Puerto Rico has been recently designated as one of the 31 Tech Hubs in the United States, formally pronounced for the advancement of biotechnology, biopharmaceuticals and biomanufacturing. In Puerto Rico, academics are the class of investigators that are most commonly engaged in the exploration of intricate biological mechanisms and are immersed in the pursuit of groundbreaking discoveries. However, as the research advances, a pivotal juncture emerges: transitioning these investigations into the market. This process is commonly enabled by university tech transfer offices, and requires an intricate dance between an independent commercial biotech entity and the academic institution, which needs to be the owner of the intellectual property seeking to transfer the technology into the market.
Specifically, the progression from academic scientific inquiry to commercial viability requires a strategic approach—establishing a robust business entity in alignment with the Small Business Technology Transfer (STTR) program. This intersection of scientific exploration and entrepreneurial endeavor presents an opportunity to bridge research advancements to real-world applications. Therefore, the following Ozcorp Scientific Insight article attempts to comprehensively outline the technical steps pivotal for investigators aiming to navigate the process of establishing an STTR-compliant business entity in Puerto Rico. This strategic alignment facilitates the translation of research findings into market-ready solutions, fostering innovation, economic growth, and societal impact.
Understanding STTR Requirements
Before diving into the business establishment process, we need to thoroughly understand the STTR program’s requirements and objectives, which aims to foster innovation by partnering small businesses with research institutions to develop and commercialize technologies. Therefore, to properly leverage this business development mechanism, you need to identify the foundational requirements for registering a new corporate entity to act as the recipient of the federal funds and list in the STTR proposal the non-profit research partner (typically the university if you are a professor) which would be owner of the biotech intellectual property and in some cases the provider of facilities for the experiments proposed.
Firstly, check with your University’s Tech-Transfer Office (TTO), to see if there are any business incorporation services that can provide you with a commercial address, unit number and proposal support (for example the UPR Rio Piedras has a TTO that works with university investigators for these matters). While we are unaware of business registration services offered by local TTOs in Puerto Rico Higher Education Institutions, it is common practice for commercialization offices in several high-profile academic institutions across the United States to provide such entity initialization services (for example, Penn Center for Innovation @ The University of Pennsylvania), often at the cost of forgoing equity. However, we’ve come to notice that the resources at local Tech Transfer offices in Puerto Rico are different than those in the USA, and might require you to think outside the box in terms of registration and execution. Therefore, below we detail the process for you to properly register your new biotech business entity and prepare it for STTR federal funding to commercialize the biotech you’ve developed in your academic laboratory.
Requirements for Proper Business Registration
Depending of the business size and stakeholders, to submit an STTR grant you would need to first register the new corporate entity as either a Limited Liability Company (LLC), which offers liability protection and flexibility in management structure or a Corporation (C-Corp or S-Corp), which also provides strong liability protection and potential tax advantages but involves more complex regulations and formalities. Unless you already have external investors and multiple interested parties, it is best to just use an LLC registration for a small simple entity, and later update to a Corporation as the business becomes more complex.
A commercial business address is recommended for the incorporation of the biotech company, mainly because it adds a level of professionalism and credibility to the entity, and protects your personal information. This type of address also ensures a dedicated location for business operations and correspondence, which is crucial for a company involved in scientific research and development. Additionally, unlike certain businesses that you can start from your residence, developing biotech requires robust facilities, and funding agencies like to see tangible infrastructure and resources in place. A commercial address signifies stability and permanence, which aligns with the substantial infrastructure needs of a biotech venture. It reassures investors and funding agencies that the company has a physical presence and the capacity to support the complex research and development activities essential in biotechnology.
If you are personally initializing the biotech corporation, you may benefit from a virtual registration, which are commonly offered by university commercialization offices. Since we’ve found that there are limitations to university resources in Puerto Rico, or if you don’t yet want to give up equity interest in the company, we’d recommend using SpecePR’s Virtual Registration service, which to us is the most accessible and feature-packed service provider for such business activities in Puerto Rico. The way it works is you solicit a membership (we recommend the yearly membership for a huge discount), and they provide you with a member number that is appended to their business address, effectively creating a new legal commercial address for your corporate registration. SpecePR also offers mailbox management services at an additional cost, which can be a more cost-effective than getting a new PO box with the USPS. Furthermore, it provides premium meeting space at a discount for their members and office space for you when your business grows. Overall, it is the most professional option we’ve found in Puerto Rico for initializing a biotech venture.
Finally, a company needs a Registered Agent, which is an individual or entity appointed by a business entity to receive service of process and official government notifications on behalf of the business. This includes legal documents like lawsuits, tax notices, and other important correspondence from the state or government. Registered agents serve as a point of contact for official communications, ensuring that the business stays informed about legal obligations and proceedings. They must have a physical address in the state where the business is registered and be available during regular business hours to receive these documents. While third-party companies offering registered agent services are common and often convenient, individuals involved in starting or owning a business can serve as their own registered agent. This option is entirely viable, especially for smaller businesses or individuals who are available during regular business hours and possess a physical address within the state where the business is registered. Being your own registered agent means taking on the responsibility of receiving legal and official documents, ensuring prompt attention to these notifications, and staying compliant with state regulations regarding the reception and handling of such materials. It also requires a consistent availability during standard business hours to receive deliveries or legal notices. This self-designation as a registered agent can be beneficial for some businesses, as it saves on the costs associated with hiring a third-party service. However, it’s crucial to understand the obligations and commitments involved in this role, as missed or mishandled documents can have legal consequences. If you’re confident in your ability to fulfill these duties and meet the requirements set by the state, being your own registered agent can be a feasible option when initializing a small business.
Registering your Business
Now that you understand the requirements for properly registering your business, lets dive into step-by-step process to formalize your registration with the Puerto Rico Department of State, the United States Internal Revenue Service, and the Puerto Rico Department of Treasury.
Step 1: Puerto Rico Department of State
To being the registration process, you must select a unique business name compliant with PR state’s regulations. Mainly, The name must be distinct and not already in use by another registered business entity within Puerto Rico. This is typically confirmed by conducting a name availability search through the Department of State corporate registrations search portal. After identifying your desired name, create an account with the Department of State’s website (so you can track your registration and be able to amend in the future), and begin the registration process. You will need all of the required information mentioned in the previous section to successfully complete your registration. When you are ready to submit, proceed to make the required payment for registration. In Puerto Rico, it’ll cost you $250 to register a for-profit business entity.
Step 2: Internal Revenue Service (IRS)
As a new entity, your accounting and records should all go no under a new “name”, which is your company registration name. Thus, to inform the IRS of your existence, you need to apply for an Employer Identification Number (EIN). This is can be done for free using the official IRS portal . This number is like your social security number, but for your business entity. Since Puerto Rico is tied to the United States of America, you must register your new incorporated entity with the IRS for tax purposes and for enabling your access to a business bank account. If you are registered as a sole-member LLC be sure to select LLC and later specify that there is only one (1) responsible party and owner. Also, be sure to screenshot your EIN and download the served PDF document since it is the only time that the IRS will show it to you.
Step 3: Suri (Hacienda)
In Puerto Rico, the taxes are handled by Departamento de Hacienda, a separate entity to the IRS. Hacienda reports taxes to the IRS, so as a business stationed in Puerto Rico, you report to Hacienda and then they report to IRS, so rest assured that you wont be doing any double filings. The government has implemented the SURI online portal (Sistema Unificado de Rentas Internas) to handle all matters related to tax reporting and filing in the island. You must register for a new account using the portal and initialize a new tax account to report your taxable income (Contribución sobre Ingresos). You are also going to need a Merchant Certificate (Registro de Commerciante) which you can solicit through the SURI portal. You will be needing this certificate when attempting to open a commercial bank account in Puerto Rico. Since you are registering a biotech with no current income, your Merchant Certificate should come out as a “Non-withholding Agent” (Agente no retenedor).
Step 4: Open a Business Bank Account
Now that you have all of your registrations in place it’s time for you to setup a business bank account for you to use to receive Federal Funds. When opening any business bank account in Puerto rico you will need your articles of incorporation, your EIN document, and the SURI Merchant Certificate. There are limited options in Puerto Rico regarding the use of a business bank, this because most USA-based banks don’t support Puerto Rico addresses, potentially because of the separation of tax jurisdictions. We’ve only used Banco Popular de Puerto Rico, but there is also First Bank and Oriental Bank. We recommend you use personal funds to deposit the minimum cash threshold to avoid incurring in monthly service fees (Banco Popular = $2500 | First Bank = $2500 | Oriental Bank = $5000). Consider meeting this threshold an initial investment into your new company. Also do not sign up for online digital banking services such as MiBanco Online from Popular, since these are considered addons in the most, if not all, of the island’s commercial banking accounts, and would start charging you additional service fees.
Setting up Accounts to solicit Federal Funds
You should now be properly registered and equipped to being soliciting grants from the federal government. It is important that you already opened up your business bank account, since you will be asked to submit the information to formally activate the following accounts.
System for Award Management (SAM) Registration
The first step to registering your incorporated business entity for soliciting federal funds is to being the process of issuing a Unique Entity Identifier (UEI) number, which is a requirement for soliciting funding from federal grants. On April 4, 2022, the entity identifier used across the federal government changed from the DUNS Number to the UEI generated by SAM.gov. When initializing your account, you want to say your organization is interested in applying for all types of federal grants. The process for getting assigned a UEI may take up to two (2) weeks. In some cases, your business registration may need additional verification, in which case you would provide SAM.gov with your articles of incorporation as proof-of-registration. After verification you would wait for the agency to assign you the UEI, and later you would need to submit more information to formally activate your number (e.g, such as submitting business bank account information). Getting the UEI also opens you up to receive a Commercial and Government Entity (CAGE) code, which is a unique identifier assigned by the Defense Logistics Agency (DLA) to suppliers to various government or defense agencies. If your STTR biotech product is meant to be sold to the federal government (e.,g, think human super-soldier enhancement peptides…), you would eventually need a CAGE code.
Small Business Administration (SBA) Company Registration.
A Small Business Concern Identification number (SBC ID) is required prior to submission of the proposal which you can quickly obtain at sbir.gov. SBA maintains and manages a Company Registry for SBIR/STTR proposers to track ownership and affiliation requirements. All SBCs must report ownership information prior to each SBIR/STTR proposal submission and update the SBC if any information changes prior to award.
Open your Grants Management Accounts with NIH and/or NSF
There are two funding agencies for biotech STTR submissions. The National Science Foundation (NSF) ad the National institutes of Health (NIH). Each agency has their own grants management portal, in which you leverage your UEI number to enlist your incorporated organization and assign to yourself roles as Signing Official and Principal Investigator.
Select one of the two tabs below for details on each of these agency-specific accounts.
When it comes to submitting NSF STTR grant proposals, Research.gov is your go-to platform. Here we outline the basic steps to open an account and navigate the submission process::
- Visit the Research.gov website.
- Click on the “Register” button at the top right corner of the screen.
- Enter your personal credentials, and use a company-specific email (e.g, grants@company.com) to create a new account.
- Once logged in head to the My Profile tab and click on the “Organizations and Roles” section, select “Add a New Role”.
- Since you just created this Research.gov account, your only option to add a New Role should be to “Find Organization”. Use your UEI number to search for your organization.
- After selecting your organization, follow the steps in the portal to create an Admin Account. This is similar to the SO account in the eRA Commons portal.
- Once you have registered the organization, you can add a PI role to your account, as well as add more users with different roles to the organization.
- Only Users with the PI role can prepare a proposal, so make sure your admin account has the PI role, or that you are logged in to the user account that has your designated PI role.
- Use the Proposal Wizard Set-up to initiate your proposal using the funding opportunity number.
- Be sure to select “My organization is an LLC” even if you are the only owner of the incorporated business, since selecting sole proprietorship implies that you are unincorporated, which is not the case.
When it comes to submitting NIH STTR grant proposals, eRA Commons is your go-to platform. NIH has a really intuitive guide for applying to STTR seed funding. Nonetheless, here we outline the basic steps to open an account and navigate the submission process:
- Visit the era.nih.gov eRA Common Login Portal.
- Click on the “Register Organization” button at the in the middle of the page.
- You will be asked to enter your company purpose, UIE number and your organization contact details credentials. We recommend you use a company-specific emails (e.g, grants@company.com) to create a new account.
- After selecting your organization, follow the steps in the portal to create a Signing Official (SO) Account. This is similar to the Admin account in the Research.gov portal.
Important – It seems that in the eRA commons system, the SO role cannot have also the PI role. So once you have registered the organization with the SO account, would need to create a separate account with a different email for you to add a PI role.
- Only Users with the PI role can prepare a proposal, so make sure your admin account has the PI role, or that you are logged in to the user account that has your designated PI role.
- Use the ASSIST portal along with the STTR NIH funding opportunity number to begin your submission.
Writing your STTR Grant
If you are reading this article, it is likely you are gearing up for a Phase 1 grant, which focuses on developing early-stage biotech. The objective of Phase I is to establish the technical merit, feasibility, and commercial potential of the proposed R&D efforts and to determine the quality of performance of the small business awardee organization prior to providing further Federal support in Phase II. The STTR Phase I awards are generally $50,000 – $250,000 for 1 year. Thus, you need to craft a comprehensive proposal that details the product objectives, supported by preliminary scientific data as well as market analysis, and feasible product financial projections. Your proposal should clearly detail how it aligns with STTR objectives, and how the funds will help you achieve your research goals within the 1 year timeframe. Finally, it is of extreme importance that you ensure the plan details collaborative efforts between your newly registered small business and the academic research institution wishing to transfer its biotechnology into the market.
Working with the Puerto Rico Science, Technology & Research Trust
We’ve come to appreciate that in Puerto Rico, there is an island-wide economic push to enhance the biotech economy lead by the The Puerto Rico Science, Technology & Research Trust (PRSRT), known as “El Fideicomiso”. This non-profit entity offers a pivotal platform for advancing Puerto Rico’s economic landscape and bolstering local citizens’ well-being through innovation-driven enterprises, scientific advancements, and technological pursuits across three main pillars: Entrepreneurship, Public Health, and Research & Development. When collaborating on an STTR (Small Business Technology Transfer) proposal alongside PRSRT, two crucial aspects come into play.
Firstly, the PRSRT’s matching funds program stands as a game-changer for Phase I and Phase II SBIR/STTR proposals. This initiative operates on a 1-to-1 matching basis, contributing up to $100,000 for Phase I and up to $200,000 for Phase II projects. Such financial backing substantially augments available resources, enabling effective execution of research and development plans. Secondly, the PRSRT’s Technology Transfer Office (TTO) offers invaluable Intellectual Property (IP) Management Services. Collaborating closely with university partners, the TTO provides vital support by conducting invention screening and assessment, offering guidance and educational resources regarding IP, and implementing a shared risk/shared reward model for selected cases. This model allows the TTO to oversee IP protection, marketing, negotiation, licensing, and deal management, ensuring that your project’s outcomes are safeguarded, utilized, and commercialized effectively.
In essence, teaming up with PRSRT not only secures substantial financial support but also guarantees adept management of your project’s intellectual property. This partnership establishes a strong foundation for crafting impactful STTR proposals and conducting groundbreaking research initiatives. For further detailed insights, visit the PRSRT website or contact us at Ozcorp Scientific.
Overall,
Establishing a business entity aligned with the Small Business Technology Transfer (STTR) program in Puerto Rico is an accessible yet intricately detailed process. The successful transition from academic research to commercial viability demands meticulous planning, strict adherence to guidelines, and professional guidance to optimize the prospects of securing funding for groundbreaking research initiatives. This comprehensive guide, authored Ozcorp Scientific’s Founder, Osvaldo D. Rivera, PhD, meticulously outlines the technical steps required for investigators aiming to navigate the process of establishing an STTR-compliant business entity in Puerto Rico. From understanding the STTR program’s requisites to the meticulous requirements for proper business registration, this resource serves as an indispensable roadmap. It emphasizes the crucial role of university Tech Transfer Offices (TTOs) and offers innovative solutions to addressing unique challenges in Puerto Rico’s business registration landscape.
Networking with experienced individuals or entities familiar with STTR awards, such as the PRSRT is highly recommended. Leveraging insights and advice from those with prior involvement in STTR processes provides invaluable guidance. This strategic networking approach enables aspiring biotech entrepreneurs to gain a deeper understanding of the nuances, potential hurdles, and best practices in navigating the STTR landscape. Collaborating with seasoned professionals or businesses experienced in STTR endeavors enhances preparedness, streamlines the application process, and maximizes the prospects of successfully securing funding for transformative research initiatives in Puerto Rico’s burgeoning biotech sector.
