Panama Corporation vs LLC vs Foundation: Which Structure for Foreigners?

Panama corporation (S.A.) vs LLC (S. de R.L.) vs foundation: one table

The three structures differ in three ways: who owns them, who appears on the public record, and what they are allowed to do. A sociedad anónima has shareholders and can carry on any lawful activity. A sociedad de responsabilidad limitada has partners whose names are registered. A private interest foundation has no owners at all, only beneficiaries.

Figures as of October 2026. The balboa (B/.) trades at par with the US dollar. The US classification shown is the general rule. Confirm it with your US tax advisor before you form the entity.

The S. de R.L. is governed by Law 4 of 9 January 2009, published in Gaceta Oficial 26202-A.^[2] That law replaced the 1966 regime, although some older S. de R.L.s formed under Law 24 of 1966 are still on the registry and still filing documents.^[3] The foundation is governed by Law 25 of 12 June 1995, which has been amended only in limited points, in 2005, 2006 and 2013.^[4]

Law 4 requires at least two partners and sets no maximum. The number of partners is simply fixed in the partnership agreement (pacto social).^[2] The capital can be stated in any currency and paid in full or in part at formation.^[2]

You are not locked in. An S. de R.L. may transform into any other type of company, including an S.A., by the majority its partnership agreement requires.^[5] The same applies in the other direction: an S.A. can become an S. de R.L. if, for example, a US owner later wants pass-through treatment. Each conversion is a notarized amendment registered at the Public Registry.

Which structure for trading, holding property, holding investments or succession

For most foreign owners, the S.A. is the default for trading and holding, and the foundation is the tool for succession. The S. de R.L. is the right answer in a narrower set of cases, mainly US owners who want pass-through tax treatment and small businesses where the partners want their ownership on the record.

Trading and running a business

Use an S.A. unless there is a specific reason not to. Banks, suppliers and the tax authority know it best, and you can add or replace shareholders without amending the public record. A company doing business in Panama needs a taxpayer number (RUC) from the DGI and an aviso de operación through Panamá Emprende. If it sells taxable goods or services, it must also register for ITBMS, Panama's 7% VAT.

Profits from Panamanian operations are taxed at 25%. Larger companies, generally those with taxable income above USD 1.5 million, pay on the greater of their net taxable income or 4.67% of gross taxable income. Retail trade in Panama is generally reserved to Panamanians, and the commercial license for retail has historically been issued only to Panamanian-owned companies.^[6] Foreign investors planning a shop or restaurant should check the licensing route before they form anything.

If the company will trade internationally and never deal with Panamanian customers, read our guide to what a compliant Panama offshore company looks like in 2026. A group that wants real operations in Panama, such as staff, logistics or a regional management office, should compare the special regimes in our guide to setting up a regional headquarters in Panama: SEM, the Colón Free Zone and Panamá Pacífico.

Holding Panama real estate

An S.A. can own Panamanian property directly, with title registered in its name at the Public Registry. Foreigners use one to keep each property separate from their other assets and to bring in co-owners through shares. Rent from Panamanian property is Panama-source income, so a company that rents out an apartment pays Panamanian tax on the net rent like anyone else. A company does not make local property tax-free.

The sale is where structure matters most. Selling the property and selling the shares of the company that owns it are taxed differently, so decide how you expect to exit before you buy. Our guides to buying property in Panama as a foreigner and to Panama property taxes and closing costs cover the purchase side line by line. If heirs are part of the plan, the usual setup is a foundation that owns the S.A., which in turn owns the property.

A Panama holding company for investments and subsidiaries

The S.A. is the standard Panama holding company. It can own shares in foreign subsidiaries, brokerage accounts, intellectual property or a yacht. Foreign dividends, foreign interest and gains on foreign assets are generally not taxed in Panama.

Whether a dividend the S.A. pays you out of foreign-source profits carries Panamanian dividend tax depends on the company's facts. It is often treated as exempt, but a 5% rate can apply in some cases, so confirm it before you plan distributions. If the holding owns companies in other countries, it may form a multinational group, and from fiscal year 2027 it may need real substance in Panama (see the tax section below).

Opening the bank or brokerage account is often the slowest step. Banks ask for source-of-funds evidence and references, and an account for a holding company can take several weeks to a few months.

Succession and family wealth: Panama foundation vs LLC or corporation

For succession, a foundation generally beats both companies, because it has no shares or quotas to inherit. When the owner of an S.A. or the partner in an S. de R.L. dies, the shares or quotas form part of the estate. The heirs generally have to prove their right to them under whatever inheritance rules apply, which can mean probate in your home country before a bank will release anything. A foundation keeps running after the founder's death under its own rules.

A foundation acquires legal personality when its charter is registered at the Public Registry, with no other authorization needed.^[7] It must have a resident agent (a Panamanian lawyer or law firm) who countersigns the charter, and initial assets of at least USD 10,000.^[7] It is run by a council of at least three members, unless the council is a legal entity.^[7] The charter or regulations can require the council to act only with the prior approval of a protector or similar oversight body chosen by the founder.^[7] Many families use the protector role to keep a trusted person, or the founder, in the loop.

A foundation may hold shares of commercial companies, provided the economic result goes to its own purposes.^[7] That is why the common family structure is a foundation at the top and one S.A. per asset or business below it. Panama itself charges no inheritance or gift tax, as explained in our guide to Panama inheritance tax and estate planning.

A foundation does not switch off your home country's inheritance or tax rules, though. Plan it with both systems in view. For a full side-by-side comparison, see Panama foundation vs corporation: key differences. When a foundation is the plan, we draft the charter, the private regulations and the companies under it together, so the pieces fit from day one.

When the S. de R.L. is the better choice

The Panama LLC earns its place in three situations:

• US owners who want pass-through tax treatment. An S. de R.L. can usually elect to be taxed as a partnership or disregarded entity in the US.
• Joint ventures between a few partners. Each partner wants ownership on the public record and a say over who comes in.
• Counterparties that require transparency. Some lenders and contract partners ask for visible ownership.

The downsides are the mirror image. Partner names are public. You need at least two partners, so a sole owner has to bring in a second partner, often a second company. Some foreign banks are less familiar with it than with an S.A.

Costs and annual fees for each structure

A typical Panama S.A. or S. de R.L. costs about USD 1,500-3,000 in the first year all in, and about USD 800-1,300 a year after that if it has no Panamanian operations. A foundation pays a higher state fee and usually higher legal fees, because its regulations are drafted around your family.

Figures as of October 2026. Government figures are official. Legal and resident agent fees are typical market ranges for a standard structure. Bank account opening is a separate cost.

The tasa única is the same for an S.A. and an S. de R.L.: USD 300 a year. A foundation pays USD 400.^[1] The Fiscal Code applies the annual fee to sociedades anónimas, foundations, S. de R.L.s and any other legal entity, Panamanian or foreign, with no difference between company types.^[8] For the first year, older versions of the Fiscal Code show USD 250. The Public Registry applies USD 300 for companies and USD 350 for foundations under the 2012 amendment.^[9]

The due date depends on when the entity was registered. Entities registered between January and June pay by 15 July each year, and those registered between July and December pay by 15 January.^[1] Late payment adds a USD 50 surcharge per year or part of a year. Missing two periods, consecutive or not, adds a USD 300 fine.^[10] After three unpaid years, the entity's rights are suspended, and reinstating it costs a USD 1,000 rehabilitation fine plus USD 25 in registry tax.^[1]

Name reservation at the Public Registry costs USD 25.^[10] A registry certificate costs USD 30 for the first page and USD 10 for each additional page.^[11] You will order one each time a bank or counterparty asks for proof of good standing.

Panama corporation formation: steps and timeline

You can form a Panama corporation, LLC or foundation without traveling to Panama. The documents are signed in Panama by attorneys-in-fact under a power of attorney.

1. Choose the structure and the name
   Pick the vehicle that fits your goal and two or three name options. Names may be in any language. A reservation holds the chosen name for 30 days.
2. Know-your-client file
   Expect to provide a certified passport copy, recent proof of address, a bank or professional reference and a source-of-funds statement. Corporate owners also send their good-standing certificate and registers. Completing this file usually decides the timeline.
3. Drafting and notarization
   The lawyer drafts the articles (pacto social) or the foundation charter in Spanish, and they are executed before a Panamanian notary. For a foundation, the private regulations naming the beneficiaries are signed at the same time and are not filed.
4. Public Registry filing
   The deed is filed with the first tasa única and the registry fees. The entity exists from the moment of registration.
5. Beneficial owner registration
   The resident agent records the entity and its beneficial owners in the private SSNF register within 15 business days of incorporation.
6. Delivery and next steps
   Certified copies are apostilled, translated if needed and couriered to you. A company that will operate in Panama then obtains its RUC and aviso de operación, and you apply for the bank account.

With a complete file, registration generally takes one to three weeks from KYC approval. Apostille and courier add another one to two weeks, and the bank account is a separate process that can take weeks or months.

The full registration process, documents and annual compliance are in our guide to Panama company registration for foreigners, and the foundation equivalent is in our guide to Panama private interest foundation cost and setup. We handle formation remotely and quote a fixed fee after a short consultation. To start, write to us or message us on WhatsApp with your goal and the countries involved.

Directors, shareholders and nominee rules today

Foreigners can own 100% of any of the three structures and hold every position in them. Nominee directors are still lawful and common, but since Law 129 of 2020 they no longer hide the real owner from the authorities. Bearer shares survive only under a custody regime that makes them pointless for privacy.

S.A.: shareholders, directors and officers

Two or more people of any nationality may organize a corporation, and they need not live in Panama. Once formed, it can be owned by a single individual or company.^[6] There are no nationality or residence requirements for shareholders, and directors and officers do not have to be shareholders.^[6] The board must have at least three directors, but one person may hold more than one position.^[6]

The usual officers are a president, a secretary and a treasurer, and they are often the same three people as the directors. Directors can be companies. Shareholder and board meetings can be held outside Panama or by electronic means, and proxies may be used.^[6] There is no requirement to pay in the authorized capital, which is usually USD 10,000 divided into 100 shares of USD 100.^[6]

S. de R.L.: partners and administrators

Two or more individuals or legal entities may form an S. de R.L. and act as its administrators.^[2] The administrators manage and represent the company. They can be individuals or companies and need not be partners. Because partners and their quotas are registered, and transfers of quotas are recorded at the Public Registry, a nominee partner is visible as the partner of record. That limits the privacy an S. de R.L. can offer.

Foundation: council, protector and beneficiaries

The foundation council plays the role of the board, and the protector, if appointed, supervises it. The founder can be a nominee. In practice, the resident agent often acts as founder on the client's instructions, so the client's name does not appear in the public charter. Beneficiaries are named in the private regulations, which are not filed at the Public Registry.

Nominee directors and shareholders in 2026

Nominee directors and officers remain lawful and widely used. They are usually people provided by the resident agent who sign as directors so that your name does not appear on the public record. What has changed is everything behind them. The resident agent must identify and register the beneficial owner, and banks ask for the same information. Panama also exchanges financial account data with other countries under the Common Reporting Standard.

Nominee shareholders work the same way. They can hold shares of record, but the person who owns or controls the company is still registered as beneficial owner. A nominee arrangement buys you discretion from the public. It does not buy secrecy from tax authorities or banks.

Bearer shares: allowed only in custody

Bearer shares are not banned outright. Under Law 47 of 2013, as amended by Law 18 of 2015, they may exist only under a custody regime in which an authorized custodian holds the certificates.^[12] Authorized custodians are:

• general-license banks;
• trust companies regulated by the Superintendency of Banks;
• securities firms and central depositories regulated by the SMV;
• lawyers registered for this purpose with the Supreme Court.^[13]

Companies that did not join the custody regime by 31 December 2015 had to amend their articles and convert to registered (nominative) shares only.^[14] Few companies joined: by 31 March 2017, only 2,282 sociedades anónimas had adopted the regime.^[14] A company that uses it must say so in its articles, and the custodian is registered with the Supreme Court, not the Public Registry.^[15] For a new company, we generally see no reason to issue bearer shares. They add custody cost and bank questions, and they no longer provide anonymity.

The beneficial owner register

Law 129 of 2020 created a single private register of beneficial owners, run by the Superintendency of Non-Financial Subjects (SSNF).^[16] The register is free, private and of limited access. Only the entity's resident agent and two designated SSNF officials can enter it, and other competent authorities obtain data through the SSNF.^[17] Under Executive Decree 13 of 2022, a person who owns or controls, directly or indirectly, 25% of the shares, quotas or voting rights is a beneficial owner.^[18]

The resident agent must register the entity and its beneficial owners within 15 business days of incorporation or of being appointed. The entity must report any change to its agent within 15 business days, and the agent then has 5 business days to update the system.^[17] If the resident agent is not duly registered, the entity's corporate rights at the Public Registry are suspended until the problem is fixed.^[17] As a Panamanian law firm, we can act as your resident agent and handle these filings for each entity in your structure.

What the Panamanian company registry shows

The Public Registry shows the entity's name, registration data, resident agent and status. For an S.A., it shows the directors and officers. For an S. de R.L., it shows the partners and their quotas. For a foundation, it shows the charter and council members. It does not show S.A. shareholders or foundation beneficiaries.

The registry is at registro-publico.gob.pa, and it scores 0 out of 100 on the Open Company Data Index, which rates how freely company data can be searched and reused.^[19] In practice, you look up a company by name or registration number, and you order a certificate when you need official proof.

Tax: the territorial system and the 2027 substance rule

All three structures are taxed on the same principle: Panama taxes income from Panamanian sources and generally leaves foreign-source income untaxed. For most owners, the choice of structure barely changes the Panamanian tax bill. The real change for 2027 is Law 526 of 2026, which taxes some foreign passive income of companies in multinational groups.

Income from business carried on in Panama is taxed at 25% for companies. An entity with only foreign-source income generally does not file a Panamanian income tax return. It must still keep accounting records and supporting documents, generally for at least five years, and hand them to its resident agent when an authority asks. Our guide to corporate tax in Panama covers rates, filings and special regimes in detail.

Law 526 of 2026: who needs economic substance

Law 526 of 28 May 2026 added economic substance rules to the Fiscal Code. They apply to entities that belong to a multinational group and earn foreign-source passive income such as dividends, interest, royalties, capital gains and real estate income.^[20] An entity that cannot show economic substance in Panama pays a single, final 15% tax on its net taxable income from that passive income, starting with fiscal year 2027.^[20] The law excludes the merchant marine and financial entities supervised by the banking, securities and insurance regulators.^[20] Executive Decree 32 of 2 September 2026 regulates the new rules.^[21]

The first question is whether your entity belongs to a multinational group, which turns on corporate structure, tax residence and ownership and control links.^[22] In general, a Panamanian entity is part of a group if it is, or should be, included in its parent's consolidated financial statements. A group means two or more entities linked by ownership or control and resident in different jurisdictions.^[23] A Panama holding company with no office or employees that only receives dividends from a foreign subsidiary is one of the structures the law reaches.^[23]

Pure holding entities, and entities that only hold or occasionally buy and sell real estate, get a lighter test. They must show adequate people and premises in Panama, but not strategic decision-making or additional operating costs there.^[23] Where the 15% applies, foreign tax already paid on the same income can generally be credited, up to the Panamanian tax.

A single company or foundation owned directly by individuals, with no related entities abroad, generally falls outside the rule. A Panama S.A. that owns a US LLC and a Colombian company may well be a group. If that describes you, review the structure before the end of 2026.

US citizens and Canadians with a Panamanian company: home-country reporting

Panama's territorial system does not protect you from your own country's tax rules. US citizens and green card holders are taxed on worldwide income, so a Panama corporation for US citizens is a tool for holding assets and running business abroad, not for avoiding US tax. Canadian, UK and most EU residents face their own controlled-company and foreign-asset reporting rules, whatever Panama does.

How the IRS classifies each structure

For US owners, the entity's IRS classification decides how its income reaches your return. An eligible entity, which includes LLCs and partnerships, can file Form 8832 to elect treatment as a corporation, a partnership or a disregarded entity. Corporations generally cannot make that election.^[24] A Panama S.A. is generally treated as a corporation that cannot change its US classification. An S. de R.L. can usually elect, which is the main reason some US owners choose it.

A foundation's US treatment depends on its terms and how it operates. It can be treated as a foreign trust or as a foreign corporation, with very different filings, so settle the classification before you fund it. Our comparison of a Panama foundation vs an offshore trust covers the US reporting side.

Form 5471 and penalties

Certain US citizens and residents who are officers, directors or shareholders of a foreign corporation must file Form 5471 with their tax return, with a complete and separate form for each foreign corporation.^[25] The basic penalty for failing to file is USD 10,000 per year for each foreign corporation. A further USD 10,000 applies for each 30 days the failure continues more than 90 days after an IRS notice, up to USD 50,000 more.^[26]

Serving as a director yourself, rather than through nominees, can bring you into the filing, so plan the board with your accountant. Our guide to Panama taxes for expats covers what follows US and Canadian residents to Panama. We work alongside your home-country accountant and provide the formation documents, registers and English translations they need for these filings.