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Myths and truths about opening a startup in Brazil

Posted 2018-08-03

Starting a business in Brazil is not an easy task and requires a lot of care. The more prepared you are, the more chances your business will have to be successful in the market.

Despite the great bureaucracy to open a company in Brazil, the figures show that startups do not stop growing. Data from the Brazilian Association of Startups (ABS) reveal that today there are 4,200 such companies, while in 2012 there were 2,519.

Check out some myths and truths that involve entrepreneurship in Brazil:

It takes an innovative idea

Myth! Opening a startup, an innovative business, is rather a great way to start a venture, however, one must be very careful when deciding to open a business anywhere in the world. Before thinking about opening something innovative, it is necessary to analyze if there is demand for this market in the country.

A survey carried out by the technology company CB Insights indicates that legal issues are among the top 20 reasons that lead startups to failure. The lack of market demand is also among these reasons.

In other words: an innovative idea is not always a synonym for success.

There is a lot of bureaucracy and taxes

Truth! In Brazil, to open a business, it is necessary to deal with various types of bureaucracy, practically every day, and for all the areas of your company. In addition, the Brazilian tax burden is considered one of the highest in the world.

Some entrepreneurs feel intimidated and even discouraged for having to face so much bureaucracy and pay so many taxes. This is a reality of the Brazilian market, and it must be well studied before opening a business or not.

In order to deal with complex issues and all the bureaucracy, it is essential to have a well-prepared partner, updated on all the legal, accounting and legal issues related to opening a business in Brazil.

Entrepreneurs always get money from venture capital

Myth! Not all entrepreneurs get money from venture capital.

So where do people get investments to start a business? Venture capital is on the list, but personal loans, credit, friends and family are possible and less risky options.

Another option is an angel investor, which is an individual who makes investments with his or her own capital in startups with a high growth potential.

Another innovative way of capturing investment is via equity crowdfunding, which is a cheaper alternative to bank loans, which has high interest rates. In this modality, a group of investors provides resources in the company in exchange for participation through online platforms. This contribution may be through the acquisition of ownership interest (equity) or equity convertible securities issued by the investee.

The contributions, in general, are smaller than those made by angel investors, but the effectiveness of funding is supplanted by the internet reachability.

Brazilian labor law is complex

Truth! The CLT – Consolidation of Labor Laws – is a 1943 document, which ensures the rights of Brazilian workers. The vast majority of Brazilian workers have work contracts governed by CLT. It is worth remembering that legal entities, self-employed professionals and civil servants do not belong to this group.

It is essential to be well informed about all aspects of the labor law and any changes to avoid problems for the company. For this to be possible, it is necessary to have specialized advice from a company that provides legal advice and can guide all steps of the company in relation to the law, avoiding any misunderstandings that may be costly for the company in Brazil.

Brazil is one of the countries with the highest number of labor lawsuits worldwide, according to a research conducted by the National Justice Council (CNJ). The Consolidation of Labor Laws (CLT) have completed more than seven decades, but there is still disrespect and much ignorance of the companies regarding the labor rights. This is due to the fact that Brazilian labor law is complex, and therefore not always easy to understand.

So it is essential to have not only legal advice but also a professional and experienced human resources team. Europartner offers human resources services, with HR professionals prepared to deal with the Brazilian labor law, that can take care of this crucial activity for the success of your company.

Human resource management is a key part of any business, and it is often better to outsource this department when starting a business in Brazil.

Author's post: Europartner Accounting

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