How to set up a company in Brazil

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administration

How to set up a company in Brazil

Setting up a business in any country is a challenge, especially considering each country’s laws and rules in setting up, opening, and maintaining a business in Brazil. It also presents just as much difficulty, but it becomes a lot easier with the correct information and tools. Having a corporation in Brazil can only come after much consideration and obeying the several types of obligations set out by the government.

Depending on various factors and the objective of your business, there are different types of corporations, such as ME’s and Ltda’s. Limited Liability Companies (LLCs) limit your personal liability to the amount invested in the company; this is the type this blog article will focus on.

Firstly, it is important to remember that any articles of incorporation and amendments to those articles afterwards, must ALWAYS be signed off by an attorney. Contrary to popular belief, it is mandatory, although it doesn’t have to be a hassle as some accountants have in-house lawyers who offer these services themselves.

To open a corporation, the following things are needed:

a) Documents (partners and owners)

  • Limitadas require at least 2 quota holders (owners), which could be 2 individuals, 2 corporations or a combination of these two, either foreign nationals or Brazilians. It does not matter.
  • In the case of foreign individuals, each shareholder/owner will need the following documents:
  1. Five legalized copies of passport (copies must be legalized by Brazilian Consulates abroad or at local “cartorio” in Brazil)
  2. Brazilian CPF number(s) for all shareholder(s).

b) Address:

  • Corporations must have an address in Brazil. Depending on the type of products the corporation will deal with (import and export corporation), the government may require minimum square footage for the address or a third-party warehouse rental contract. Legalized copies of the property tax bills and/or rental contracts may be required.

c) Other Legal Requirements:

  • By Law, all Brazilian corporations/companies must have a local administrator known as Administrador. This person must be a Brazilian citizen or at least a legal resident in Brazil (if a foreign national). This person shall be responsible for the corporation‘s activities before the different governmental authorities.

With all these documents and information in hand, you can seek legal help to open your corporation in Brazil, which, in São Paulo, can take up to 10 weeks.

Under Brazilian tax law, the LLC is treated as a corporation requiring a minimum of two members (individuals or companies) with no minimum capital required.

The LLC is managed by one or more managers (administradore/s) who must be either Brazilian or a resident alien; LLC members that fulfil these requirements can control the company.

When the members are not the managers of the LLC, the latter’s authority is usually restricted in the articles of incorporation or in the appointment resolution. Typically, the following acts on behalf of the company are subject to the prior written authorization of the members:

(I)  to buy or sell materials, supplies and equipment or to contract services involving the commitment or expenditure over a certain amount (fixed in Reais or as a percentage of the capital)

(II)        lease any asset, buy or sell real estate property

(III)      assume any liability over a certain amount (fixed in Reais or as a percentage of the capital),

(IV)       to retain and discharge audit services

(V)         to make or authorize any distribution of profits

(VI)       to assign or encumber company assets

(VII)    to file for bankruptcy or reorganization procedures, to merge, consolidate or split up the company, or dissolve the company

(VIII)  to submit disputes to arbitration.

While the manager’s authority can be limited, certain management powers cannot be eliminated. Representation of the company before the authorities, receiving service of process, hiring employees and committing the company in the ordinary course of business are examples of such minimal management powers.

Top Tip: when selecting the manager of the LLC, it is recommended to run a financial check of the candidate; the preceding is relatively simple, quick and not expensive.

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

www.gatewaytosouthamerica.com

Please note: This is only a guide, and you should check for any changes with a local Brazilian law firm before acting.

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  • GTSA says:

    Fabiano Deffenti from Carvalho, Machado, Timm & Deffenti Advogados kindly updated this information for us.
    1. You can have sole shareholder companies. They are called “EIRELIs”. They are fairly new (the law came into force in January 2012)
    2. There is no need to get five copies of the passport (I do not know where that number came from). While it is helpful to get extra copies, you really only need two (or one if the person already has his/her CPF or applies for it through a Brazilian Consulate/Embassy);
    3. All companies that sell products need to have a warehousing area, regardless as to whether they import or export. This is required for State tax registration (ICMS)
    4. The local executive directors (‘administradores’ for ‘limitadas’ ou ‘diretores’ for ‘SAs’) must permanently reside in Brazil, regardless of citizenship status. Non-citizens need to hold a long-term visa. The only exception are for non-executive directors (‘conselheiros’ – members of the advisory board). Finally, the process is anything but “simple, quick and cheap”. At least not if compared to the vast majority of developed jurisdictions. Just check Brazil’s rankings on IFC’s Doing Business rankings.

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