LLC formation in Brazil: Everything you need to know
Before considering LLC formation in Brazil, companies must understand that local business systems and processes can be complex and intricate. Fortunately, in recent years, the country has taken steps to become a more attractive destination for foreign business and investment.
Navigating the Brazilian business landscape can be both promising and complex for foreign investors. Latin America’s largest economy offers a plethora of opportunities, with an estimated GDP of USD$2.126 trillion. However, LLC formation in Brazil requires a thorough understanding of local rules and regulations, which can be intricate and difficult to navigate.
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This guide aims to provide valuable information on the process of LLC formation in Brazil, shedding light on the types of legal entities in Brazil, minimum requirements and essential steps to establish a presence in this dynamic market. Biz Latin Hub can help you with market entry and ongoing support with legal compliance – from tax advisory to labor law and anything else you may require.
5 key things to know before starting LLC formation in Brazil
Before incorporating a company in Brazil, you must familiarize yourself with the formal process and your business needs. For example, a subsidiary company is different to a branch office. The former is easier to set up than the latter.
- By law, any foreign company can be a partner, investor, or shareholder in a Brazilian company, making the Brazilian company a subsidiary of the foreign entity: The Brazilian company will then be a legal entity having the same rights and responsibilities as any other company. The process of opening a branch, however, can be complicated. This process requires specific authorization from the Brazilian Ministry of Development, Industry, and Foreign Trade.
- Meeting the requirements for company ownership: To open a limited liability corporation, you must have at least one shareholder, but rules may differ depending on company type. Brazilian residents must represent foreign shareholders in Brazil.
- Incorporating a company comes with no formal investment requirements: However, investment is needed to qualify for the permanent Brazilian investor visa, usually for R$500,000. A Brazilian Central Bank (Banco Central do Brasil) registration is also required.
- All companies in Brazil must have a unique registered fiscal address: This address must represent a physical location; it cannot be virtual.
- Other aspects to consider: LLC formation in Brazil includes the requirement that companies have a local administrator and have commercial and company names.
Starting a business in Brazil: 4 Types of Brazilian companies
The country has different types of company, so you should know the alternatives to LLC formation in Brazil in case one of them may be a better fit for your needs.
- Limited Liability Company (Sociedade Limitada / SRL).
- Limited Liability Corporation (Sociedade Anônima / SA).
- Consortium.
- A new branch of an existing company.
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), Ltda, 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 that each shareholder’s responsibility is tied to their assigned capital — or based on their investment. Hence, the liability of each shareholder is limited to the value of their shares, but all shareholders are jointly liable for the payment of the share capital.
Structure 2 – Limited Liability Corporation (Sociedade Anônima / SA)
Limited liability corporations, locally referred to as an anonymous society (Sociedade anônima) or SA, are closest to what’s known as a Subchapter C Corporation in the United States.
This 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 be public (known as a Sociedade por Ações Aberta) or private (known as a Sociedade por Ações Fechada), meaning the shares and securities will not be available to the general public. Corporations seeking to raise funds often use this type of entity.
Entity Structure 3 – Consortium
A consortium is the gathering of corporations of other companies to perform a particular operation or activity. Consortiums are unincorporated entities where two or more members engage in trade, business, financial operations, or ventures and share profits.
Entity Structure 4 – Opening a new branch
When choosing a Brazilian company structure, it’s worth considering the possibility of incorporating a branch. However, 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.
To open a branch office in Brazil, you need to demonstrate the existence of a legal entity in another jurisdiction, including the articles of incorporation and a list of shareholders. All documents must be officially translated, legalized (notarized or equivalent), and certified by a Brazilian consulate.
What are the minimum requirements for LLC formation in Brazil?
It’s crucial to understand what the minimum requirements are for LLC formation in Brazil before you start the process. Below is a detailed list of requisites.
- Minimum of (1) shareholder, either legal entities or individuals, national or foreign. Non-resident shareholders must have a local representative.
- Contribute a minimum initial capital of USD$500. – Important Note: Based on our experience, we recommend a minimum initial capital commensurate with your planned activities.
- Appoint a legal director within the bylaws of the company, this can be a lawyer, the company founder, and/or a senior executive within the company.
- Register a fiscal address which must be within the country and used for official correspondence.
- Open a local corporate bank account.
Important tip: The founding shareholders do not need to physically travel to the country as LLC formation in Brazil can be completed via a power of attorney.
What do you need to get started with your LLC formation in Brazil?
To proceed with incorporating a company in Brazil, you will need to provide the following:
- A name for your legal entity.
- Shareholder identification documents.
- Intended business activities and corporate purpose of the company.
- Proof of funds for the minimum initial capital
Important Tip: We always recommend having a preferred legal name and two alternatives in case the primary legal name is unavailable.
6 simple steps to LLC formation in Brazil
Here we outline the process of incorporating a Limited Liability Company in Brazil. To operate locally, companies must complete six principal steps for the entity incorporation process.
Here are the six steps to incorporate a Brazilian Sociedade Limitada (Ltda.):
- Step 1: Due diligence to ensure preparedness.
- Step 2: Grant power of attorney to your local legal representative.
- Step 3: Register the articles of incorporation.
- Step 4: Register with the public authorities.
- Step 5: Register with the Brazilian Central Bank.
- Step 6: Opening a bank account in Brazil for your company.
1. Due diligence to ensure preparedness
Before formally starting the incorporation process, you must gather the necessary information for every step in the process. Incorporating a company in Brazil requires a lot of documentation and company information. This includes the type of legal entity, the number of shareholders, and the minimum capital, among others. It is critical to ensure all the information is clear so the remainder of the process will run smoothly.
2. Grant power of attorney to your local legal representative
Where the shareholder/s are foreign persons or legal entities, there is a requirement to secure a Cadastro de Pessoas Físicas (CPF), which is a Brazilian Tax ID. This allows them to register within the Entity Articles of Association before the Board of Commerce.
3. Register the articles of incorporation
Your POA should have access to all necessary information and submit the required documents – known as the articles of incorporation – to the Trade Board. These should include entity and company names, a business address, capital, shareholder and administrator information, and descriptions of company activity. The cost associated with registering the articles of incorporation depends on the local home state.
4. Register with the public authorities
The next step when forming a company in Brazil is to register the company with various authorities. This includes the Federal Revenue Bureau (Receita Federal do Brasil), the relevant municipal authority, and the state authority if applicable. Depending on the nature of your business and the activities of your employees, you might also need to register with other parties. In some cases, registering with labor unions is required as well.
5. Register with the Brazilian Central Bank
Registering the company’s taxpayer number with Banco Central do Brasil is mandatory for all foreign investors. The taxpayer number (CNPJ) is the essential reference number for any company and is a requisite. To obtain the taxpayer number, the company must first register with the National Registry of Legal Entities (Cadastro Nacional da Pessoa Juridica).
6. Opening a bank account in Brazil for your company
The last step to incorporating a company in Brazil is complex and time-consuming. Due to extensive ‘know your customer’ procedures, this process can take anywhere from a few days to up to three months. It depends on your relationship with the bank and your financial situation. To open a bank account, your company must have shareholder documents, the incorporation articles, and a taxpayer ID.
FAQs for company formation in Brazil
Answers to some of the most common questions our clients ask us about LLC formation in Brazil.
Can a foreigner own a business in Brazil?
Yes, by either legal persons (legal entities) or natural persons (individuals).
What is the Brazil Company Tax ID?
The Brazil Company Tax ID is known as CNPJ (Cadastro Nacional da Pessoa Jurídica), which translates in English to the National Register of Legal Entities a unique identification number issued to entities for tax purposes in Brazil.
How long does it take to register a company in Brazil?
It takes 10 weeks to register an operating company in Brazil.
What does an LTDA company name mean in Brazil?
In Brazil, when you come across LTDA in a company’s name, it stands for Sociedade Limitada. This corporate arrangement limits partners’ liability for their contributions to the company’s capital. Partners within an LTDA are not personally liable for the company’s debts beyond their initial investment. This feature shields individual assets and provides a safeguard. This structure is common for small to medium-sized enterprises in Brazil, as it harmoniously blends partnership and corporate elements. It extends both flexibility and legal protections.
What does an S.A. company name mean in Brazil?
The S.A. in a company name in Brazil refers to a Sociedad Anónima, which is similar to a joint stock company. This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is solely to the value of their shares. The S.A. structure is common in Brazil due to its exceptional adaptability and flexibility, rendering it the favored option for certain business ventures.
What entity types offer Limited Liability in Brazil?
The Sociedade Limitada (Ltda.) is a Limited Liability Company in Brazil.
Comparison between SA and LTDA in Brazil
| LTDA Company | S.A. Company | |
|---|---|---|
| Minimum Shareholders | 1 (can be individuals or legal entities, including foreign ones) | 2 (can be individuals or legal entities, including foreign ones) |
| Non-resident Representation | A local representative | Must have a local representative |
| Board Structure | Minimum of 1 director | Minimum of 1 elected member (board of directors) |
| Operational Duration | Indefinite | Indefinite |
| Shareholder Liability | Only to their share value; jointly liable for share capital | Only to the price of acquired shares |
| Capital Composition | Cash, movable/immovable property (divided into quotas) | Cash, movable/immovable property (divided into shares, with possible classes) |
| Regulatory Complexity | Simple (changes via amendments to articles of association) | More complex (changes via shareholders’ meeting minutes) |
Contact our team for help with LLC formation in Brazil
Many of these procedures may appear difficult, but numerous resources are available to help. Careful organization during these steps will help smooth the process. Many businesses opt for professional help and guidance from local experts to ensure success.
At Biz Latin Hub, our professionals can guide you and your business through these rules, regulations, and processes. With the help of our office in Sao Paulo, your company will be registered in Brazil and ready for business in no time. Extensive experience in company registration, legal, financial, and company representation sectors makes Biz Latin Hub Latin America’s leading provider of back-office services.
Please contact us today to learn more about the Brazilian economy, the business opportunities to form a company in Brazil, and how you might take advantage of these political shifts. Read about our team and expert authors on our team page.
