What to Know About the Different Business Opportunities in Brazil and the Business Environment
Ranked seventh in terms of its economy and fifth in terms of its population, Brazil has though the largest market in Latin America. Brazil is famous for its cultural diversity and its natural wonders. It is the case in this article to study the different business opportunities in Brazil.
It is important to know which legal structure is best for your business requirements in Brazil. Below we will find out the most common legal entities you need to establish your company or business in Brazil.
Limited Liability Company (‘’Limitada’’ / ‘’Ltda’’)
The Brazilian Limited Liability Company like the US LLC are the most common types of businesses. Here the important thing in this kind of companies concerns the limitation of responsibility of each shareholder. The responsibility is entitled to the amount of his or her assigned capital. However, note that all shareholders are responsible for the payment of the initial corporate capital.
Characteristics of the LLC in Brazil are:
- Unless the business involves commercial activities or recruits foreign managers and directors, it requires no minimum or maximum capital
- Every LLC business associates with certain Association and thus, registered at the Board of Trade
- Be they residents or not, two shareholders are required with no minimum or maximum interests in ownership
- Nonresidents must have a representative in the country
- Shares cannot be registered or sold in the stock exchange if they are ‘’Limitadas’’
- Has effective control on the business, the shareholder of over 75% of the shares
- You can sell your shares with the consent of the other shareholders
Limited Liability Corporation – S/A (‘’Sociedade Anònima’’ / ‘’S.A.’’)
They are guided by a particular law (‘’Lei das Sas’’) and look like the US subchapter C corps. The different shares in a corporation could be voting or non-voting. Here, each shareholder pays only the amount of the subscribed share. It is a business opportunity for big companies seeking to raise funds from the public.
Characteristics of Some SA in Brazil are:
- There must be at least two shareholders, residents or not.
- They can either be public (‘’Sociedade por Açòes Aberta) or Closed (‘’Sociedade por Açòes Fechada’’), this means the shares are not available to the public.
- To finalize the incorporation, the capital must be complete of which 10% placed in a Bank.
- Five per cent of its annual income paid in a legal reserve until it attains 20% of the capital.
- The major shareholder has the control, and the minor shareholder acts like a controller in the absence of other shareholders during meetings, voting and other events.
- Keep a record of all financial statements of the corporation at the local commercial registry. Moreover, published in the major and minor newspapers.
- They need a board of directors who are fiscal residents in Brazil or have a permanent visa and an Administrative Council who do not necessarily need to reside in the country.
Silent Partnership – SCP
Two or more members contribute to the activity and share the profits. They are unincorporated organizations. Examples of these types of businesses are real estate, reforestation projects, and hotel pooling. They have specific aims, meaning the company lives until it achieves its goals.
Its Characteristics in Brazil are:
- Here the ostensible partner is responsible for the management and operations before third parties
- Other members are liable to the ostensible partner
- Silent partnerships are equivalent to a corporate entity for income tax purposes, as stated in the tax legislation in Brazil
This is a situation whereby many businesses come together with the aim of operating a certain activity. Consortiums are unincorporated entities in which two or more members contribute in all operations and share profits.
Characteristics of Consortiums in Brazil include:
- Here each partner is responsible for his/her own obligations according to the consortium agreement
- On the bases of each role played by the consortium, each partner’s rights and obligations are specific
- The agreement must contain the following points; the role of the consortium, the businesses in the consortium, the duration, address and jurisdiction, liabilities and responsibilities of each partner
- You must register on the local board of trade; moreover not being a corporate, the consortium is not a taxpayer
Single Holder Limited Liability (‘’Empresa Individual de Responsabilidade Limitada’’ / ‘’EIRELI’’)
These are the most commonly used legal entities by private businessmen. The capital has to be a minimum of 100 fold the actual minimum wage. Each shareholder is liable to the number of shares owned. Note that it is important for all shareholders to participate in corporate capital. In addition, only Brazilians or foreigners with a permanent residence have permission to establish an EIRELI. However, individual shareholders having 100% of the capital can join an EIRELI.
Branch Office of a Foreign Corporation
A business can decide to open a branch office in Brazil, however, it is difficult since it takes about 6 months and high costs than other legal structures. To exploit these different business opportunities in Brazil, the company has to operate with the same name in the country and must have a permanent legal representative. To prove this, the business must show its legal existence, deposit copy of articles of incorporation, list of shareholders, its latest balance of sheet and a copy of the resolution to establish a branch in Brazil. By doing so, you must provide an amount of capital to the branch, all documents legalized, certified by a Brazilian consulate and officially translated.
Characteristics of the Foreign Branch Office in Brazil:
- Remittances of profits are exempt from withholding tax
- You need special authorization to open a foreign business branch given by the Ministry of Development, Industry and Trade
- A foreign branch office can only start operations when it is registered, and its authorization and documentary evidence, published in the Diàrio Oficial and a local newspaper
In Need of Information for Your Business Needs in Brazil
In an attempt of to gain fiscal sustainability and liberalize the closed emerging market by the Brazilian authorities, its competitiveness has grown and now provides business opportunities for private companies who want to access its more than 200 million consumers.
Choosing the exact legal structure and setting up a company in Brazil can be a challenge. However, collaborating with a local partner is better. Contact Biz Latin Hub; and our team of local experts and professionals will help you in your business venture in Brazil, with business services from company incorporation, legal and commercial representation services to accounting and taxation support. Contact our Brazil office – person-in-charge Bruno, our country Manager for detailed information.
Click the following link and you will find out more information about doing business in Latin America.