Company Incorporation in Colombia: Advantages and Disadvantages of an S.A.S.

In recent years, Colombia has experienced significant business growth, reflected in the steady increase in company incorporations. According to data from the Chambers of Commerce, the Simplified Stock Company (S.A.S.) has become the dominant corporate structure, accounting for more than 95% of newly incorporated companies in the country.

What Is an S.A.S. and How Does It Work in Colombia?

A Simplified Stock Company (S.A.S.) is a type of legal entity with its own assets, rights, and obligations, separate from those of its shareholder or shareholders.

In Colombia, the S.A.S. has become a practical and efficient vehicle for both local entrepreneurs and foreign investors, allowing them to develop business projects while protecting personal assets and maintaining operational flexibility.

 

Legal Basis and Legal Nature

The S.A.S. was introduced into Colombian law through Law 1258 of 2008, with the target of simplifying the company incorporation process and promoting entrepreneurship and job creation. The widespread adoption of this corporate form demonstrates the effectiveness of that legislative objective.

From a legal standpoint, the S.A.S. remains a company distinct from its shareholders, with the added benefit of simplified incorporation and administration, which differentiates it from more traditional corporate structures.

Incorporation Process

One of the most distinctive features of the S.A.S. is its incorporation process. As a general rule, an S.A.S. may be incorporated through a private document, duly notarized and registered with the relevant Chamber of Commerce where the company will operate.

Only in specific situations—such as when real estate is contributed as capital at the time of incorporation—is a public deed required, as with other types of companies. In practice, however, this is uncommon, as many companies are first incorporated through a private document and later receive real estate contributions through separate transfer instruments.

Main Advantages of Setting Up an S.A.S.

The S.A.S. has become the preferred corporate structure in Colombia due to several practical advantages, including the following:

Agile Incorporation and Reduced Costs

Because an S.A.S. may be incorporated through a private document rather than a public deed, the incorporation process is faster and involves fewer formalities than other corporate structures. This reduces both time and administrative burden, allowing business operations to begin more promptly.

Additionally, avoiding public deed requirements significantly reduces notarial and registration costs at the incorporation stage. These savings may be redirected toward the business itself, improving early cash flow and operational capacity.

Flexibility y autonomy

The S.A.S. offers a high degree of flexibility in corporate governance and share structure. It allows the issuance of different classes of shares with specific rights and obligations, does not require a board of directors, and may be incorporated with a single shareholder.

This flexibility enables entrepreneurs and investors to tailor the company’s structure to their specific business objectives, provided that such arrangements remain within the applicable legal framework. With proper legal guidance, the S.A.S. can be an optimal vehicle for foreign investors seeking efficient control and administration.

Asset Protection

One of the primary reasons for incorporating a company is to separate business risks from personal assets. The S.A.S. fulfills this function by limiting shareholder liability to the amount of their respective capital contributions.

As a result, shareholders may operate their business with greater legal certainty, knowing that their personal assets are generally protected from the company’s liabilities. This feature, combined with the flexibility and efficiency of the S.A.S., explains why it remains the most widely used corporate structure in Colombia.

Disadvantages and Risks of an S.A.S.

Despite its advantages, the Simplified Stock Company (S.A.S.) also entails certain disadvantages and risks that should be carefully evaluated against its benefits before incorporation.

Risk of Improper Use

The ease of incorporating an S.A.S. has, in some cases, led to its use as a shell company without genuine commercial activity. This can raise concerns among banks, public authorities, and potential investors, and may complicate related procedures, including applications linked to the Partner/Owner Visa.

Where an S.A.S. is used for fraudulent purposes or to evade legal obligations, Colombian law allows for the application of piercing the corporate veil, under which shareholders may become personally liable for the company’s obligations due to improper use of the corporate structure.

 

Lack of Corporate Governance Practices

The flexibility and autonomy offered by the S.A.S. require responsible management. Flexibility and efficiency should not be confused with informality or lack of governance.

In practice, insufficient attention to corporate governance may result in poor decision-making, conflicts of interest, or unclear limitations on the authority of legal representatives, all of which can hinder business development.

These risks can be mitigated through proper corporate structuring and the implementation of governance rules tailored to the company’s size and operations, with specialized legal support.

Equivalent Tax and Labor Obligations

This is not a disadvantage per se, but it is important to note that an S.A.S. is generally subject to the same tax and labor obligations as other corporate forms. There are no inherent tax exemptions or special labor incentives simply by virtue of incorporating as an S.A.S.

While shareholder liability remains limited to the amount of their capital contributions, compliance with tax filings, social security contributions, and labor regulations is mandatory. For this reason, decisions regarding the incorporation of an S.A.S. should be made with appropriate legal and tax advice to fully understand the obligations involved.

When (and When Not) to Use an S.A.S.

Taking the above into account, the Simplified Stock Company (S.A.S.) is generally an excellent option for entrepreneurs and investors seeking to develop a tailored business structure while separating personal assets from those of the company. This separation allows shareholders to manage business risks while protecting their personal assets.

However, there are exceptional cases in which Colombian law requires specific corporate forms. Certain regulated activities—such as professional football clubs, private security companies, and financial institutions—cannot operate under an S.A.S. structure and must adopt alternative legal forms.

Additionally, it is important to assess whether incorporating an S.A.S. is more efficient than operating as an individual or sole trader. In some cases, conducting business as a natural person may be simpler, although it does not provide asset separation and exposes personal assets to business liabilities. A proper legal analysis is therefore essential to determine the safest and most efficient structure based on the nature and scale of the activity.

Conclusion

The S.A.S. can be a highly effective tool for foreign entrepreneurs and investors seeking to develop or expand their business in Colombia. While its incorporation process is agile and relatively simple, its legal, tax, and operational implications must be carefully considered to make an informed business decision.

Before incorporating a company, it is advisable to confirm whether the S.A.S. is the most appropriate structure for your specific project.

Review your case with JG Lawyers and receive comprehensive legal guidance on the most suitable corporate structure for your business in Colombia.

Request a case review with JG Lawyers

FAQ About the S.A.S. in Colombia

Can an S.A.S. have only one shareholder? 

Yes. An S.A.S. may be incorporated with a single shareholder, allowing for separation between the shareholder’s personal assets and the company’s assets.

Is there a minimum capital requirement to incorporate an S.A.S.?

Law 1258 of 2008 does not establish a minimum capital requirement for incorporation. Shareholders may determine the amount of subscribed capital at their discretion. The law allows a period of up to two years for the payment of the agreed capital contributions.

How long does the incorporation process take?

In most cases, the incorporation process takes one to two weeks, including the preparation of documents, registration with the Chamber of Commerce, and obtaining the NIT and RUT from the Colombian tax authority (DIAN).

Is a Lawyer Required to Incorporate an S.A.S. in Colombia?

No, hiring a lawyer is not mandatory, as the incorporation process may be completed directly through the Chamber of Commerce. However, obtaining legal and tax advice before registering the company is strongly recommended.

A lawyer can assist in properly defining the company’s structure, the classes of shares, and the internal corporate governance rules. Although these elements may appear straightforward, drafting them without technical criteria can lead to future conflicts or tax risks.

In practice, adequate legal guidance at the incorporation stage helps prevent costly mistakes later on, particularly as the company grows or attracts investors.