Even if you’re not planning to do business in Costa Rica, there’s a good chance you’ll end up the proud owner of several different corporations of the shell variety. Shell corporations have the advantage of being treated as a person under Costa Rican law, which makes them a good way to shield your assets from liability. For example, if a car held in a corporation gets in an expensive accident, only the corporation can be sued for damages, not the shareholders, and the corporation’s only asset is the car itself. Most people who know what they’re doing keep their car, house, boat, motorcycle, and any other valuable asset segregated from each other in separate corporations.

The other advantage to keeping property in a corporation is that transfers of the property can be done tax-free, since the transfer of shares of a corporation is not subject to the 1.5% property transfer tax. It’s a loophole that you will see most developers taking advantage of, and it’s not unusual to find a new development with each of its several dozen condos packaged with its own little shell corporation.

As mentioned in the due diligence chapter, purchasing assets by buying the shares of a corporation can be a risky business. Not only do you acquire the corporation’s assets, you acquire any debts it might have. Of course, in that case, and if you have a decade or two to spare, you could always sue the seller for breach of contract (see above). But no one wants to get tied up in that, and even if you have a lawyer review the corporation before buying it, you can never be 100% sure that all of a corporation’s debts and obligations have come out into the open. Generally, the newer the corporation the better, but you’re always smart to get one that’s completely new. For that, you would need to either have a lawyer build a new corporation, or buy one off the shelf. Not all corporations are created equal. Each SA, for example, has a constitution that grants certain rights to certain members of the board of directors. This constitution can be well written or poorly written, and the quality of the law firm that set up the corporation is what makes the difference. Shell corporations can cost anywhere between $200 and $5,000, but you generally don’t want to be on either extreme. $500 to $800 is a decent range to shoot for.

There are basically two different kinds of corporations you would deal with. One is a sociedad de responsibilidad limitada or , or SRL. The other is a sociedad anónima, or SA.

Sociedad Anónima

An SA (in Spanish pronunciation, “es-ay ah”) is the more common form of corporation used in Costa Rica because of its flexibility. They need at least three people to sit on a board of directors, and their authority is determined by the articles of incorporation drawn up by the lawyer. It is owned through shares, and its structure is very flexible, depending mostly on how your attorney builds it.

Sociedad de Responsibilidad Limitada

A sociedad de responsibilidad limitada, or SRL, is the rough equivalent of a limited liability corporation. It’s principle difference with SAs is that it is managed by a single general manager rather than a board of directors, and instead of shares it’s owned by “quotas.” Again, in practice, it’s not very different from SAs, but most attorneys prefer to work with SAs.