Brazil is one of the most bureaucratic countries in the world when it comes to opening a legal entity. It is strongly advisable to use professional help in this regard.

iCAABS has established itself as one of the leaders in assisting foreign firms enter the Brazilian market and works with each individual company to establish the most economical and efficient approach to registering and opening a legal entity in Brazil.

There are several choices of different types of legal entity from Micro-companies, Sociedade Limitadas and full blow S/A (Sociedade Anônima) plus a few other lessor used types of entities. The Limitada is often the vehicle of choice for the majority of international companies opening up in Brazil. A Limitada is similar to an American LLC or a UK Limited company.

The main differences between the different types of company are at a high level, the Limitada usually gives you trading flexibility and ease of implementation. For more complex operations and registering on the stock market, the S/A is the only choice.

Micro-companies are usually adopted by individuals in respect of small business and offer some tax incentives and simplified tax operations at lower levels of revenue. There are several basic types, each one having a limit on the amount of revenue. The maximum amount of revenue that can be put through any micro-company is R$2.4m. There are also strict laws governing ownership. For example if you are projecting to do R$4.7m of business you can not open 2 micro companies and there are quota holding limits on a quota holder within a Limitada prohibiting participation within a micro-company etc.

The Sociedade Limitada (Limitada) is the most popular corporate structure since it is easier to set up than an S/A and has far fewer public-disclosure requirements than an S/A.

The capital of a Limitada is divided into quotas (the amount to which each partner limits his liability). The Limitada is formed through a similar but simpler procedure than the Sociedade Anônima and involves the same taxes. Operational costs are generally lower as the Limitada does not require external auditing.

For Limitadas, little disclosure is required; Limitadas rarely reveal basic financial information, such as operating expenses or year-end profits.

It is not necessary to register a Limitada on a stock exchange, and no minimum amount of capital must be deposited in a bank. A member may not sell a stake in the company (called quotas) without the consent of all other members.

There are different rules and regulations for an international company to consider like; the Brazilian company HAS to have a Brazilian address and one of the quota-holders HAS to have permanent residency within Brazil. He/She does not necessarily have to be Brazilian but has to have a permanent visa.

The rules for a foreigner to qualify for a permanent visa are quite straightforward and there needs to be an investment of at least R$150,000 in the Brazilian entity and this investment has to be registered with the Brazilian Central Bank.

The actual steps and timeframes involve vary from case to case and are dependent upon the type of business a company is going to conduct, the type of products or services it will sell and where it will be located.

There is also the potential for a large amount of translation of documents back and forth. International companies should choose their translation partners carefully and check out references. It is critical that translations are accurate and appropriate. If not appropriate this can add a lot of time into an already long process and also involve additional costs to have work re-translated and additional filing fees.

For foreign companies entering the Brazil market, to open a legal entity and conclude all the necessary legal registrations can involve a process that can easily get up to 20 or more different stages in even the most simple scenario.

At a minimum the following stages will need to be completed for the most basic situation:

  • Company name search, to check the name is not registered or has not been previously registered and ensure there are no problems or potential risky history associated with the company name.
  • If the company is funded by foreign capital, remit capital and register it with the central bank (Banco Central do Brasil) within 30 days.
  • Register the company with the state where the company’s principal office will be located. Pay registration fees and obtain an identification number.
  • Register with the Secretariat of Federal Revenue (Receita Federal do Brasil) for federal- and state tax purposes. Obtain a company number (known locally as the CNPJ), confirm taxpayer enrolment and obtain inspection of state taxes.
  • Obtain permission from the respective state-level Ministry of Economy (Secretaría da Fazenda Estadual) to print receipts and invoices.
  • Apply for an operations permit with respective municipality.
  • Register company’s employees in social integration programme (contribuição para o programa de integração social—PIS).
  • Open a bank account for the Length of Service Guarantee Fund (Fundo de Garantia por Tempo de Serviço—FGTS) unemployment account.
  • Request permission from the Ministry of Labour and Employment (Ministério do Trabalho e Emprego) for the limited number of expatriate employees who need to be hired.
  • Register with the Employees Union and Patronal Union.

Again depending on the nature of the business some organisations may need to go through lengthy processes of registering products with Anvisa, Environmental agencies, Anatel for telecoms, RADAR to import goods which is controlled by the Central Bank via SISCOMEX.

All of these steps include their own unique documents, which again the international organisation needs to consider translation costs, legal expenses, tax and accountancy expenses and the cost of each individual registration or filing.

iCAABS is able to provide a comprehensive service to international firms wishing to open an entity in Brazil.

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