and mysterious as figuring out the “magic bullet” that will make your business concept take off and become successful over the long term. For many of us, it is a question of careful planning and hard work. We recently met with a local business lawyer, to learn the basics of How To Start a Business in Pereira, or How to Start a Business in Colombia.
How to Start a Business in Pereira
Believe it or not, it’s actually pretty easy to get a business in Colombia set up, or even Invest in Colombia. The timeline for it is a couple weeks to a month – but, there are a few ways you can set yourself up for success while also protecting yourself from liability. If you are a foreign resident, then knowing some of the tips and tricks we are going to share with you could save you a lot of time and money.
#1 | Do the DIAN, or tax bureau paperwork
Believe it or not – you can actually put the cart before the horse and start a Business in Colombia without having your papers straight all the way. BUT – once you open the doors, you have about a week to start the process. There is a bit of leeway for you to either “test” an idea, or get started on the execution of it. You need two things:
- RUT: No cost, it is a registration number that identifies your business in Colombia.
- NIT: No cost, it is usually the number of your Cedula, or Colombian ID card plus a number that denotes the tax classification of your business. This is what allows the state to come and solicit taxes from you.
Go to the DIAN. This step will require a decent knowledge of Spanish. This isn’t like the US where you will find forms in Spanish/English…only Spanish.
#2 | Camara Comercio or Chamber of Commerce
In this step, you will receive a number designating you as a “persona natural como comerciante” which authorizes you to operate legally. This is also the step where you ensure your business name hasn’t been used prior, or that it isn’t too generic either. It would be good to note that at this stage, you MUST have a Colombian bank account.
#3 | Food Handling Safety Courses and Certifications
According to the department of health, you must have a food handling certificate for any type of business that comes in contact with food. SENA is a local technical school which offers these courses at a reasonable rate. As long as you can show you are studying with the intention to have your certificate within “x” amount of time, you can begin or continue to operate.
#4 | Department of Health Inspection
There is a rating system for each food establishment in Pereira. If you see a red sticker on the wall of an establishment, it means they have serious rodent or bug or bacteria problems and are at risk of imminent shutdown. Yellow means that there is some risk, or some insect issue occurring currently. Green means everything is good, your business is in full compliance and you have the green light to continue to operate.
You will start to receive visits from the Health and Fire department to ensure you are operating up to code standards. You will find certain nuances like “light colored uniforms for food handlers” and become acquainted with all the rules and regulations you must meet to be open. Don’t stress just make sure you take notes and try to comply with each thing they give you.
#5 | Fire Department
This is your safety and building code compliance circuit. Here you show that you have a first aid kid, fire extinguisher and emergency plan. You must have all the same labeling of “First Aid”, “Fire” and “Exit” as in the US or Canada pretty much. There is also a special Fire Department Tax that you will be asked to pay when you do the paperwork for the Camara Comercio.
Obviously this whole process can be a bit costly, and while it all sounds simple, we still need to get down to the dollars and cents of the matter. Your overall costs can run anywhere from 200,000 COP (just over $50 USD) on up to 4,000,000 COP (or over $1,000) for startup depending on what type of business, your tax zoning and many small factors which can find you in legal issues quickly if you aren’t careful. But, with a bit of planning, it isn’t that hard to do either.
The average cost of real estate will typically start at 2,000,000 COP and work it’s way up from there. Circunvalar can cost 4,000,000 – 12,000,000+ COP per month!
Know Your Market – Especially if you haven’t lived in Pereira for very long, it would be wise to consider investing in a market study, this can cost 150,000 COP or more depending on the scope.
Environmental Impact – There are some specific laws and regulations protecting certain natural resources. For example, if you have a farm with a “guadual,” or bamboo grove, you cannot cut without a permit, and you cannot sell cut bamboo without another special permit. It would be wise to ensure you fully understand these issues – depending on the business you are running.
Customer Service – One of the easiest ways to get ahead of the competition in Colombia, is to offer good customer service. Especially since this isn’t as culturally common here, you might find a special niche depending on the level of service you can provide.
Who is Juan “Juano” Lopez Corzo?
A Pereira native, Juano who studied in both Colombia and Spain, where he gained not only an education, but an experience that has opened him up to be able to work with foreign residents and visitors as an experienced traveler. He is an Environmental Administrator and a Lawyer who specializes in Commercial Rights with a masters in International Relations.
Especially if you are new to business in Pereira, or your Spanish is limited, then you might consider hiring a professional to guide you in your new business startup. Of course, you will want a professional who can provide service from a standpoint of actual experience and cultural understanding. In other words, someone like Juano, who has traveled, who speaks English, and who has previous experience starting and advising businesses in Colombia.
For the peace of mind a little bit of sage advice will give you, the cost of his services are negligible and start around 800,000 COP or ~ $280 USD. He can guide your through the necessary paperwork while ensuring you are a bit more protected from a legal standpoint.
Business Advice for Gringos by Gringos
A local expat business owner in the Coffee Axis weighed in on the debate with some advice for other gringos. This person asked to stay anonymous.
Hello all, one point which I like to reiterate is the fact that almost no one local here seems to grasp that a foreigner who is opening a business needs to actually make a living out of it. We are in the tourism business and competition is super hard and dominated by price thinking rather than quality thinking. Also our restaurant has been hampered by general price levels of the market – bueno-bonito-barato. Funny enough everybody really likes to try something different – oh BTW, only as long as they can get it at the same price as bandeja paisa.
Creating a business here in the paper jungle can be challenging and be aware that as a foreigner – maybe even with a not so perfect Spanish – many will try to take advantage of your lack of specific knowledge. Most people you try to work with will do exactly as you say and no more. EVEN if what you ask is completely stupid. No matter how much you pay for assistance you will receive little or no guidance on how to do things intelligently. For this reason, it is important to consult with an expert that generates confidence.
Do not expect anyone to take ownership of any process, do not expect employees to be responsible. Funny thing they prefer to work by instruction so nothing is their fault (just did what you said), and at the same time they are resistent to any advice that could ask them to work smart and not hard.
Whenever you want to start a business here as a foreigner or even as a local do it as a Regimen Simplificado. That will give you all the benefits of having a NIT (tax registry) without all the imposed taxes. There are limits to the amount of money one can make in a month, but there are not the same rigid demands for accounting reports and you can invlice your services without having to get the government approved number of invoice licenses. As long as one does cash business this is the way to do it.
Like give me instructions and I do as I always did, and when you confront them they will stubornly claim that they followed your instruction to the point no matter how much factual evidence you can rub in their faces to prove the opposite.
For the previous reasons, it is very important to have a good employment contract, which a legal counselor can help you set up and navigate. And, its not that expensive especially in comparison with North America or Europe.
Colombian Wisdom for Business or Investment in Colombia: El ojo del amo engorda el buey. Si eres propietario de un negocio, para verlo crecer debes estar presente y hacerte cargo. / The eye of the master fattens the ox. If you are the owner of a business, to see it grow you must be present and take charge.
If you work hard to control every single detail in your set up and operations, Colombia is a wonderful place to open business – everything is possible.