How to establish your business in Panama: The premises contract
Thursday, July 21st, 2011
During our assessments to local and foreign investors, one of the points we touch with keen interest, after legally constituting their company in Panama, is about the premises for their business offices.
There are different options that can be managed when considering the commercial space for any business: rent a premise, invest in the purchase of a property, or choose the services of virtual offices. And with the flexibility of Law 5 de 2007, the Panamanian law that regulates the start and other commercial operation requisites in Panama, there are certain types of commercial activities that can be done from a private residence.
Depending on the kind of business and its needs, the key points to acknowledge may vary. Things like storage space for goods or products, access and public display, location, looks and structure of the place are all relevant elements that the investor or owner, who possesses a clear idea of what his business needs to succeed, should revise beforehand.
Nevertheless, legal counsel on the important aspects of whichever option is chosen is something that we always recommend at EpiphyCorp.
For example, if the rent option is chosen, then it’s important to review within contract items such as monthly payments dates, deposits, extra charges for possible back or due payments, fix up work, damages, renovations and general notices.
If the purchase of a place is decided on, then another series of issues come up: costs, type of payments, credit options, delivery dates and overall conditions in which the property is received, as well as any available guarantees in case of infringement. There is also the option to use shared or virtual offices, such as the coworking concept, where payment and use conditions, together with space availability and benefits, are the most relevant points to consider.
A simple advice that we share on how to choose the base of operations for a business in Panama, regardless of the option that is selected, is about the importance of formalizing the agreement with a written contract. A verbal agreement represents a “half contract”, which in the long run may end up in misunderstandings that could bring damages to both parts. We’ve seen many cases with clients and friends that make contracts relying just on the person’s “word”, something that may seem honest or simple at first but that after a while could bring unexpected higher charges, or doubt regarding payments in cases of repairs to the property, or other similar and uncomfortable situations for the tenant.
A written contract, either for rents, purchases or office services, should be reviewed before signed, because whatever it expresses along its lines represents the terms that will establish this commercial relationship; but everything that is not mentioned, in case a conflict may arise, the situation will be managed according to Panamanian general contract law, which may be summarized like this: whatever is not agreed upon is not an obligation for any of the involving parties. The tenant or whoever uses the property shouldn’t take risks and always verify the contract before signing it.
EpiphyCorp’s legal consultants provide services in revising any contract that the client company receives when choosing a premise for its business, with the objective of making this transaction as easy and clear as possible for everyone involved. If you need assistance with this area of expertise, please contact us for an initial free assessment.
