Corporate Structures in Panama: Company or Foundation?

Panama stands out as an outstanding jurisdiction for both investors and entrepreneurs looking to identify a new market to generate or safeguard their income. Understanding the different corporate structures in Panama is essential, as advisors often recommend that executives create companies, typically as anonymous societies, and consider other organizational models, such as foundations.

Corporate Structures in Panama: What is the Difference Between a Company and a Foundation?

The fundamental difference between these structures lies in their purpose and operations. While executives establish companies to conduct commercial activities directly and on a regular basis, founders use Private Interest Foundations to manage assets, protect wealth, and hold various investments. Foundations cannot carry out commercial activities directly; instead, they must operate through companies.

Similarly, a company must have a Board of Directors composed of three natural persons of any nationality, fulfilling specific roles such as President, Secretary, and Treasurer. In contrast, a Private Interest Foundation requires a Foundational Council, which may consist of either one legal entity or three natural persons of any nationality, serving as President, Secretary, and Treasurer.

Another significant distinction is that a Private Interest Foundation issues a document known as the Bylaws or Regulations. This private document outlines the main and secondary beneficiaries, as well as the provisions that will apply in the event of the primary beneficiary’s death. In the context of companies, there are only nominative share certificates, which must be endorsed for transfer. If a shareholder fails to endorse the certificate and passes away, the estate may need to go through a testamentary or intestate succession process.

Structuring a Private Interest Foundation can help avoid this complexity and is often recommended when a client operates through a Company. The Private Interest Foundation can act as a holding for the shares of the company, providing an efficient and simplified solution in cases of ownership transfer and succession planning.

At Cajigas & Co., we are here to help you safeguard your legacy. Contact us immediately for advice tailored to your needs. The creation of these corporate structures in Panama can be a straightforward and uncomplicated process with the guidance of professionals at your disposal.