Establishing a legal entity is the most time consuming and complex of the three expansion options. However, it gives you the most control over your workforce and operations in a foreign country and is the only option that allows you to hold fixed assets like real estate. If you have completed a thorough market investigation and are committed to a long term growth investment in Colombia, company formation is likely the best option. This can be accomplished in as little as 2 weeks with the help of Ongresso.
While there is a more significant investment of time and money when establishing a legal entity, some businesses choose to outsource back office tasks related to HR, accounting, and legal to external specialists to reduce complexity and time spent on non-core activities. This allows them to become operational faster with a smaller team and put their principal focus on strategic instead of administrative tasks.
Having a presence in-country is especially important in Latin America for developing trust with clients and business partners. For example, importing products to sell through a distributor is quite common, but local partners are insistent that you demonstrate a high level of commitment and investment in the relationship before deciding to work with you. Local businesses have been burned by foreigners in the past by having a mindset of “trust but verify” and have shifted to “verify, then trust”. This is particularly relevant for products or services with an after-sales component (as opposed to FMCG for example).
Note that in order to hire foreigners, your company needs to be established for at least 6 months with an average corporate bank account balance of 100 monthly minimum wages. For example, the current minimum wage in Colombia is 877,803 COP, meaning the average balance over 6 months needs to be at least 87,780,300 COP (approx. $26,000 at current exchange rate, according to Min Trabajo).