Brazil is the 5th largest country in the world and the largest in Latin America. It has a population of over 200 million and is the region’s largest economy. it’s GDP is $1.6 trillion and according to data collected by the OECD, is due to grow by 1.2% in 2023, slightly down on 2022.
Furthermore, it’s worth noting that the market is expected to bounce back after a few years of low FDI. Despite falling from around $70 billion 2019 to around $45 billion in 2021, new president Luiz Inácio Lula da Silva (more commonly reffered to as Lula) has pledged to end predecessor Bolsonaro’s more hawkish policies like deforestation. These were widely condemned by the international community and could explain the sharp fall. This is something to keep an eye on as the new presidency gathers speed.
Whatever type of legal structure in Brazil you ultimately choose, there are some exceptional opportunities available. Brazil offers excellent opportunities in traditionally strong industries like the meat, cotton, sugar, and coffee industries. These continue to represent strong opportunities for investors. However, there has been some criticism leveled at these sectors for their non-sustainable approach to business. Brazil is open to new, innovative solutions to these problems, as illustrated by the huge success of vegan food producer, The New Butcher. This is indicative of a younger generation of the Brazilian market who are more conscious in their purchasing habits. These types of companies in Brazil could be the next big opportunity!
Without a doubt, it’s ripe for innovation. Entrepreneurs looking to enter the Brazilian market and access the business opportunities and vast talent pool that comes with it should be well-informed and understand the process meticulously. This includes setting up the right type of entity!
In this article, we provide a guide to the most common types of legal structures. It’s an excellent starting point for anyone looking to start a business in Brazil.
Your four main options are:
- Opening a limited liability company
- Opening a limited liability corporation
- Opening a consortium
- Opening a Brazilian branch of your existing foreign company
If you’re planning on launching in the Brazilian market, contact us to find out more about how we can help.
Table of Contents
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) or SRL. This type of legal structure in Brazil is similar to a limited liability company (LLC) in the United States.
A key benefit to the limited liability company in Brazil is the fact that each shareholder’s responsibility is tied to their assigned capital — or in other words, it is based on their investment.
Some characteristics of the Brazilian limited society (sociedade limitada):
- No minimum or maximum capital required unless the entity is involved in trading or hiring foreign individuals as managers or directors
- This type of entity is incorporated through an Article of Association which needs to be registered with the Board of Trade
- Only one shareholder is needed. They don’t need to be a resident and there’s no minimum or maximum percentage of interest ownership
- Non-residents must be represented by an individual resident in the country
- An SRL cannot be registered or sell shares in the stock exchange
- Any quota holder representing holding more than 75% of the quotas has the effective control of the entity
- A member cannot sell shares without the approval of the other shareholders
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 type of 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.
This type of entity is popular among larger corporations interested in seeking to raise funds .
Some characteristics of the SA in Brazil include:
- At least two shareholders required (natural or legal persons, resident or not)
- The corporation’s capital must be completely subscribed and 10% must be deposited in a bank account as part of the incorporation process
- At least 5% of annual net income needs to be set aside in a legal reserve until it reaches 20% of capital
- Financial statements must be filed with the local commercial registry and published in the Official Gazette
- An SA must have a board of directors (who are fiscal residents of Brazil or hold residency) and administrative council (who can be non-resident foreigners)
Entity Structure 3 – Consortium
A consortium is the gathering of corporations of other companies with the aim of performing a particular operation or activity. Consortiums are unincorporated entities where two or more members take part in trade, business, financial operations or ventures, and share profits.
Some characteristics of a consortium in Brazil include:
- A consortium is established through a consortium agreement
- Partners are responsible for their own obligations and liabilities, as set out in the consortium agreement
- That same agreement will define the aim of the consortium and establish each partner’s rights and obligations
- The consortium agreement must be filed with the local board of trade in the same jurisdiction as the main office
- A consortium is not regarded as a tax payer, like other types of companies in Brazil
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.
In order to set up a branch office in Brazil, it’s necessary to demonstrate the existence of a legal entity in another jurisdiction, including a copy of the articles of incorporation and list of shareholders, among other documentation. All documents must be officially translated, legalized (notarized or equivalent), and certified by a Brazilian consulate.
A certain amount of capital must be allocated to the new branch,
Some characteristics of a branch office in Brazil include:
- Remittances of profits are exempt from withholding tax
- Special authorization to open a branch of a foreign corporation must be issued by the Ministry of Development, Industry and Trade.
- A foreign branch office can only start operations once registered and its authorization and proof of documentation has been published
Biz Latin Hub can help you do business in Brazil
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean. We have offices in 17 key cities around the region, making us the ideal partners to support multi-jurisdiction market entries and cross-border operations.
Contact us today to find out more about how we can assist you.
In the following video, you will find out more information about doing business in Latin America:
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.