How to Form an LLC in Puerto Rico
A Puerto Rico LLC (limited liability company) is a business entity that offers strong liability protection and more flexibility than a corporation in how it can be managed and taxed. To officially start your Puerto Rico LLC, you’ll need to file a Certificate of Formation with the Puerto Rico Department of State and pay the $250 fee. First, you must choose a company name and appoint a registered agent for your LLC. Forming an LLC in Puerto Rico takes between a day and a week, depending on how you file. We’ve created a step-by-step guide to help you get your LLC up and running.
Ready to Start an LLC in Puerto Rico?Get Started
Name Your LLC
Designate a Registered Agent
Submit LLC Certificate of Formation
Write an LLC Operating Agreement
Get an EIN
Open a Bank Account
Fund the LLC
File reports + taxes
1. Name Your LLC
Before you file your Certificate of Formation, you need to make sure your business name follows Puerto Rico’s LLC name requirements, written in PR Laws Title 14 § 3952. First, you must make sure your preferred name is available—meaning no other business in Puerto Rico is currently using it. Also, your LLC name must contain one of the following:
- “Limited Liability Company”
- “Compañía de Responsabilidad Limitada,”
- the abbreviation “LLC,” “CRL,” “L.L.C.” or “C.R.L.”
Already have a business name? Check to see if it’s available.
Can I reserve a business name in Puerto Rico?
Yes. If you want to make sure no other business claims your name while you’re preparing to file, you can reserve a business name for 120 days by filing an Application for Reservation of Corporate Name and paying the $75 filing fee.
What’s the difference between my LLC’s name and an assumed business name?
Your official business name is the one written on your Certificate of Formation. If your LLC uses another name to do business, that name is called an assumed business name. An assumed business name is also sometimes called a trade name or doing business as name (DBA).
For example, Hank’s Vintage Toy Shop, LLC might expand its products and start going by Hank’s Toy Emporium. Hank’s Vintage Toy Shop, LLC would remain the business’s legal name, and Hank’s Toy Emporium would be an assumed business name.
To register an assumed business name in Puerto Rico, you must file a Trade Name Application with the Department of State and pay the $150 fee.
Considering using an assumed business name? Learn How to Get a DBA.
2. Designate a Registered Agent
Next, you need to appoint a Puerto Rico registered agent. Your registered agent (also called a resident agent) will be the person or company you designate to accept important notices from the Department of State on your business’s behalf. According to PR Laws Title 14 § 3954, every Puerto Rico LLC must maintain a registered agent. You can serve as your own registered agent, or you can appoint another person or a registered agent service.
Learn why the pros use a registered agent service.
What does a registered agent do?
The basic duties of a registered agent are described in PR Laws tit. 14 § 3542. Your registered agent needs to:
- Maintain a physical address (not a P.O. box) in Puerto Rico.
- Be available during regular business hours.
- Accept legal mail on behalf of your business and forward it to you—fast.
Can you be your own registered agent in Puerto Rico?
Yes. If you are your own registered agent, you will need to put your name and address on the public record. You will also need to maintain regular business hours to accept service of process in person.
To avoid taking a hit to personal privacy or missing a legal summons while on vacation, many business owners hire a registered agent service. A good registered agent will be there to handle your service of process—a great one will let you list their business address on your Certificate of Formation. We’ll bet you can guess what kind of registered agent we are.
Can I change my registered agent after I start an LLC?
Yes. You can change your registered agent in Puerto Rico at any time either by going in person to the Department of State to file a Certificate of Change of Resident Agent form or by creating an account on the Department of State website and filing an amendment online. There is no option to change your registered agent by mail. The fee to change your registered agent in Puerto Rico is $80 for LLCs.
3. Submit LLC Certificate of Formation
Once you’re ready to officially start your LLC, you’ll need to complete a form called the Certificate of Formation and submit it to the Puerto Rico Department of State online, by mail, or in person. The filing fee is $250.
The Certificate of Formation requires the following information about your LLC:
- Company name. Must include “Limited Liability Company,” Compañía de Responsabilidad Limitada, or the abbreviation ““LLC,” “CRL,” “L.L.C.” or “C.R.L.”
- Principal office. This must be an actual street address in Puerto Rico and will go on the public record.
- Mailing address. You can use a P.O. box here if you want.
- Registered agent. Someone who will accept service of process on behalf of your business.
- Business purpose. This can be specific or general. If you don’t want to be specific, you can write something like, “For any and all legal purposes for which an LLC can be organized in Puerto Rico.”
- Authorized person(s). The name(s) and street address(es) of whoever your LLC authorized to complete your Certificate of Formation. This doesn’t have to be someone within your LLC.
- Administrators. The names and street addresses of whoever will be in charge of your LLC after the Certificate of Formation is filed.
- Term of existence. You can either choose a specific date for your LLC to dissolve or choose “indefinite” or “perpetual.” “Perpetual” means you ideally want your business to continue forever, whereas “indefinite” means you expect your business to dissolve at some point, but you haven’t chosen a specific date. Practically, it doesn’t make much difference whether you choose “indefinite” or “perpetual” on this form.
- Effective date. When your LLC becomes official. Your LLC can either become effective immediately (most common) or on any date up to 90 days in the future.
- Signature. The authorized person(s) sign here.
You will also need to provide a business email address where the Department of State can contact you regarding your filing. This business email address does not go on the public record, but everything else on this form will.
How can I keep my personal information off the public record?
The names and addresses on your Certificate of Formation go onto the public record. So if you share your own address on this document, marketers are likely to find it and bombard you with junk mail. Then they’ll sell your information to someone else.
To keep your personal information private, the best strategy is to hire a registered agent who will list their business address in all address fields on the Certificate of Formation instead of yours.
What’s the difference between a member-managed and manager-managed LLC?
In a member-managed LLC, all members (owners) share the responsibility of steering the business’s operations. In a manager-managed LLC, the members hire one or more managers to oversee business operations. The people in charge of managing your LLC will be able to hire employees, enter contracts, and open company bank accounts, plus much more.
For help with deciding which management structure works best for you, see our page on LLC Member Vs Manager.
How do I file the Puerto Rico Certificate of Formation?
You can file the Puerto Rico Certificate of Formation online, by mail, or in person.
By mail or in person:
Departamento de Estado de Puerto Rico
Calle San José
San Juan, PR 00901
4. Write an LLC Operating Agreement
An operating agreement (or limited liability company agreement) is a legal document that outlines the rules and procedures of an LLC. It’s where your members decide how you will distribute profits and losses, how you’ll vote to make changes, and even what you’ll do if you need to throw in the towel and dissolve the business.
Your operating agreement will be an internal document, so you should keep it on record at your business, rather than submitting it to the Puerto Rico Department of State. In the absence of an operating agreement, your LLC will be governed by Puerto Rico’s default laws for LLCs.
Check out our attorney-drafted Puerto Rico LLC Operating Agreement.
Does Puerto Rico require an LLC to have an operating agreement?
No. PR Laws Title 14 § 3951 (g) describes the powers an operating agreement can have in Puerto Rico, but the law doesn’t require LLCs to adopt one. However, you will likely need an operating agreement to open a business bank account, which is a crucial step for maintaining limited liability status. Also, in the case of a lawsuit, your operating agreement could help you win the case by showing that your LLC has been following protocols.
What should be included in an operating agreement?
Your operating agreement is like the blueprint for your LLC, outlining its structure and most important components—everything from your members’ initial contributions to how membership interest can be transferred to how you’ll settle disputes. Here are some topics that operating agreements typically include:
- initial investments
- profits, losses, and distributions
- voting rights, decision-making powers, and management
- membership interest
- dissolving the business
Puerto Rico law doesn’t put a lot of restrictions on what operating agreements can include. For the most part, you can include any rule for your LLC in the operating agreement, as long it doesn’t violate the law or Certificate of Formation.
Does a single-member LLC need an operating agreement?
Yes. It might seem like a waste of time to draft an agreement with yourself, but if you ever face a lawsuit, your operating agreement can help you demonstrate that your LLC is a distinct entity following its own rules—which could be crucial to maintaining your limited liability status. Single-member LLCs also typically need an operating agreement to open a business bank account.
5. Get an EIN
Once your Certificate of Formation has been approved by the Department of State, it’s time to apply for an EIN. An EIN (which stands for Employer Identification Number) is a number given to a business by the IRS for identification on tax forms. It’s basically a social security number for businesses. You can get an EIN for free from the IRS. The fastest way is to apply online, but if you don’t have a social security number, you’ll need to mail in the paper form.
Do I need an EIN for my Puerto Rico LLC?
Yes. Legally speaking, only LLCs that hire employees or have S-Corp or C-Corp tax status are required to have an EIN. But nearly every bank requires an EIN to open a business bank account. Also, if you have an EIN, you can avoid giving your personal social security number to vendors.
Stressed out? Hire us to form your LLC for you!
What To Do After Forming Your Puerto Rico LLC
6. Open a Bank Account
Your LLC needs its own bank account to maintain its limited liability status. Why? Having limited liability status means that your LLC is legally a separate entity, with its own assets, interests, and liability. If your LLC’s funds are mixed in with the owners’ personal money, a court could decide that your LLC is not a true separate entity, which could jeopardize your limited liability.
- Puerto Rico LLC Certificate of Formation (a copy is fine)
- the LLC’s operating agreement
- the LLC’s EIN
- an LLC Resolution to Open a Bank Account (if your LLC has more than one member).
If your LLC has more than one member, use our free LLC Resolution to Open a Bank Account.
7. Fund the LLC
Now that your LLC has a bank account, it’s time to fund it! All LLC members need to make an initial contribution to pay for their membership interest. This typically means each member writes a check to the LLC bank account. Alternatively, members could contribute property or services to the LLC. Just be aware that if members invest property or services, there’s likely to be a tax event.
What is LLC membership interest?
The percentage of the LLC that each member owns is their membership interest. Usually, membership interest is directly proportional to each member’s contribution. So if one member contributes $5,000, and five other members each contribute $1,000, the first member would have 50% membership interest in the LLC, and the other five members would each have 10% membership interest.
Membership interest typically correlates to voting power, unless the operating agreement specifies otherwise. So in our example LLC, the member with 50% membership interest would essentially have five votes, whereas the members with 10% membership interest would only have one vote each.
8. File State Reports & Taxes
Puerto Rico LLCs need to submit an Annual Statement and pay an annual fee of $150. The Annual Statement is slightly less detailed than the Annual Report that corporations have to submit, but it serves the same purpose—updating the Department of State on your business’s ownership and contact information.
Scared you’ll forget? Let us file your Puerto Rico Annual Statement for you.
When is the Puerto Rico Annual Fee & Statement due?
The Puerto Rico Annual Statement is due by April 15th every year, starting the year after you formed your LLC. So if you started your LLC on April 1st, you don’t need to file an annual report two weeks later—your first annual report won’t be due until April 15th of the following year.
How are Puerto Rico LLCs taxed?
Domestic Puerto Rico LLCs are taxed as corporations by default. However, LLCs can also elect to be taxed as a pass-through entity by filing a Classification Election with the Puerto Rico Department of the Treasury and a Federal Classification Election with the IRS.
If your LLC is taxed as a pass-through entity, the profits will pass through the business to the owners, who report the profits as personal income on their tax returns. The profits in this case would be taxed at the federal self-employment tax rate (15.3%).
Learn more about S-Corp Vs LLC tax designation.