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Starting a business in Brazil : what kind of entity should you create ?Posted 12/12/2019
If you plan to start a business in Brazil, you should be aware of the several types of entities that can be established on the territory. First and foremost, let’s get focused on the most common ones, which are : LTDA, EIRELI and SA. In this new article, we will provide a global idea of each type of structures.
You’re thinking of launching a new business, or create a branch in Brazil ? Our team of experts helps you in all the administrative and legal aspects of your establishment process. Feel free to contact us for further information, or any question.
LTDA : Sociedade de responsabilidade limitada
The LTDA is unquestionably the most popular type of company established in Brazil. Indeed, this kind of organization remains very pliable, in some crucial aspects : capital, ownership structure and liability of each shareholder.
First advantage, creating a LTDA can be done without minimum capital requirement. You can then start your company with a small capital, and load it progressively. However, you should consider the fact that if you start with an important capital, you will face some difficulties decreasing it after.
If you plan to found a LTDA company in Brazil, you should include at least 2 shareholders. These shareholders can be natural persons or other entities, which can be either locals or foreigners. Please note that there is no mandatory requirement to nominate a Brazilian as a shareholder, nor any legal or tax advantages. Moreover, there’s no specification for the % of shares that each shareholder should have.
The liability of the shareholders is limited to the amount of each of its shareholders quotas. The contribution of the associate who brings his technical skills, his know-how or his professional knowledge, is equal to one of the partner who has the lowest participation in the industry.
To ensure compliance with local rules in terms of administration, you should already notice that every company in Brazil has to nominate a Brazilian (or foreigner with permanent residency) as a director, a brazilian attorney-in-fact (or foreigner with permanent residency), a servicing office (address), and an accountant.
Our team of experts can help to bring you structure compliant with brazilian legislation.
EIRELI : Empresa Individual de Responsabilidade Limitada
An EIRELI works in a very similar way to the LTDA. The debts of the company are limited to be charged only against the capital contributed by the owner of the company. However, there are some strategic differences, regarding the shareholder and the capital aspects.
This company model provides the advantage that only one person can be the sole owner of a limited liability company. However, there are a few restrictions to be aware of :
- The company’s capital must be equal to at least a hundred Brazilian minimum wages.
- The owner of the company cannot own another Eireli.
- The general rules for a “Sociedade Limitada” company will also be applied to the Eireli.
SA : Sociedade Anonima
Because setting-up this type of structure is more complex, SA is the less common entity founded here in Brazil. While the LTDA and EIRELI are considered as “People’s company”, the SA must be considered as a “Capitals Company”. The investors are then more focused on the values of their “Stocks”, trying to maximize the value of the company.
In the case of the SA, the minimum capital must represent 10% of the value of the stocks that the company opens to the stock market.
This kind of entity includes as many partners as defined by the constitutional document (at least two). You can either found an “open capital company”, or a closed one. .
Lastly, the liability of each shareholder is limited to the value of his investment.
If you’re a foreign investor seeking for administrative and legal support, don’t hesitate to contact our team of consultants. We’ll provide you with our expertise on the brazilian market, and help your business grow and sustain.Author's post: Europartner Accounting