Doing business in Honduras is becoming increasingly appealing due to its consistent growth, improved security, and favorable business opportunities. Among all Latin American countries, Honduras offers the fastest company setup process, making it an attractive option for incorporating a company in the region. Honduras is bordered by El Salvador, Guatemala, and Nicaragua and has a well-developed agricultural sector, a growing industrial base, and a developing professional services sector. The country’s main exports include bananas, coffee, fish, garments, and electrical goods. According to The World Bank, Honduras has experienced the second-highest growth rate in Central America, with growth expected to accelerate in the coming years. As a result, foreign businesses are increasingly considering Honduras for investment opportunities.
Company formation in Honduras:
After experiencing nearly 25 years of uninterrupted gross domestic product (GDP) growth, Honduras achieved a GDP of $25.1 billion in 2019. Gross national income (GNI) also rose to $2,390 per capita during the same year. Honduras is a party to various free trade agreements (FTAs) both through collective agreements with other Central American countries and through bilateral treaties. These agreements provide preferential access for businesses based in Honduras to markets in 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, overall FDI has shown an upward trajectory, increasing 14-fold between 1998 and 2018. In 2019, over $955 million of FDI entered the country.
If you are interested in setting up a company in Honduras, continue reading to learn about the different types of legal entities available and the steps involved in the incorporation process. Alternatively, you can contact us directly to discuss your business options.
Company formation in Honduras: types of legal entities
In Honduras, there are four main types of legal entities to choose from when incorporating a company: proprietorship, partnership, private limited liability company (LLC), and public liability company (PLC). Each entity has its own advantages and requirements. A proprietorship is the easiest to set up but carries unlimited liability, with the owner being fully responsible for company debts and assets. A partnership is similar but liability is shared among the named partners. An LLC can be fully foreign-owned and must have between 2 and 20 shareholders. The liability of the shareholders is proportional to their contribution to the company. Setting up an LLC requires a low minimum share capital of $250 and the appointment of a manager who can be one of the contributing partners. On the other hand, a PLC requires the appointment of two directors and ownership is divided into publicly traded shares.
6-step guide for company formation in Honduras:
While the specific steps and requirements may vary depending on the chosen entity type, the following is a general guide to the company formation process in Honduras:
1. Deposit the initial capital in a Honduran bank account: The first step is to deposit the initial capital in a local bank. The choice of bank may depend on factors such as the type of business, location, or sector of operation.
2. Register the articles of incorporation: Using a notary, prepare and register the articles of incorporation with the Chamber of Commerce. This includes specifying the company name, registered address, and providing a description of the company structure and purpose.
3. Apply for a tax identification code (TIN): After registering the articles of incorporation, apply for a tax identification code which will be used for official financial documentation.
4. Register with local and national Chambers of Commerce: Register the company with the Chamber of Commerce, paying a fee based on the initial share capital.
5. Apply for required zoning certificate and operational permit: Acquire a zoning certificate to confirm the permitted location for your business activities. Obtain an operational permit to ensure the company is authorized to carry out specific activities.
6. Register with local authorities to complete company formation: Register the company 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). The IHSS receives 5% of each employee’s salary, while INFOP and FOSOVI receive 1% and 1.5% respectively.
Common FAQs when forming a company in Honduras:
Here are answers to some common questions about company formation in Honduras:
1. Can a foreigner own a business in Honduras? Yes, a business can be 100% foreign-owned by either legal entities or individuals.
2. How long does it take to register a company in Honduras? Registering a company in Honduras generally takes 4 weeks.
3. What does an S.A. company name mean in Honduras? S.A. stands for “Sociedad Anónima,” which translates to “Joint Stock Company.” It establishes the company as a separate entity from its shareholders, with shareholders having limited liability.
4. What does SRL company name mean in Honduras? SRL stands for “Sociedad de Responsabilidad Limitada,” which translates to “Limited Liability Company.” This entity type operates independently from its shareholders and provides limited liability.
5. What entity types offer limited liability in Honduras? Both S.A. (Sociedad Anónima) and SRL (Sociedad de Responsabilidad Limitada) offer limited liability in Honduras.
6. What are the main differences between S.A. and SRL in Honduras? The main differences include the number of shareholders required, the administrative structure, transfer of shares, suitability for different company sizes, and regulatory requirements.
Biz Latin Hub can assist you with company formation in Honduras:
At Biz Latin Hub, our team of company formation specialists can help you quickly establish a business in Honduras and take advantage of the available opportunities. We offer a range of back-office support services, including legal, accounting, hiring, and commercial representation, making us your single point of contact for company formation in Honduras or any other Latin American country where we operate. Contact us today for personalized assistance or a free quote.
