For anyone planning on entering the Brazilian market and considering how to constitute their business, there are a number of different types of companies in Brazil to choose from.
Brazil is Latin America’s largest country by area, most-populated nation, and biggest economy. Known as a major source of natural resources and agricultural goods, Brazil’s broad culture and geography means it is home to a wide array of commercial opportunities.
Below, a guide to the most common types of legal structures is provided, which should be of use to anyone planning on starting a business in Brazil.
They include a limited liability company, a limited liability corporation, a consortium, and a branch office of a foriegn company.
If you are planning on launching in the Brazilian market, contact us to find out more about how we can support you.
Table of Contents
Entity 1 – limited liability company (sociedade limitada / SRL)
One of the most common types of companies in Brazil that is the limited liability company, known locally as a limited society (sociedade limitada) or SRL. This type of legal structure in Brazil resembles a limited liability company (LLC) in the United States.
One of the key draws of a limited liability company in Brazil is the fact that each shareholder’s responsibility is limited to their assigned capital — essentially being based on their investment.
Some characteristics of the Brazilian versions of an LLC include:
- No minimum or maximum capital required unless the entity is involved in trading or hires foreign individuals as managers or directors
- This type of entity is incorporated through an Article of Association which needs to be registered before the Board of Trade
- Only one shareholder is needed, whether resident or not, with no minimum or maximum percentage of interest ownership required
- Non-residents need to be represented by an individual resident in the country
- An SRL cannot be registered or sell shares in the stock exchange
- Any quota holder representing holding more than 75% of the quotas has the effective control of the entity
- A member cannot sell shares without the approval of the other shareholders
Entity 2 – limited liability corporation (sociedade anonima / SA)
Limited liability corporations, referred to locally as an anonymous society (sociedade anonima) or SA, are regulated by a spefic set of regulations known as the Law of SAs. Among types of companies in Brazil, these are closest to what is known as a Subchapter C Corporation in the United States.
This type of 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 either be publicly traded (known as a Sociedade por Ações Aberta) or closed (known as a Sociedade por Ações Fechada), meaning the shares and securities will not be available to the general public.
This type of entity is popular among larger corporations interested in seeking to raise funds via the issuance of shares.
Some characteristics of the SA in Brazil include:
- At least two shareholders required (natural or legal persons, resident or not)
- The corporation’s capital must be completely subscribed and 10% must be deposited in a bank account as part of the incorporation process
- At least 5% of annual net income needs to be set aside in a legal reserve until it reaches 20% of capital
- Financial statements must be filed with the local commercial registry and published in the Official Gazette
- An SA must have a board of directors (who are fiscal residents of Brazil or hold residency) and administrative council (who can be non-resident foreigners)
Entity 3 – consortium
Among types of legal structures in Brazil, a consortium is the gathering of corporations of other companies with the aim of performing a particular operation or activity. Consortiums are unincorporated entities where two or more members take part in trade, business, financial operations or ventures, and share profits.
Some characteristics of a consortium in Brazil include:
- A consortium is established through a consortium agreement
- Partners are responsible for their own obligations and liabilities, as set out in the consortium agreement
- That same agreement will define the aim of the consortium and establish each partner’s rights and obligations
- The consortium agreement must be filed with the local board of trade in the same jurisdiction as the main office
- A consortium is not regarded as a tax payer, like other types of companies in Brazil
Entity 4 – branch office of a foreign corporation
When contemplating which of the different types of companies in Brazil best suits your needs, it is worth considering the possibility of incorporating a branch — although bear in mind that the process can be lengthy and costly, taking up to six months to complete and involving higher costs than other types of company formation.
In order to set up a branch office in Brazil, it is necessary to demonstrate the existence of a legal entity in another jurisdiction, including a copy of the articles of incorporation and list of shareholders, among other documentation. All documents must be officially translated, legalized (notarized or equivalent), and certified by a Brazilian consulate.
A certain amount of capital must be allocated to the branch,
Some characteristics of a branch office in Brazil include:
- Remittances of profits are exempt from withholding tax
- Special authorization open a brach office of a foreign corporation must be issued by the Ministry of Development, Industry and Trade.
- A foreign branch office can only start operations when it has been registered and its authorization and documentary evidence has been published
Biz Latin Hub can assist you doing business in Brazil
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean. We have offices in 17 key cities around the region, making us ideal partners to support multi-jurisdiction market entries and cross-border operations.
Contact us today to find out more about how we can assist you.
In the following video, you will find out more information about doing business in Latin America: