Doing business in Honduras is an increasingly attractive prospect, thanks to consistent growth over recent decades, an improving security situation, and good business opportunities. With company formation in Honduras also being of the fastest entity setup processes in Latin America, foreign businesses are increasingly looking at the Central American nation as a good option for investment.
Bordered by El Salvador, Guatemala, and Nicaragua, Honduras has a well-developed agricultural economy, as well as a growing industrial base and evolving professional services sector. Among the country’s major export products are bananas, coffee, fish, garments, and electrical goods.
Over recent years, the country has experienced the second-highest growth rate in Central America, only exceeded by Panama, and The World Bank has stated that Honduras has a great deal of potential for even more accelerated growth in the coming years.
After a quarter of a century of almost unfettered gross domestic product (GDP) growth, Honduras registered a GDP of $25.1 billion in 2019, while gross national income (GNI) — a key marker of prosperity — rose to $2,390 per capita that same year (all figures in USD).
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. Those provide businesses based in Honduras with preferential access to Canada, Mexico, Peru South Korea, the United States, and the United Kingdom, as well as the European Union.
Honduras has seen fluctuations in foreign direct investment (FDI) inflows in recent years, however those inflows have followed a generally upward trajectory that saw a 14-fold increase between 1998 and 2018. While the following year saw FDI inflows drop back, more than $955 million entered the country in 2019.
If you are interested in doing business in Honduras, read on to understand better about some of the entities to choose from, as well as the steps involved in the process. Or go ahead and contact us now to discuss your business options.
Company formation in Honduras: which type to choose?
When going through company formation in Honduras, there are four main types of legal entity to choose from, namely proprietorship, partnership, a private limited liability company (LLC), or a public liability company (PLC).
Each entity has its own advantages and prerequisites, with a proprietorship being the easiest to set up, but carrying unlimited liabilities, with the owner fully responsible for company debts and assets. A partnership is a similar arrangement, differentiated by the fact the liability is spread among the entity’s named partners.
In the case of an LLC, a low minimum share capital of $250 is required for set-up. Such an entity can be fully foreign-owned and must have between 2 and 20 shareholders, who will hold liability equivalent to the portion that they contributed to the company. For an LLC, only one manager is required to be appointed and it can be one of the contributing partners.
Alternatively, a PLC requires two directors to be appointed, with company ownership divided into shares, which are publicly traded on a stock exchange.
A 6-step guide for company formation in Honduras
While steps and requirements can vary based on the type of entity you are choosing to set up, the following guide indicates key steps in the process of company formation in Honduras:
1. Deposit your initial capital in a Honduran bank account
The first step towards company formation in Honduras is to deposit 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 in which you are entering.
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 will include the likes of the company name, its registered address, its structure, and its purpose. This process will usually take around 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 both a zoning certificate and an operational permit to be acquired. The former will establish the location of the business activities, confirming that it is permitted to undertake such activities in that location, while the latter will demonstrate the company’s permission to undertake those activities.
6. Register with local authorities to complete company formation in Honduras
Your company will have to be registered for taxes with the Ministry of Finance’s Revenue Administration Service (SAR), as well as with 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 when forming a company in Honduras
In our experience, these are the common questions and doubtful points of our Clients.
Yes, a business can be 100% foreign owned by either legal persons (“legal entities”) or natural persons (“individuals”).
Registering a company in Honduras takes 4 weeks
The S.A. in a company name in Honduras refers to a “Sociedad Anónima,” which translates 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.
SRL in Honduras, stands for “Sociedad de Responsabilidad Limitada,” which translates 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.
In Honduras, both “S.A” (Sociedad Anónima) and “S.R.L” (Sociedad de Responsabilidad Limitada) are limited liability entity types.
A: Shareholders: An S.R.L. can have one to twenty-five shareholders, while an S.A. must have at least five shareholders.
B: Administration: An S.R.L. has no board of directors, only appointed managers; an S.A. requires a board with at least one member and a comptroller.
C: Liability: In both entities, shareholders are jointly liable for debts up to their contributions.
D: Transfer of shares: In an S.R.L. share transfers require approval from other shareholders, while S.A. shares can be transferred without approval through a public deed.
E: Company Size: An S.R.L. is ideal for smaller companies or those with shareholders outside of Honduras, while S.A. suits larger companies.
F: Regulatory requirements: An S.R.L. faces easier regulations compared to S.A., with fewer formalization requirements.
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. 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 entering and doing 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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