Puerto Rico LLC Guide

Table of Contents

The first step in creating your LLC is picking a unique entity name. Here are the basic guidelines for naming your new LLC:

• The entity name must be distinguishable from an existing domestic or foreign entity registered within Puerto Rico. In other words, if someone has already registered the entity name within Puerto Rico, you cannot use the same entity name.
• The name of a limited liability company shall contain the terms “Limited Liability Company” or “Compañía de Responsabilidad Limitada” or the abbreviation “L.L.C.”, “C.R.L.”, “LLC”, or “CRL”.
• The name of the LLC cannot include any words or phrases that indicate or imply it is engaged in a trade or business that the entity is not authorized to pursue. In addition, the name should not create a false implication of government affiliation. For example, your LLC name shouldn’t include “insurer” or “insurance company” unless licensed and registered to do business as an insurance company within Puerto Rico. The LLC name shouldn’t include “college” or “university” unless the entity obtains the proper authorization and licensing.

Like many jurisdictions, Puerto Rico has no stated restrictions on the length of the entity name. However, the IRS does have some limitations on the entity name when applying for an employer identification number (EIN).

The IRS’ online EIN application limits the number of characters to less than 70, so consider using an entity name with less than 70 characters to ensure your entity name matches the name on your CP 575 (EIN Confirmation Letter). In addition, the IRS does not allow the use of a period (.) or many other special characters. The only characters the IRS system can accept are 1) alpha (A-Z), 2) numeric (0-9), 3) hyphen (-), and 4) ampersand (&).

For example, assume you create a company using the legal name “Company ABC, Inc.” and file an EIN application the same day. The IRS will process your EIN and send you a CP 575 confirmation with the entity name “COMPANY ABC INC”. Note how the IRS does not allow the period (.) or the comma (,).

Your LLC must have a registered agent physically located within Puerto Rico. The registered agent is a person or company that agrees to receive any process, notice, or demand required or permitted by law and other official government communications on behalf of the LLC.

The registered agent is not to be used to receive regular mail or other correspondence, such as bank statements. If you don’t have a physical office location to receive mail, consider using a virtual office and mail forwarding service.

The registered agent must have a physical address in Puerto Rico and be available during regular business hours (i.e., 9 am to 5 pm, Monday through Friday). Most registered agent service providers charge between $25 and $200 annually for this service.

If you live in Puerto Rico and want to save money, you can act as your own registered agent. Read our blog “Can I Be My Own Registered Agent” for more information.

Although you may be able to serve as your LLC’s registered agent, we recommend hiring a third-party professional service provider as your registered agent.

To officially open your LLC, you must file the necessary organizational documents with the Government of Puerto Rico. States refer to this document as either the Certificate of Formation or the Articles of Organization.

Puerto Rico identifies this document as the Certificate of Formation. You can find templates and other documents available on the Puerto Rico State Department website.

Here’s the minimum information that you must include with your filing:

• Name of the Limited Liability Company: Include the full legal name of your LLC, which includes the words “Limited Liability Company” or a permitted abbreviation.
• Principal Office: Enter the street address for the LLC’s principal place of business. If you hire a registered agent service provider, you should use a different address from the registered agent. If you don’t have a physical office location or don’t want to use your home address for privacy reasons, consider using a mail forwarding service that allows you to purchase a designated address for a low monthly fee.
• Registered Agent: Provide the name and address of the registered agent in Puerto Rico. You cannot use a P.O. Box for the registered agent address. The registered agent must formally agree to act as your LLC’s registered agent; otherwise, the appointment is invalid.
• Business Purpose: Describe the nature of the business or the purposes of the company.
• List of Organizers: The Certificate should include the name and address of each authorized person for the LLC.
• LLC Term: Indicate whether the company is a term company with a predetermined dissolution date. In most cases, the LLC’s term is “perpetual” until formally dissolved by the members.
• Delayed Effective Date: An LLC is active when the Certificate of Formation is filed with the state. Alternatively, the Certificate may specify a delayed effective date, which cannot be greater than 90 days from the filing date.
• LLC Organizer: The Articles should include the name, address, and signature of the organizer who prepares and files the Articles.

How to Send Your Form to the State

All business entity registrations must be submitted online. File your Certificate of Formation online through the Government of Puerto Rico Department of State website.

LLC Filing Fees

Like many jurisdictions, Puerto Rico charges filing fee to open an LLC. The filing fee for a new LLC is $250.

Most states and jurisdictions do not require an LLC to have an operating agreement; however, it is highly recommended, even in cases where the LLC has only one member.

The LLC operating agreement is a business agreement between the members and managers that lays out the operating rules for the business. The operating agreement usually includes provisions that address ownership, member rights and responsibilities, member ownership percentages, tax considerations, allocation of profits and losses, distribution of capital, and the dissolution of the LLC.

Under The Commonwealth of Puerto Rico’s LLC statutes, an LLC is not required to have an operating agreement. The statutes provide that the members may enter into an operating agreement, which need not be in writing, to regulate the affairs of the company and the conduct of its business. It is recommended to have a written LLC operating agreement, especially for multi-member LLCs with more than one owner.

Your LLC needs an entity taxpayer identification number (TIN) called an employer identification number (EIN). The EIN will help the entity open bank accounts and credit cards, apply for business licenses, set up company payroll for employees, and file income tax and payroll tax returns.

The EIN application is free and can be accessed online using the IRS website. You can find the application page in the “Small Business and Self-Employed Section” of the IRS website. If you are unsure about how to complete the EIN application, you can hire a third-party provider to file the necessary application.

Sometimes, the LLC is ineligible to apply online, and it must paper file or fax the IRS Form SS-4 to the appropriate IRS office. For example, an LLC with non-U.S. ownership may be unable to use the online application. View our post “Form SS-4 (Application for EIN)” for more details and video tutorials on EIN filings for an LLC with non-U.S. ownership.

Once the EIN is approved, the LLC receives a CP 575 (EIN Confirmation Letter), which assigns the EIN and confirms the default federal tax treatment based on the number of LLC members. A single-member LLC is, by default, a disregarded entity, while a multi-member LLC is a partnership.

If the LLC desires to change its tax classification to either an S Corporation or C corporation, the LLC would need to separately file Form 2553 (Election by Small Business Corporation) or Form 8832 (Entity Classification Election).

The LLC should open a business checking account using the LLC name, EIN, and company address. As an LLC owner, you do not want to use your personal bank account to receive payments and pay company expenses. Commingling business and personal accounts can create issues for the LLC and its members, such as piercing the company veil by challenging the entity’s separate existence.

To open a business bank account, you’ll generally need the following information and documents:

• The LLC’s Certificate of Formation or Articles of Organization.
• The LLC’s operating agreement, if applicable.
• The LLC’s EIN with a copy of the IRS CP 575 confirmation notice.
• The name, address, and U.S. taxpayer ID number for any substantial owner of the LLC. A substantial owner generally owns more than 25% of the company.
• Provide a completed and signed Form W-9 (Request for Taxpayer Identification Number and Certification). A foreign-owned disregarded LLC may be required to provide a Form W-8. View our blog post “Form W-8 Withholding Certificate – Which One Do You Need?” for more information.

When choosing a business bank account, there are many factors to consider. Those factors may include account fees, minimum balance requirements, monthly transaction limits on deposits and withdrawals, interest rates on savings products, bank solvency and stability, access to credit, and the quality of their customer service.

Popular banking options for new small businesses include Wise and Mercury.

A business credit card is critical for making business purchases and paying expenses. By opening a credit card, you open a credit profile for your LLC. Building credit history for your business is just as important as building credit for an individual. A solid business credit score and positive history will make obtaining loans, lines of credit, and other financing easier for your LLC.

For more information on banking products, please visit the “Banking & Credit” section of our website.

Beginning January 1, 2024, there are new reporting requirements for entities that are domestic or foreign reporting companies. The Corporate Transparency Act (CTA) implemented these new filing requirements, which require all reporting entities to provide information about beneficial owners and company applicants to the Financial Crimes Enforcement Network (FinCEN).

A domestic LLC is an entity formed within the United States and is generally classified as a domestic reporting company that must file these reports with FinCEN.

What are the Filing Deadlines for an Initial BOI Report?

The filing deadline for an initial BOI report depends on when you opened the LLC. If you opened the LLC before January 1, 2024, the LLC must file its initial BOI report on or before January 1, 2025. If you opened the LLC in 2024, the LLC must file its initial BOI report within 90 days of the entity formation date. If you opened the LLC on or after January 1, 2025, the LLC must file its initial BOI report within 30 days.

What are the Filing Deadlines for a Corrected/Updated BOI Report?

The LLC must file an updated report when there is a change to previously reported information about the company or its beneficial owners. The LLC must file a corrected report if the previously reported information was incorrect when originally submitted.

The LLC must file an updated or corrected report within 30 calendar days of the change in information or discovery of the inaccuracy.

What Information Must be Reported?

The principal purpose of BOI reports is to report information on the natural persons who beneficially own or control a company and the persons who prepare and file the organizational documents.

A beneficial owner includes an individual who exercises substantial control over the reporting company or owns or controls at least 25% of the ownership interests in the reporting company. A company applicant is an individual who directly files the document that creates the company (e.g., the Articles of Organization or Certificate of Formation). A maximum of 2 individuals may be reported as company applicants. There is no limit on the number of beneficial owners included in a BOI report.

For a sample BOI filing for an LLC formed in 2024, view our blog post “How to File BOI Report – Example for Single Member LLC,” which includes a related video tutorial.

Here are some other items you should consider when opening your LLC.

Annual Reporting in the State

Like most jurisdictions, your Puerto Rico LLC must comply with annual filing and reporting obligations to maintain good standing. Puerto Rico may administratively dissolve the LLC if the entity does not comply with these annual obligations.

The LLC annual statement fee is due on or before April 15th of each year. The cost to renew is $150 per LLC.

Launch a Company Website

Launching a website for your new business is essential because it establishes your online presence, making your brand accessible to a global audience 24 hours a day.

A website builds credibility, allowing potential customers to learn about your products or services, read testimonials, and contact you for more information.

Many business create their website using WordPress because it is user-friendly, flexible, and highly customizable. Select a web hosting service and purchase a domain name to get started. You can check out hosting providers like Bluehost, Hostgator, and WP Engine.

Virtual Mailing Address & Mail Forwarding Services

If you are a new entrepreneur running your business from home, consider using a virtual mailbox and mail forwarding service provider.

A virtual office address provides a physical address rather than a P.O. Box. The virtual office enhances the company’s credibility and provides the business owner some privacy protection by preventing them from using their home address for contact information, invoicing, and other correspondence.

A third-party mail forwarding service provider will receive and open your mail, scan the documents, and upload those documents to a secure portal for your review. If you need to obtain the original document, the provider can forward the original mail to your residential address for a small fee.

You can check out mail forwarding providers such as Northwest Registered Agent.

Annual Income Tax Filings

All U.S. companies, including entities in U.S. territories, must comply with all territorial, federal, state, and local tax filing obligations. A U.S. LLC is, by default, a pass-through entity for federal tax purposes, meaning the entity itself is not subject to income taxes because the earnings are passed through to the LLC members and reported on their respective income tax returns.

An entity formed in Puerto Rico is considered a “foreign” entity for U.S. tax purposes. A Puerto Rico LLC is treated as a “corporation” for federal tax purposes. If the LLC obtains an employer identification number (EIN), it can file an entity classification election via Form 8832 to elect partnership or disregarded entity tax treatment.

For more information on business taxes for LLCs, please visit the “Business Taxes“ section of our website.

Payment Processing Services

Most customers expect to be able to pay for goods and services using a debit or credit card. If your business plans to accept credit & debit card payments from customers, you’ll need to partner with a credit card processing company to receive these payments. Some of the most popular choices for credit card processing are Stripe, Paypal, and Wave Invoicing.

Processing credit & debit card payments usually result in a processing fee, which is a fixed percentage of the payment amount. For example, suppose you run an online store, and a customer purchases a product for $50. The payment processor may charge a 3% processing fee on the $50 sale. The processor will keep a fee of $1.50 (3% times $50) and deposit the remaining $48.50 into your company bank account.

Summary

Starting an LLC in Puerto Rico is the first step to launching your new business venture. Our LLC guide helps you navigate the various steps and complete the process as smoothly as possible.

If you need help and want to hire a third-party service provider, entity formation service providers can help you complete each step of the process.