Company formation in Honduras presents an increasingly attractive opportunity for entrepreneurs whisihing to do business in the country, driven by the nation’s steady economic growth, improving security conditions and promising business prospects. Honduras stands out in Latin America as the leading destination for rapid company formation, offering an accelerated process that is unmatched by any other country in the region.
Whether attracted by the country’s strategic location or its diverse economic sectors, entrepreneurs looking to capitalize on Honduras’ business-friendly environment are well positioned to navigate the process of business formation in Honduras and take advantage of the opportunities it offers for growth and success.
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Company formation in Honduras is much easier with a partner such as Biz Latin Hub that can guide you through the process. As experts in Latin America and the Caribbean, we know all about the region and can help you avoid pitfalls and problems.
Why choose company formation in Honduras?
Situated between El Salvador, Guatemala and Nicaragua, Honduras has a well-established agricultural sector, a thriving industrial base and a rapidly evolving professional services industry. Its main export products include bananas, coffee, fish, clothing and household appliances.
Over recent years, the country has experienced the second-highest growth rate in Central America, exceeded only by Panama, and according to The World Bank, Honduras is expected to see growth accelerate in the coming years.
The country is party to a number of free trade agreements (FTAs), both via agreements struck by Central American countries collectively and through bilateral treaties. The agreements provide businesses based in Honduras with preferential access to Canada, Mexico, Peru, South Korea, the United States, the United Kingdom, and the European Union.
Although Honduras has seen fluctuations in foreign direct investment (FDI) inflows in recent years, since 1998 they have followed a general upward trajectory, increasing 14-fold between 1998 and 2018. In the following year FDI inflows dropped, but more than $955 million entered the country in 2019.
Company Formation in Honduras: Which Type to Choose?
In Honduras, there are four main legal entities you can choose from when incorporating a company: proprietorship, partnership, a private limited liability company (LLC), or a public liability company (PLC).
Each entity has its own advantages and prerequisites. A proprietorship is the easiest to set up, but it carries unlimited liabilities and the owner is fully responsible for company debts and assets. A partnership is a similar arrangement, differentiated by the fact that liability is spread among the entity’s named partners.
An LLC can be fully foreign-owned and must have between 2 and 20 shareholders, whose liability will be equivalent to how much they contributed to the company. Setting up an LLC requires a low minimum share capital of $250 and the appointment of one manager who can be one of the contributing partners.
Alternatively, a PLC requires the appointment of two directors and company ownership divided into shares, which are publicly traded on a stock exchange.
What are the minimum requirements for company formation in Honduras?
In Honduras, incorporating a company involves several steps and requirements to ensure compliance with the country’s legal framework. Here are the minimum requirements to incorporate a company in Honduras:
- Choose a Business Name: The first step is to select a unique name for your company. It’s essential to ensure that the chosen name is not already in use and complies with the naming regulations set by the Honduran authorities.
- Registered Office: You need to have a physical address in Honduras where your company will be registered. This address will serve as the official location for receiving legal notices and communications.
- Articles of Incorporation: Prepare the Articles of Incorporation, which outline key details about your company, such as its name, purpose, share structure, registered office, and corporate governance structure.
- Minimum Shareholders: In Honduras, you can establish a company with a minimum of one shareholder. Shareholders can be individuals or legal entities, and there are no restrictions on foreign ownership.
- Minimum Capital: Unlike some countries, Honduras does not have a minimum capital requirement for company formation. However, it’s common practice to establish an initial capital contribution, which can vary depending on the nature and scale of the business.
- Appoint Directors: You must appoint at least one director to manage the company’s affairs. Directors can be individuals or legal entities and do not necessarily need to be residents of Honduras.
- Notarization and Registration: The Articles of Incorporation and other relevant documents must be notarized by a Honduran notary public. After notarization, these documents should be submitted to the Mercantile Registry for official registration.
- Tax Registration: Once your company is incorporated, you need to register for taxation purposes with the Honduran tax authorities (Servicio de Administración de Rentas – SAR). This includes obtaining a tax identification number (RTN) for your company.
- Business License: Depending on the nature of your business activities, you may need to obtain specific licenses or permits from local authorities or regulatory bodies before commencing operations.
- Compliance with Regulations: Ensure ongoing compliance with Honduran laws and regulations, including filing annual returns, maintaining proper accounting records, and adhering to any applicable licensing or industry-specific requirements.
A 6-step Guide for Company Formation in Honduras
While steps and requirements can vary based on the type of entity you choose to set up, the following guide indicates key steps in the process of company formation in Honduras:
- Step 1 – Deposit your initial capital in a Honduran bank account.
- Step 2 – Register the articles of incorporation.
- Step 3 – Apply for a tax identification code.
- Step 4 – Register with local and national Chambers of Commerce.
- Step 5 – Apply for required zoning certificate and operational permit.
- Step 6 – Register with local authorities to complete company formation in Honduras.
1. Deposit your initial capital in a Honduran bank account
The first step towards company formation in Honduras is depositing your initial capital in a local bank. You may find that a particular bank is recommended based on the type of business, geographic location, or sector you will operate in.
2. Register the articles of incorporation
Using a notary, you will then need to prepare and register the articles of incorporation with the Chamber of Commerce, which must include your company name, its registered address, and a description of the company structure and purpose. This process will usually take a week.
3. Apply for a tax identification code
After registering the articles of incorporation, you will need to apply for a tax identification code (TIN), which will be used to identify the company on tax declarations, invoices, and other official financial documentation. This process usually takes no longer than a single business day.
4. Register with local and national Chambers of Commerce
The next step for company formation in Honduras involves registering the entity at the Chamber of Commerce, which will carry a fee based on the initial share capital. The maximum fee applicable is 3,000 lempiras (approximately $125 as of May 2021).
5. Apply for required zoning certificate and operational permit
The process of company formation in Honduras requires acquiring both a zoning certificate and an operational permit. The former will establish the location of the business activities, confirming that it is permitted to operate in that location, while the latter will confirm that the company is permitted to undertake particular activities.
6. Register with local authorities to complete company formation in Honduras
To complete the company formation process, your company will have to be registered with the Ministry of Finance’s Revenue Administration Service (SAR), the Social Security Institute (IHSS), the professional training institute (INFOP) and the Social Housing Fund (FOSOVI). Contributions to the IHSS total 5% of each employee’s salary, while the INFOP and FOSOVI receive 1% and 1.5% respectively.
Common FAQs about company formation in Honduras
Answers to some of the most common questions we get asked by our clients.
Can a foreigner own a business in Honduras?
Yes, a business can be 100% foreign owned by either legal persons (legal entities) or natural persons (individuals).
What is the Honduras Company Tax ID?
In Honduras, for companies and individuals engaging in commercial activities, it is mandatory to register in the Single Registry of Taxpayers and acquire a Taxpayer Identification Number, commonly referred to as RUC (registro único de contribuyente) in Spanish.
How long does it take to register a company in Honduras?
Registering a company in Honduras takes 4 weeks.
What does an S.A. company name mean in Honduras?
The S.A. in a company name in Honduras refers to a Sociedad Anónima, which is similar to a Joint Stock Company. This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, crafting a safeguarded boundary. The S.A. structure holds substantial prominence in Honduras due to its exceptional adaptability and flexibility, rendering it the favored option for a diverse range of business ventures.
What does SRL company name mean in Honduras?
SRL in Honduras, stands for Sociedad de Responsabilidad Limitada, which is similar to Limited Liability Company in English. This legal entity operates independently from its shareholders, offering them limited liability. SRL companies are prevalent due to their simplified requirements, making them a popular choice for business structures.
What entity types offer Limited Liability in Honduras?
In Honduras, both S.A (Sociedad Anónima) and S.R.L (Sociedad de Responsabilidad Limitada) are limited liability entity types.
Comparison of S.R.L. and S.A. Business Entities
| Aspect | S.R.L. | S.A. |
|---|---|---|
| Shareholders | One to twenty-five shareholders. | Must have at least five shareholders. |
| Administration | No board of directors, only appointed managers. | Requires a board with at least one member and a comptroller. |
| Liability | Shareholders are jointly liable for debts up to their contributions. | Shareholders are jointly liable for debts up to their contributions. |
| Transfer of Shares | Share transfers require approval from other shareholders. | Shares can be transferred without approval through a public deed. |
| Company Size | Ideal for smaller companies or those with shareholders outside of Honduras. | Suits larger companies. |
| Regulatory Requirements | Faces easier regulations compared to S.A., with fewer formalization requirements. | Has more regulatory requirements compared to S.R.L. |
Biz Latin Hub can Help you with Company Formation in Honduras
At Biz Latin Hub, our multilingual team of company formation specialists is equipped to help you quickly enter the Honduran market and take advantage of the business opportunities available. Company formation in Honduras is part of a wider offer that we have for our clients.
With our complete portfolio of back office support options, including legal, accounting, hiring, and commercial representation services, we can be your single point of contact for forming a business in Honduras, or any of the other 17 countries in Latin America and the Caribbean where we operate.
Reach to us now for personalized assistance or a free quote.
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