Establish a business in Puerto Rico, The Uncompany

How to establish a business in Puerto Rico

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So you decided to establish a business in Puerto Rico, and now you’re asking yourself what kind of legal structure you should have. I’ll mainly go into Sole Proprietorship, DBA and LLC, but I’ll add a link so you can go over more information on the others. Hopefully by sharing this information, it will help you decide and avoid the issues I had. Even if you learn about the options on your own, it’s always good to speak with a CPA and with staff from your local government offices. Some people offer business registry services as well. If you decide to delegate these tasks, make sure the person offering them has the right credentials. Also, make sure you get an official business document with a list of the services they will do for you, what each service costs, and by when you can expect to have everything in place. So, back to some common options. What’s the difference between them?

Sole Proprietor

This would be doing business under your own name. There would be no separation between the sole proprietorship and the owner, so the income earned by your business is considered income earned by you. You would need to keep track of income/expenses and it would be reported in your personal tax return. The sole proprietor is personally liable for any debt or legal issues you encounter. Basically, your savings and property would be up for grabs, if anything should happen.

DBA

DBA stands for ‘Doing Business As’. It’s also referred to as a ‘fictitious business name’, among others. Basically, it’s the operating name of a company, as opposed to the legal name of the company. The legal name would be your own name; you’d be doing business using your social security number (SSN), or an Employee Identification Number (EIN) you can obtain form the IRS, which is tied to your SSN. For example, if your name is John Smith and you work on creating websites, you could have a DBA called ‘JS Websites’. Each city/county/state has its requirements as to whether a DBA needs to be registered, and the cost associated with it ($10-$100, more or less). It’s the simplest way for a someone to conduct business under a different name, but just like the sole proprietor, you would be personally liable for any debt or legal issues.

LLC

LLC stands for Limited Liability Company. The LLC limits the personal liability of the owner(s), and is less formal than a corporation. Many small businesses choose the LLC, because of its protection and less complex requirements. It also gives you the option to be taxed as a ‘C Corporation’ or as an ‘S Corporation’ (where the business doesn’t file its own taxes). That way you would avoid paying double taxes (on both the business and your earnings).

Tips to establish a business in Puerto Rico & common issues (DBA)

EIN & Suri

  • EIN – You can (and should) request an EIN number from the IRS. It’s free! (irs.gov) For obvious reasons, you don’t want to give out your SSN to each and every client, you would use your EIN number instead. You’ll end up with a letter from the IRS you can save & print that shows your name, DBA name, address, and EIN number. You’ll need to print a copy.
  • SURI – You need to register your DBA in SURI. (SURI) You’ll specify the legal name (yours) along with the physical and postal address, and the accounts you’ll need activated. If you’re like me, and you do business online with clients, you’ll probably just need the ‘sales and use’ account. Once you have that, you’ll need to access the account and go to the ‘locations’ tab. There you’ll go to ‘add location’ and again enter the legal name/address, the DBA name/address, and you’ll search for the type of business you do and its associated code. Once done, the option to click on your ‘Merchant Registry Certificate’ will appear. You’ll need to print this one out too.

*Note – I did this first, and the Hacienda office didn’t like it. Since they assume you will do business with locals, they understand you can provide them with your merchant registry certificate no and be done with it. They wanted me to use my SSN if I was registering as a DBA. It’s probably a gap within their process; they might need to do extra work if they need to somehow merge the work you do under your SSN and what’s done with the EIN. That’s only my assumption though. And honestly, it shouldn’t matter if they don’t like it. It’s safer to use an EIN if you’ll be working with people outside of PR.

Bank & Permits

  • Bank – You’ll need the two documents above in order to open your commercial bank account. Each bank will have its own rules for DBA accounts, so do your research and pick the one you think is best. They might ask you for a screenshot of your website, business card, or copy of past invoices. This is important, the name and address on the EIN letter from the IRS and the Certificate from SURI have to match!
  • Permits – Confirm with your CPA & your town’s government office if permits are required to operate under a DBA name. It’s probable you’d need one if you have an office. In such a case, you’d request a ‘Right of Use’ permit for your office location.

Issues I encountered & Tips (for the LLC)

Department of State – After some time, I decided I would register a LLC with the Department of State. First, do a search and see if the name of your business is available. If it’s available, you can go ahead and register here Department of State. If you’re unsure of what name to go with, you can always try a business name generator, powered by AI.

The cost for the register is $250.00 per year. Once finished, you’ll be able to save & print your articles of incorporation and your certificate of organization. You’ll need these later on.

Request your EIN

EIN – After some very confusing calls with the IRS and the bank, I had to request another EIN, this time for a Single Member LLC. Again, it’s free, (irs.gov) and you’ll end up with a letter from the IRS you can save & print that shows the name of your LLC, the address, and the EIN number.

*Important note – If you use the prefix ‘The’ for your business name, it’s possible that when you request an EIN number for your LLC, the IRS system won’t show that prefix. In PR, banks will require the names on the documents to be an exact match before you’re able to open a business account. In my case, I was told by phone from the IRS System simply didn’t allow for that prefix, and that banks in the US were aware. But, I had already sent them a letter, requesting that they add the prefix. And four months later, they sent me a letter with the added prefix.

You’ll need to print a copy of your letter.

Register in SURI

SURI – You need to register your LLC in SURI. (SURI) You’ll specify the LLC name along with the physical and postal address, and the accounts you’ll need activated.

*Important note – Even if you specify you’re registering a LLC in SURI, you’ll need to specify the same name shown on the articles of formation from the Department of State. For example, if you registered JS Websites LLC with the Department of State, you should use that same name in SURI (JS Websites LLC). If you’re like me, and you do business online with clients, you’ll probably just need the ‘sales and use’ account. Once you have that, you’ll need to access the account and go to the ‘locations’ tab. There you’ll go to ‘add location’ and again enter the legal name/address, the location name/address, and you’ll search for the type of business you do and its associated code. Once done, the option to click on your ‘Merchant Registry Certificate’ will appear. You’ll need to print this one out too.

Open your business bank account

Bank – You’ll need the documents from the Department of State, IRS, and SURI in order to open your commercial bank account. Each bank will have its own rules for LLC accounts, so do your research and pick the one you think is best. They might ask you for additional information, like a screenshot of your website, business card, or copy of past invoices. This is important, the name and address on the EIN letter from the IRS, the Certificate from SURI, and the documents from the Department of State have to match!

Make sure you have the required permits

Permits – For a business that operates out of an office location, there are additional permits required to operate in PR. Check with your town’s local office to see what is required. You’ll probably need a Right of Use Permit, and a Patent from your Town. Requirements should be similar to the following list though –

  • Original birth certificate
  • Certificate of good conduct
  • ASUME Office – Certificate of nothing owed
  • CRIM Office – Certificate of nothing owed (individual and business)
  • CRIM Office – Certificate of tax returns for the last 5 years
  • Hacienda Office – Certificate of nothing owed (individual and business)
  • Hacienda Office – Certificate of tax returns for the last 5 years
  • Photo of Car (for mobile business)
  • Personal photo (2×2)
  • Merchant’s Registry Certificate (SURI)
  • Municipal Patent
  • Date of start of operations in town/municipality
  • Copy of society structure
  • Copy of articles of formation & certificate of organization
  • Copy of EIN letter
  • Phone number
  • Physical & postal address of business (water or electric bill) (not for mobile business)
  • Certifications of nothing owed – Hacienda, ASUME y CRIM
  • Copy of merchant’s registry certificate (SURI)
  • Details of members of the board

Easy, right?! No worries, all businesses have to comply with legal requirements, it’s just part of the process. So grab your coffee, stay organized, and plan out your legal errands.

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If you’d like to know more about the other business structures – Business Structures – IRS

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