Legal Myths for Entrepreneurs in Costa Rica: What you should know

Entrepreneurship in Costa Rica is a path full of opportunities. Out there we can here many legal myths that can put your business at risk if you do not have the right information. In this blog, we debunk some of the most common ones so you can make informed decisions and protect your business.

Myth 1: I don't need to register my business if it is small.

Fact: Any formal economic activity must be registered, regardless of its size. If you do not register your business before the Tax Administration and the Costa Rican Social Security Fund (CCSS), you could face fines and penalties. In addition, without a formal registration, you will lose opportunities to access tax credits and benefits.

Myth 2: I can use any name for my business without registering it.

Reality: Although you can operate with a business name without registering it, this does not guarantee you exclusive rights to it. If someone else registers it before you in the National Registry, they may demand that you stop using it. Registering your trademark protects you legally and gives you a competitive advantage.

Myth 3: I don't need written contracts with my customers or suppliers.

Fact: A verbal agreement may be valid, but difficult to prove in the event of a dispute. A written contract clearly states the terms of the service or product and protects you from potential legal problems. Well-written contracts are essential, especially for high-value services or long-term agreements.

Myth 4: If I work alone, I don't need to pay social security.

Reality: In Costa Rica, even if you are self-employed, you must register before the CCSS. Failure to do so can lead to accumulated debts and problems. In addition, many companies only work with suppliers that are up to date with the CCSS.

Myth 5: I don't need to pay taxes if my business is small.

Reality: All businesses, regardless of their size, are subject to paying taxes according to their turnover. Even if you are an independent entrepreneur, you must declare income and pay Income Tax and Value Added Tax (VAT) if applicable. Failure to file correctly can result in fines and legal problems.

Myth 6: I can use any image or music on my social networks without permission.

Fact: Using copyrighted content without permission can lead to lawsuits or penalties. If you use third-party photos, videos or music, make sure you own the rights or use license-free image and audio banks. Platforms like Facebook and Instagram can block your content if they detect copyright infringement.

Myth 7: If I sell on social media, I don't need to invoice.

Fact: Selling on social networks does not exempt you from invoicing and paying taxes. If you offer products or services, you must register with the Ministry of Finance and issue electronic invoices. Failure to do so could result in penalties and hinder the growth of your business.

Myth 8: I can fire a worker without justification.

Reality: In Costa Rica, the Labor Code establishes that any dismissal must be justified or, failing that, the employer must pay notice and severance. Dismissing a worker without complying with these regulations may generate labor lawsuits and additional costs for the company.

Conclusion

Avoiding these myths can save you a lot of legal and financial problems. As an entrepreneur, it is vital to inform yourself and seek professional advice to ensure that your business is protected and complies with all regulations. Don't let misinformation jeopardize your effort and dedication!

If you have doubts about the legality of your business, contact us and we will help you make the best decisions to protect your business.