| It is important to keep in mind that running a business
in Costa Rica is not like managing a business in the United
States because of unusual labor laws, the Costa Rican work
ethic and the Costa Rican way of doing business.
In order for a foreigner to own a business, a Costa Rican
corporation or sociedad anónima must be formed
(see the section entitled Taxes in the last chapter).
If you do choose to establish your own business, keep in
mind that you can be limited to managerial or supervisory
duties and will have to hire Costa Ricans to do the bulk of
everyday work. We also recommend that you do a thorough feasibility
study. Spend at least a few months thoroughly analyzing its
potential. Do not assume that what works in the United States
will work in Costa Rica.
Check out restrictions and the tax situation. And, most important,
choose a business in which you have prior experience. It's
much more difficult to familiarize yourself with a new type
of business in a foreign country.
Remember, a trustworthy partner or manager can mean the difference
between success and failure. Make sure you choose a partner
with local experience. Do not trust anyone until you know
him or her and have seen them perform in the workplace.
You will be doomed to failure if you intend to be an absentee
owner. We know of someone who founded an English-language
book distribution business that initially did very well.
However, the person moved back to the United States and put
a couple of employees in charge, and everything eventually
fell apart: sales began to lag, money went uncollected, checks
began to bounce, expenses were unaccounted for and incompetent
salesmen were hired. Their potentially successful business
just could not be run from abroad.
You have to stay on top of your business affairs. At times
it is hard to find reliable labor, and the bureaucracy can
be stifling. If you have a business with employees, be aware
of your duties and responsibilities as an employer. To avoid
problems, know what benefits you need to pay in addition to
salary to avoid problems. Remember that the more employees
you have, the more headaches.
In case things get rough, be sure you have enough money in
reserve, in case of an emergency. You should have an ample
reserve of capital to fall back on during the initial stage
of your business.
Newcomers should not count on obtaining financing in Costa
Rica for a new business. If you become a resident, you may
be able to obtain some type of financing. Neophytes should
learn not only the language but also the rules of the game.
One option is to buy an existing business from someone else.
In principal, this can save you lots of time and trouble,
which means you can bypass most of the cumbersome start-up
procedures and usually save a lot of time and energy.
While this is a definite advantage over starting a business
from scratch, there is a downside. You can be taken advantage
of by an unscrupulous seller trying to dump his problems on
you. These problems may include unpaid back wages to employees,
loss of a license or lease, or other legal problems that may
not be apparent at first.
The best thing to do is to have a good lawyer check into
the legal status of the proposed purchase and investigate
potential problem areas. He can then tell you whether he thinks
the business is feasible and if there is any unwanted baggage.
You will also need to have a good accountant do a complete
inspection of the books and records, and perhaps even conduct
a complete audit to make sure all taxes, wages and Social
Security payments are up-to-date.
Any one of these items could cause untold headaches if not
detected before you buy the business. Taking care of these
matters is the best investment you could possibly make.
Talk to people, especially the old-timers, who have been
successful in business, and learn from them. Profit from their
mistakes, experiences and wisdom. Do not rush into anything
that seems too good to be true. Trust your intuition and gut
feeling at times. However, the best strategy and rule of thumb
is, Test before you invest.
Newcomers find themselves seduced by the country's beauty
and friendly people and are often lured into business and
investment opportunities that seem too good to be true, and
often are.
When it comes to making money in Costa Rica, it has been
said: The best way to leave Costa Rica with a million dollars
is to bring two. In the case of some foreigners, this statement
is true. During the time we have lived in Costa Rica, we have
seen many foreigners succeed and fail in business ventures.
Only about three in 10 foreigners succeed in business in Costa
Rica. There are few success stories and a lot of failures,
in areas as diverse as bars, restaurants, car-painting shops,
language schools, real estate, tourism, and bed-and- breakfasts
to name a few. People have impossible dreams about what business
will be like in Costa Rica. It is a gigantic mistake to assume
that success comes easily in here. Initially, starting any
business usually takes more time and more money. Also, many
unforeseen problems are surely, to arise.
Costa Rican Resident Travel Bookstore in Downtown
San José
If you decide to purchase an existing business, make sure
it is not over-priced. Try to find out the owner's real motives
for selling it. Make sure you are not buying a pink elephant.
Ask to see the books and talk to clients if you can. To ferret
out a good deal, look for someone who is desperate to sell
his business. Check the newspapers and ask everyone you know
if they know of someone selling a business. Finally, make
sure there are no lawsuits, debts, unpaid creditors or liens
against the business.
There are some benefits to investing in certain businesses
in Costa Rica. As we mention in Chapter 6, you can obtain
Costa Rican residency by investing in tourism or a reforestation
project. Also, part of your profits can be sheltered in your
corporation.
Business tip: dealing with people is always the best way
to deal with people here, develop a business relationship
here. All business in Costa Rica is based on friendships and
mutually respectful behavior. In fact, when dealing with all
government officials it is a good idea to treat them to a
snack, a drink and chat. You will be amazed at the difference.
After reading the above information, if you still have questions
or are confused, we advise you to consult a knowledgeable
Costa Rican attorney for further information. If you plan
to invest or do business in a Spanish-speaking country, you
should definitely purchase Wiley's English-Spanish Dictionary,
Barron's Talking Business in Spanish, or Passport
Books Just Enough Business Spanish. All of these guides
contain hundreds of useful business terms and phrases.
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