Starting your company in Brazil can be a challenging feat, especially if you don’t know all the rules and regulations of the country. Businesses must take into account the complexity and intricacy of local systems and processes before taking on the exciting challenge of expanding to this country. But in recent years, the country has taken progressive steps towards becoming a more attractive destination for foreign business and investment.
Below, we outline the rules, regulations and options for commercial activity in the country.
Important things to know before starting the company formation process
Before incorporating your company in Brazil you must familiarize yourself with some critical aspects of the process. For example, in Brazil a branch is different than a subsidiary. Opening a subsidiary company in Brazil is less complicated 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 fully governed by law and will have the same rights and responsibilities as any other company.
On the other hand, opening a branch can be quite complicated. This process requires specific authorization from the Brazilian Ministry of Development, Industry and Foreign Trade. You must know the differences between these two and decide which model works better for you.
Company ownership and investment
Another thing to consider is company ownership in Brazil. To open a limited liability corporation in Brazil, for example, you must have at least two shareholders. Moreover, it is important to note that foreign shareholders must be represented by local Brazilian residents.
There are no formal investment requirements to form a new company. There is, however, an investment required for the permanent Brazilian investor visa. Normally, an investment of R$150,000 or more is needed to qualify for this visa.
All companies formed in Brazil need to have a unique registered fiscal address. This address must represent a physical location; it cannot be a virtual address.
Other items things to consider during the formation or incorporation process include the trading name, requirements for a company administrator in Brazil, and company name.
Brazil’s Limited Liability Company
In Brazil there are a lot different of companies or legal entities, however, the most common type is the Limited Liability Company.
The local Limited Liability Company (LLC) structure closely resembles the US LLC, so it’s easier to understand. The main thing to keep in mind when looking into an LLC is the varying responsibility of the shareholders. Each shareholder’s responsibility is contingent upon the value of his or her assigned capital. Despite varying degrees of capital ownership, all shareholders are liable for the payment of the initial corporate capital.
Steps to Incorporate a Brazilian LLC
To operate locally, companies must navigate the process of incorporation through six main steps. Here we focus on the process of opening an LLC in Brazil.
1. Due diligence to ensure preparedness
Before formally starting the incorporation process, you must first gather all the necessary information required by Brazilian authorities throughout the entirety of the process. There are a lot of things that need to be taken into account to incorporate a company: the type of entity, the numbers of shareholders, the minimum capital, the required documentation, among others. It is critical to ensure everything is clear so the remainder of the process will run seamlessly and smoothly.
2. Grant power of attorney to your local legal representative
It is essential that the shareholders of the company grant power of attorney (POA) to their legal representative in the country. This step is important to ensure the legal representative can go through the entire procedure on the shareholder’s behalf without any problem.
3. Register the articles of incorporation
Your POA should gather all necessary information to incorporate the company and submit the required documents – known as the articles of incorporation – to the Board of Trade. The articles of incorporation include the name of the entity, address of the business, shareholders, capital, activity, company name, administrator of the company. The cost associated with these submissions will differ depending on which state the company will base itself.
4. Register with the public authorities
Next, you must register the company with various authorities, including the Federal Revenue Bureau (Receita Federal do Brasil), the relevant municipal authority, and the state authority. Aside from the aforementioned institutions, there might be other parties you are required to register your company with depending upon the nature of the business and activities of employees. 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 a mandatory step for all foreign investors. The taxpayer number (CNPJ) is considered the most important reference number for any Brazilian company and is required documentation for any remittance activity. In order to obtain the taxpayer number, the company must first register with the National Registry of Legal Entities, known in Portuguese as Cadastro Naciaonal da Pessoa Juridica.
6. Opening a bank account
While this is the last step in the process of incorporation, it is very complex and takes a lot of time. With an extensive “know your customer” procedure by the bank, 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 a taxpayer ID, the articles of incorporation, and the documents from the shareholders.
Reach out to our team
While these processes seem arduous and complex, there are plenty of resources available to help you. Being diligent and organized when going through these steps will help smooth the process along. To ensure success, many businesses opt for professional help and guidance from local experts.
At Biz Latin Hub, our team of 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 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.
Contact us at [email protected] for personalized assistance.