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Limited liability company VS Public limited company

Posted 2020-01-28

Which type of company should you build in Brazil ?

 

If you plan to develop a business in Brazil, you may be required to constitute either a limited liability company (Sociedade Limitada – Ltda), or a public limited company (Sociedade anónima – SA). 

Our new article intends to sum up the main differences between these 2 widespread types of organizations in Brazil, in order to clarify your international business strategy.

Limited liability company, or Sociedade Limitada

 

The Limited liability company is definitively the predominant corporate type in the Brazilian economy. The creation of a “limitada” is mostly simplified due to the fact that it does not include the obligation to publish acts.

Number and type of partners : 

This type of company must include at least two partners, who may be natural or legal persons : 

  1. Brazilian or not, resident or not.
  2. Individual associates must register with the CPF “Cadastro de pessoas físicas”.
  3. Any partner, natural or legal person, non-resident or not having its seat in Brazil, must have a legal representative, natural person resident in Brazil (Brazilian or foreign permanent resident).

 

Share capital :

The Limited company provides considerable flexibility in terms of capital : 

  1. There is no minimum amount.
  2. The capital can be 100% of foreign origin for almost all sectors of activity.
  3. The capital is divided into shares, which are equal shares that can be accumulated and indivisible from the capital of a limited liability company and cannot be incorporated into negotiable securities. In addition, its transmission is restricted (not free) and cannot be called shares.
  4. The minimum capital for its constitution must be 3,000 euros, a figure that must be fully subscribed and disbursed at the time of the incorporation of the company, which means that it does not admit passive dividends, that is, expendable afterwards.

 

Liability of partners :

The liability of the partners, as indicated by the name of the company, is limited to the capital contributed, which means that it is only responsible for the debts of the entity for the capital invested.

Should you build a Limited liability company in Brazil ?

This form is suitable for contractors who plan to open a business in a simplified way, in any type of sector, with partners, by stipulating the rules and responsibilities.

Public limited company, or Sociedade anónima

 

The Public Limited Company constitutes (Public Limited Company in the UK, and a Corporation in the US) ) a type of purely capitalist society in which capital is the most important element. Due to its characteristics, it is the legal form that best suits the needs of large companies.

It should be noted that the establishment of an SA entails a heavier and more expensive management of acts, which must be published in newspapers and in the Commercial Register.

Number and type of partners :

To set-up this type of structure, at least two people must subscribe to all the shares making up the share capital fixed in the articles of the association.

Besides, at least 10% of the issue price of the subscribed shares must be paid up as a cash deposit.

Share Capital :

  1. The SA can be based on an open capital (listed on the stock market), or a closed capital (which obtain their resources through the shareholders). 
  2. The capital is divided into shares, in principle of equal nominal value.
  3. The minimum share capital of the constitution is 60,000 euros. These types of companies can be created by simultaneous foundation (all shares are disbursed at the time of creation) or successively (shares are disbursed successively).
  4. The capital must be fully subscribed and disbursed at least 25% at the time of the incorporation of the company. The amounts that are subsequently paid as agreed are called passive dividends.

 

Liability of partners/shareolders :

The shareholders’ liability is limited to the issue price of the shares subscribed for or acquired by them.

The freedom of share transfer by shareholders does not influence the structure of the company.

Should you build a Public limited company in Brazil ?

In a nutshell, public limited companies are distinguished from other types of companies by the following essential characteristics:

  1. The division of a share capital into parts, as a rule, of equal nominal value, called shares.
  2. Partners’ liability limited only to the issue price of the subscribed or acquired shares, thus not responding to third parties for the obligations assumed by the company.
  3. The free cessibility of shares by the partners, without affecting the structure of the company the entry or withdrawal of any partner.
  4. The possibility of subscribing the share capital through an appeal to the public.
  5. The use of a trade name or trade name for business name, plus the words limited company.

The public limited company structure is adapted to already consolidated companies with strong growth potential, which include the possibility of entering investors and other forms of resource capture.

If you need further information or support in your brazilian business plan, feel free to contact our team of experts. We’ll provide you with our expertise on the brazilian market, and be delighted to help your business grow and sustain.

Author's post: Europartner Accounting

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