Incorporating a company in Brazil can be challenging, especially if you don’t know the local rules and regulations. Before expanding into the Brazilian market, companies must understand that Brazilian systems and processes can be complex and intricate.
Fortunately, in recent years, Brazil has taken steps towards becoming a more attractive destination for foreign business and investment. This guide outlines the rules and regulations to be aware of when incorporating a company in Brazil and introduces the different types of legal entities.
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Important Things to Know Before Starting the Company Formation Process in Brazil
Before incorporating a company in Brazil, you must familiarize yourself with the formal process and how it may differ depending on your business needs. For example, in Brazil, a branch is different from a subsidiary. Opening a subsidiary company in Brazil is easier than opening a branch.
By law, any foreign company can be a partner, investor, or shareholder in a Brazilian company, making the Brazilian company a subsidiary of the foreign entity. The Brazilian company will then be a legal entity having the same rights and responsibilities as any other company.The process of opening a branch, however, can be complicated. This process requires specific authorization from the Brazilian Ministry of Development, Industry, and Foreign Trade. You should understand the differences between these two models and decide which one works best for you.
Company Ownership and Investment when Forming a Business
Another consideration when incorporating a company in Brazil is meeting the requirements for company ownership. To open a limited liability corporation, you must have at least one shareholder, but rules may differ depending on company type. Brazilian residents must represent foreign shareholders in Brazil.
Incorporating a company comes with no formal investment requirements, but investment is needed to qualify for the permanent Brazilian investor visa, usually for R$500,000. A Brazilian Central Bank registration is also required for all investments (Banco Central do Brasil).
All companies in Brazil must have a unique registered fiscal address. This address must represent a physical location; it cannot be virtual.
Other aspects to consider during the company formation process include the requirement that companies have an administrator in Brazil and have trading and company names.
Starting a Business in Brazil: Types Of Brazilian Companies
Entity Structure 1 – Limited Liability Company (Sociedade Limitada / SRL)
One of the most common company types in Brazil is the limited liability company, known locally as a limited society (sociedade limitada), Ltda, or SRL. This type of legal structure in Brazil is similar to a limited liability company (LLC) in the United States and is referred to as the Brazilian LLC.
A key benefit to the limited liability company in Brazil is that each shareholder’s responsibility is tied to their assigned capital — or based on their investment. Hence, the liability of each shareholder is limited to the value of their shares, but all shareholders are jointly liable for the payment of the share capital.
Entity Structure 2 – Limited Liability Corporation (Sociedade Anônima / SA)
Limited liability corporations, locally referred to as an anonymous society (Sociedade anônima) or SA, are regulated locally by the Law of SAs. These are closest to what’s known as a Subchapter C Corporation in the United States.
This legal structure in Brazil can issue different classes of shares (voting and non-voting) while liability among shareholders is limited to the payment of shares to which the shareholders have subscribed.
Corporations can either be publicly traded (known as a Sociedade por Ações Aberta) or closed (known as a Sociedade por Ações Fechada), meaning the shares and securities will not be available to the general public. Corporations seeking to raise funds often use this type of entity.
Entity Structure 3 – Consortium
A consortium is the gathering of corporations of other companies to perform a particular operation or activity. Consortiums are unincorporated entities where two or more members engage in trade, business, financial operations, or ventures and share profits.
Entity Structure 4 – Opening a New Branch
When choosing a Brazilian company structure, it’s worth considering the possibility of incorporating a branch. Remember: this process can be lengthy and costly, taking up to six months to complete, and may involve higher costs than other types of company formation.
To open a branch office in Brazil, you need to demonstrate the existence of a legal entity in another jurisdiction, including the articles of incorporation and a list of shareholders. All documents must be officially translated, legalized (notarized or equivalent), and certified by a Brazilian consulate.
What are the minimum requirements to incorporate a Limited Liability Company (Sociedade Limitada / SRL) in Brazil?
The minimum requirements to incorporate in Brazil are:
- Minimum of (1) shareholder, either legal entities or individuals, national or foreign. Non-resident shareholders must be represented by a local representative.
- Contribute a minimum initial capital of USD500. – Important Note: Based on our experience, we recommend a minimum initial capital commensurate with your planned activities.
- Appoint a Legal Director within the bylaws of the company, this can be a lawyer, the company founder, and/or a senior executive within the company.
- Register a Fiscal Address which must be within the country and used for official correspondence.
- Open a local corporate Bank Account.
Important tip: The founding shareholders do not need to physically travel to the country as the establishment can be completed via a power of attorney.
What do you need to get started with your Company Formation in Brazil?
To proceed with incorporating a company in Brazil, you will need to provide the following:
- A name for your legal entity.
- Shareholder identification documents.
- Confirm the business activities and corporate purpose of the company
- Confirm the minimum initial capital to be registered
Important Tip: We always recommend having a preferred legal name and two alternatives in case the primary legal name is unavailable.
Steps to Incorporate / Register a Brazilian Sociedade Limitada (Ltda.)
Here we outline the process of incorporating a Limited Liability Company in Brazil. To operate locally, companies must complete six principal steps for the entity incorporation process.
Here we outline the process of incorporating a Limited Liability Company in Brazil. Entity incorporation involves six steps for companies to operate locally.
1. Due diligence to ensure preparedness
Before formally starting the incorporation process, you must gather the information required by the Brazilian authorities for every step in the process. Incorporating a company in Brazil requires a lot of documentation and company information: the type of legal entity, the number of shareholders, and the minimum capital, among others. It is critical to ensure all the information is clear so the remainder of the process will run smoothly.
2. Grant power of attorney to your local legal representative
Where the shareholder/s are foreign persons or legal entities, there is a requirement to secure a “Cadastro de Pessoas Físicas” (Natural Persons Registration) “CPF”, which is a Brazilian Tax ID. Thereby allowing them to register within the Entity Articles of Association before the Board of Commerce.
3. Register the articles of incorporation
Your POA should have access to all necessary information and submit the required documents – known as the articles of incorporation – to the Trade Board. The articles of incorporation should include entity and company names, a business address, capital, shareholder and administrator information, and descriptions of company activity. The cost associated with registering the articles of incorporation differs depending on the state where the company will be based.
4. Register with the public authorities
The next step when forming a company in Brazil is to register the company with various authorities, including the Federal Revenue Bureau (Receita Federal do Brasil), the relevant municipal authority, and the state authority (if applicable). Depending on the nature of your business and the activities of your employees, you might also need to register with other parties. In some cases, registering with labor unions is required as well.
5. Register with the Brazilian Central Bank
Registering the company’s taxpayer number with Banco Central do Brasil is mandatory for all foreign investors. The taxpayer number (CNPJ) is considered the essential reference number for any Brazilian company and is required documentation for any remittance activity. To obtain the taxpayer number, the company must first register with the National Registry of Legal Entities, known in Portuguese as Cadastro Nacional da Pessoa Juridica.
6. Opening a bank account in Brazil for your company
The last step to incorporating a company in Brazil is complicated and time-consuming. Due to the banks’ extensive “know your customer” procedures, this process can take anywhere from a few days to up to three months, depending on your relationship with the bank and your financial situation. To open a bank account, your company must already have completed shareholder documents, registered the incorporation articles, and acquired a taxpayer ID.
Common FAQs when Forming a Company in Brazil
Answers to some of the most common questions we get asked by our clients.
Yes, a business can be 100% foreign-owned by either legal persons (“legal entities”) or natural persons (“individuals”).
It takes 10 weeks to register an operating company in Brazil.
In Brazil, when you come across LTDA in a company’s name, it stands for “Sociedade Limitada.” This corporate arrangement is characterized by limiting partners’ liability for their contributions to the company’s capital. Partners within an LTDA are not personally liable for the company’s debts beyond their initial investment. This feature shields individual assets and provides a safeguard. This structure is commonly embraced by small to medium-sized enterprises in Brazil, as it harmoniously blends partnership and corporate elements. It extends both flexibility and legal protections.
The S.A. in a company name in Brazil refers to a “Sociedad Anónima,” which translates to a “Joint Stock Company.” This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, crafting a safeguarded boundary. The S.A. structure holds substantial prominence in Brazil due to its exceptional adaptability and flexibility, rendering it the favored option for diverse business ventures.
The Sociedade Limitada (Ltda.) is a Limited Liability Company in Brazil.
A. Number of Shareholders: The LTDA can have a minimum of one shareholder, either legal entities or individuals, whether national or foreign. Non-resident shareholders must be represented by a local representative. On the other hand, an SA must have a minimum of two shareholders, whether legal entities or individuals, whether national or foreign. Non-resident shareholders must also be represented by a local representative.
B. Board of Directors: The LTDA can have a minimum of one director, who is appointed as an Administrator in the articles of incorporation. Conversely, in an S.A., the Board of Directors shall consist of one or more elected members.
C. Duration: Both LTDA and SA can have an unlimited duration.
D. Responsibility of Shareholders: In an LTDA, the liability of each partner is limited to the value of their shares, but all partners are jointly and severally liable for the payment of the share capital. In contrast, in an S.A., the liability is limited to the price of the acquired shares.
E. Social Capital: For an LTDA, the capital comprises cash, movable, and immovable property, and is divided into quotas. Each partner’s liability is limited to their share amount. Conversely, for an S.A., the capital includes cash, movable and immovable property, and is divided into shares. Various classes of shares are also possible.
F. Regulation: An LTDA is subject to simpler regulation compared to an SA, with fewer formalization and disclosure requirements. Changes in an LTDA are made through amendments to the articles of association, whereas in an SA, they are made through minutes of shareholders’ meetings.
Contact our team for help with registering your company
Although these procedures may appear difficult, numerous resources are available to help. Being diligent and organized during these steps will help smooth the process. Many businesses opt for professional help and guidance from local experts to ensure success.
At Biz Latin Hub, our professionals can guide you and your business through these rules, regulations, and processes. With the help of our office in Sao Paulo, your company will be registered in Brazil and ready for business in no time. Extensive experience in company registration, legal, financial, and company representation sectors makes Biz Latin Hub Latin America’s leading provider of back-office services.
Please contact us today to learn more about the Brazilian economy, the business opportunities to form a company in Brazil, and how you might take advantage of these political shifts. Read about our team and expert authors on our team page.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.