Brazil, officially recognized as the Federal Republic of Brazil boasts over 200 million population and ranks within the top positions of the world’s biggest population. The country has become an integral choice for many foreign and global firms to incorporate.
As a member of the so-called BRICS (Brazil, Russia, India, China, and South Africa) economies, Brazil is expected to evolve into one of the world’s leading economies in the 21st century.
The Brazilian government commonly welcomes foreign investment, but, the structure for incorporation can be sophisticated and there are a number of options open to entrepreneurs looking to do business in Brazil.
The Main Types of Companies in Brazil
Brazil is one of the biggest markets in Latin America, with the local authorities granting various options for legal entities to be set up for multinational investors.
In Brazil, there are primarily 4 types of companies you can choose to incorporate:
- The limited liability company (sociedade limitada / LTDA)
- EIRELI (Empresa individual de responsabilidade limitada)
- The Limited Liability Corporation (Sociedade Anônima / S.A.)
- A Branch Office (Foreign Corporation)
Also, Brazil allows for the formation of a Consortium which is an unincorporated entity.
- The Limited Liability Company (Limitada / Ltda)
Limitadas are the most popular type of legal entities registered under Brazilian Corporate law. The major characteristics of the Ltda. is in respect to the limitation of the liability of each shareholder.
Each shareholder is restricted to his/her assigned share capital. To form a Limitada, a minimum of two shareholders of any nationality are needed. Non-residents shareholders must be represented by a regional representative and a minimum of one local resident director has to be assigned as well. The shareholder owning a share of more than 75% of the company has active control over executive decisions. There is no requirement for paid-up share capital and a member is not permitted to sell their own shares without the approval of other shareholders. A Limitada is incorporated through an Articles of Association and must be registered before the Board of Trade.
- Limited Liability Corporation (Sociedade Anônima /S.A.)
The Limited Liability Corporations (SA) are regulated by corporation acts and are the form that most closely matches the US subchapter C corps. Corporations formed under the S.A are permitted to issue both voting and non-voting shares, and shareholders’ liability is each restricted to the number of shares to which he/she has subscribed. For foreign shareholders who don’t reside in Brazil, legal representatives have to be assigned. SA is usually suited for large businesses looking to obtain funds from the general public.
To set up an SA, at least two shareholders, are required. A corporation may be either a publicly traded corporation (Sociedade por Ações Aberta), or a closed corporation (Sociedade por Ações Fechada), whose shares and securities are not available to the general public. It is important to note that the Corporations must adopt the Board of Directors and Administrative Council administration bodies.
- Branch Office (Foreign Corporation).
A major or parent company looking to expand its operations may organize a branch in Brazil. For the establishment of a Branch Office in Brazil, it is necessary for the entity to maintain the same name as its country of origin and a fully responsible legal representative is imposed at all times. Note that a branch in Brazil is taxed at the same rate as a Brazilian company.
- EIRELI (Empresa Individual de Responsabilidade Limitada)
The EIRELI is mostly used by individual entrepreneurs. The EIRELI can be incorporated by a single individual shareholder that holds 100% of the paid-in capital. The EIRELI adopts the same rules as the Limitada with respect to the responsibility of the shareholder. Note that no individuals can own more than one EIRELI at once.
- A Consortium
The Brazilian legislation interprets the consortium as an unincorporated entity, by virtue of which two or more partners plan to carry on a trade, financial operation, or venture and share its profits. Consortiums must be filed with the Board of Trade (Junta Comercial) in Brazil and are not regarded as a corporate entity from a tax standpoint.
Selecting the right entity option in Brazil depends on your business plans. Also starting a business in Brazil can be sophisticated and it requires a thorough understanding of all the rules and regulations.
If you would like to know more about the types of companies in Brazil or if you are ready to register and incorporate your company in the country, let’s go ahead and contact your Damalion experts now.
