Brazil is the land of samba, soccer, and beaches. You might be surprised but it is the land of business as well. Other than its breathtaking scenery and vibrant culture, Brazil is also a thriving country for businessmen and investors to set up a business. The country offers tons of lucrative business opportunities for entrepreneurs in cities like Sao Paulo, Florianópolis, Curitiba, and Vitória. So, whether you are a seasoned entrepreneur or a budding startup founder, grab a caipirinha and read this guide on business setup in Brazil to launch your company now!
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Things to Consider When Business Setup in Brazil
In Brazil, opening a legitimate business might be challenging. Whether you want to outsource to business setup experts in Brazil or do it yourself, we have gathered all the information you require. Here are a few important things to think about before you start setting up your business in the country:
There exist various industries and business types having a wide range of setup requirements. The nationality of the people or headquarters may also be taken into account. The existence of current trade partnerships or agreements must also be specified.
All procedures must be carried out in Portuguese because it is the mother tongue of Brazil. There are many words and phrases that are different from Portuguese. But keep in mind that there aren’t many variations from the official language itself. Still, the fact that English is the most widely used foreign language in the country’s business community is advantageous for businesses.
Brazil is a huge country with numerous states that follow various laws (such as different indirect incentives and tax rates). A few federal initiatives encourage economic growth in the less developed parts of northern Brazil. It’s crucial to go over these particular criteria with state development organizations or agencies.
Companies doing business operations in Brazil are required by law to choose a legal representative who can represent them in front of regional authorities, partners, and clients. This representative must be either a foreigner who has a fixed residence in Brazil and a permanent visa or a Brazilian national.
The choice of legal representation is an important one that carries with it important responsibilities and the potential to significantly affect your business operations. That is why, it’s crucial to pick a candidate having local market knowledge and training in law or accounting.
Depending on the business’s industry and location, additional approvals, permits, and more may be required for business setup. Companies must request the required operation permissions from their local governments or municipalities.
Official documents must first be legalized by a notary public in the country of origin before submitting them to Brazilian government agencies. Some organizations might also demand that the documents must be professionally translated. Your legal representative or lawyer in Brazil will be able to provide you with advice on the precise steps that must be taken in order for a specific document to be accepted.
No matter where a business is planning to invest, it will eventually pay twice as much for every employee it hires. That’s because a wide range of privileges, including Christmas bonuses, maternity leave, social security benefits, and more, are outlined in the Brazilian Labour Code (CLT) which companies must follow.
It is advised to carry out a comprehensive investigation before choosing a local partner in Brazil to make sure you are not falling into a fraudulent scam. When you contact some shell businesses, they could try to demand money upfront before abandoning you in Brazil with no genuine investment.
Bureaucracy and Lack of Centralisation
Making centralized registering processes are missing in several areas, despite recent improvements in the past few years. It is because some regions remain disconnected from federal authorities. This implies that depending on the region established, registration procedures and needs may differ and involve more labor. In general, bureaucratic issues make these concerns worse.
Days spent on the registration process can exceed 100 days due to excessive delays and the abundance of different documents needed by various organizations. Therefore, yes Brazil has been viewed as an eye-catching investment opportunity for many businesses, but launching a business in Brazil is a somewhat hard process that demands more patience, effort, and money.
Complex Tax System
Brazil is renowned for its heavy tax load on both businesses and individuals. There are different types of taxes in the country applicable to them. They are governed at the federal, state, and municipal levels, which further complicates this issue. The lack of centralization of these systems will make conducting business in Brazil somewhat difficult.
Required Documents for Starting a Business in Brazil
The following are the required documents to start a business in Brazil:
- Articles of incorporation/bylaws are required. The “National Simple” (Simples Nacional) for small businesses, Taxable Income, or Estimated Profit revenue method must be selected when filing these taxes, along with a number of other choices, such as the legal representatives in charge of the management of the company and the name of the company. Legal assistance is for the preparation of the articles of incorporation and bylaws are also advised.
- Power of attorney given to the Brazilian Representative.
- Copies of the representatives’ personal documents, such as their visas, and the address voucher for the location where the company will be set up.
- Corporate taxpayer ID number (CNPJ).
- Municipal and State Taxpayer Registries.
- Operation Permit / Municipal License (Alvará ou Licença de Funcionamento).
- National Institute of Social Security (Previdência Social) and Special Fund for Unemployment – FGTS Registrations.
Keep in mind that all international documents must be notarized in the Bureau of Registry of Deeds and Documents (Cartório) and translated into Portuguese by a sworn translator (whose contacts are available at the local Board of Trade). Additionally, a Brazilian consulate in the associate’s country of origin must notarize the documentation.
How to Register a Business in Brazil in 9 Steps?
To register a business in Brazil, you will need to complete the following steps:
Step 1. Get a Local Brazilian Tax Identification Number
Businesses must get a CNPJ Certificate. For that, they need to register for taxes with the Federal Revenue Services in the National Register of Corporate Taxpayers. A business must describe the kinds of activities it would be carrying out after placing the order for the CNPJ. The check and balance of the company’s operations and taxation require this information.
State and federal regulators have coordinated the registration process for social security and tax in Brazil’s main cities. This step is important because it may differ based on the state of operation. Prior to approving the company’s registration into the CNPJ, local tax authorities may investigate the company’s headquarters.
Step 2. Hire a Legal Representative
Companies in Brazil are required to have one manager who is a permanent resident of Brazil. But this manager does not always have to be a Brazilian citizen. This person is in charge of expressing the company’s authority when required. Being the chosen and dedicated representative, they will have the authority to handle all important company matters.
On behalf of the parent company, they will also be in charge of official and legal paperwork, such as judicial summons. This must be decided in written form before a business can submit an application for permission to open a branch office.
Step 3. Check Availability of the Business Name
Yes, reserving a name for the company before incorporation is not required, still it is strongly advised to verify first. Checking to see if the business name is available will help you stay clear of future problems. The majority of states provide this service online, which takes no time and is easy to do. You must send the Board of Trade a “request for extension” if you wish to check the availability of the company name on a federal level.
Step 4. Draft the Business’s Bylaws
You and your legal representative also need to draft the bylaws of your legal entity for registering your business in Brazil. information about the structure and nature of the business, along with information on internal procedures are included in the bylaws.
Step 5. Register an Office
Depending on the state, several procedures are required to open an office. The prerequisite conditions of registration are somewhat convoluted due to this reason. For example, in some circumstances, you must incorporate in order to receive a tax identification number before opening an office, while in other circumstances, you must get a company address in order to incorporate it.
As this phase can be confusing for people, it’s typical for companies to simply set up a virtual office on the Articles of Association, incorporate, and set up an office first. Once they have incorporated, they can then change the company address. As there are no clear prerequisites for office registration, the process will depend on finding a lease agreement before the company submits the incorporation documents.
Step 6. Register the Company’s bylaws
The business must register with the federal government after preparing and notarizing incorporation paperwork. Depending on your business, the company must submit its corporate documents to either the Registry of Civil Companies or the Board of Trade. An identifying number (NIRE) will be given to the company at this point. You can register your social security (INSS) and federal taxes (CNPJ) upon filing with the Board of Trade.
As the Board of Trade oversees each and every business operation, multiple registrations can frequently be handled by them. Each state has a Board of Trade, which is under the supervision of the Brazilian Ministry of Development, Industry, and Foreign Trade and the National Department of Business Registration (DNRC).
Step 7. Publish the Financial Statements
The publication of foreign companies’ financial accounts in a widely read newspaper and an Official Gazette is a requirement for operating authorization. The price charged by these publishers is typically determined at the time of publishing. It is also charged per word or letter.
Step 8. Open a Corporate Bank Account
Opening a corporate bank account is also important. You can open a business bank account as soon as the authorities approve your company’s registration. Based on the activities of your company in Brazil, the legal representative can give you suggestions for the best bank to choose from.
Businesses must complete forms and produce legal documentation in order to open a business account including the following:
- Incorporation documents and registration certificate
- Proof of registration, identification, and registration status with the National Registry of Legal Entities of the Ministry of Finance/Internal Revenue Service issued 30 days earlier at max
- CNPJ certificate
- Authorization for waiver of registration information – REFIS (Taxpayers program)
- Identification of legal managers and partners – Submit information forms and documents such as CPF, ID, proof of residence, etc. for the registration of the company’s officers or shareholders
- Power of attorney document if required
- Livestock, chattel property, and real estate documents such as proof of payment of property tax or ITR for the last year, proof of property ownership, Registration and Licensing of Vehicles, Certificate of Ownership, etc.
- Authorization for waiver of registration information – SCR (Credit information system)
Step 9. Register the Paid Capital
Once you have opened the corporate bank account, you can visit Central Bank to register the initial paid capital with them.
You need to make the initial deposit of capital into the corporate bank account as well.
Other Registrations a Business May Require
Following are some of the registrations that a business may require in order to incorporate in Brazil:
Some businesses require must also register with the state such as those engaged in sales, manufacturing, and transportation services. By registering, a company notifies the state authorities of the start of its operations and is given permission by authorities to collect and remit state taxes on a variety of activities, including the aforementioned ones.
ICMS is the name of the tax that must be paid to the State. This tax is applicable to Circulating Goods and Transport Services (Imposto sobre Operaçes related à Circulaço de Mercadorias e sobre Prestaçes de Serviços de Transporte Interestadual e Municipal).
At this point, a number of documents and forms are needed. The process of starting a business in Brazil still requires a lot of paperwork and time, despite the Bolsonaro administration’s efforts to cut red tape.
For service businesses, registration with the municipal body that is in charge of the company’s location is also necessary. It will notify the municipal authorities that the company has started its business operations and they will enable the company to pay municipal taxes, Service taxes are commonly paid to the towns in Brazil.
Municipal registration is typically handled automatically by the trade board in most states. Nevertheless, rules and regulations may differ by town and state.
Registration with Social Security
The business should register with Social Security after acquiring the Municipal Operation License (even if it has not hired any employee). Social security taxes must be paid even if the business only has partners. The registration process must be completed within 30 days of starting the business operations.
Other Licenses Required
The state’s firefighter authority (Corpo de Bombeiros Militar do Estado) inspects the premises and then issues the Firefighter Authority’s License (Alvará do Corpo de Bombeiros).
Municipal Operation License
One of the last steps on the long path to a corporation becoming fully operational in Brazil is obtaining the Municipal Operating License (Alvará de Funcionamento). Certain conditions must be met in order to obtain this license. These conditions depend and vary on the town in charge of the area where the business will operate.
Depending on the activity, specialized business licenses may be required. These licenses typically involve time-consuming and expensive demands, as well as occasionally bonds. Some of the tasks that could require such a special business license include:
Accounting Books and Invoices
Companies in Brazil rely on the government’s approval to publish their invoices and accounting books. All accounting records and invoices used to be printed by licensed printing shops. Nowadays, the software is used to handle the majority of accounting and books.
But the attachment to mistrust and excessive regulation is still there. The tax authorities’ websites must be used to issue invoices (notas-fiscais), or they must at least be integrated with the system of the authorities. The idea is that by making market participants rely on government processes to generate their invoices, these participants won’t engage in tax fraud.
Allowed Legal Entities in Brazil
Brazil offers foreign businesses three different types of business setup structures. Each of these business structures has particular benefits and drawbacks, as well as varying requirements for minimum capital, business activity scope, and business registration. The majority of the time, it will rely on how committed a company is to Brazil and the planned business activity.
A foreign company may establish itself in Brazil either through a branch, representative office, or subsidiary.
A simpler method of establishing a presence in Brazil is through subsidiaries. These are Brazilian corporations established in accordance with Brazilian law. Although there are many different types of companies recognized by Brazilian law, the Limited Liability Company (Sociedade Limitada) and the Corporation (Sociedade por Ações – SA) are the two that are most commonly used. In January 2012, a brand-new entity known as the single-member or individual limited liability company (EIRELI), which has just one member, also became accessible to people.
Branches are most frequently used by foreign banks and aviation firms. They are subject to prior authorization being obtained by the Federal Executive Branch of Brazil. It is normally not advised to build a branch in Brazil due to the complicated procedure of setting up one.
The federal government must authorize the formation of a branch as well as any changes made to the branch’s articles of incorporation. Then, the company must expand its operations within a year of receiving authorization. If not, the authorization will end immediately. It is crucial to specify the business operations in the Articles of Association since the government may cancel the license if the company performs outside of its stated corporate purpose. It is possible that the authorizations may be delegated, for example, through the Ministry of Development, Industry, and Commerce.
A representative office enables a foreign business to engage in a certain set of operations. Representative offices are typically used to conduct market research, build relationships, and formalize agreements with business partners and clients.
A representative office is typically not allowed to engage in commercial taxable activities and is restricted in what it can do.
A representative office, like a branch, is regarded as an extension of its parent corporation and is not considered a separate legal organization. This indicates that the representative office’s responsibilities and debts are the responsibility of the parent company.
Types of Companies in Brazil
Brazilian law supports a variety of business models. The most common ones in the creation of joint ventures and subsidiaries are Limited Liability Companies (LLC) and Corporations (S.A.). This is because the individuals’ responsibilities are quite limited in both scenarios. These businesses have a legal position as entities that are separated from their participants under the law.
Other corporate structures, such as special types of non-legalized partnerships or consortia, are also permitted under Brazilian law. The parties in this situation have separate rights and obligations for the benefit of the group as a whole. These contractual structures are typically used for non-corporate businesses or to achieve special goals.
General Partnerships (partnerships), which imply limitless liability of the participants, is another type of organization recognized by Brazilian law. Other types of companies now enjoy some tax benefits that these companies historically enjoyed. Which is why these partnerships are less common today.
In Brazil, there are five different types of company formations. But the two most typical ones are:
Sociedade Limitada (Ltda)
Sociedade Limitada is a private limited liability company where members have limited liability. Due to their inability to issue shares in order to raise capital, small and medium-sized firms typically are best for this type of business structure.
“Contrato Social” is its incorporation document. This document is almost equal to a limited liability company’s “Operating Agreement”.
A single-member or individual limited liability company (EIRELI) can be formed by businesses with just one member.
Sociedade Anônima (S.A)
Sociedade Anônima (S.A) is a public limited company. Since it is a public limited company, the liability of its shareholders is also restricted. Given that large businesses have the legal right to issue shares and sell them on the stock exchange, following this type of company formation is advised for big companies entering the market. “Estatuto” is its official document of incorporation.
For a Brazilian LLC to exist, there must be a minimum of two “quota holders” as shareholders. These people can form an LLC by signing their Articles of Association along with completing all other local and state registration requirements. However, at least one member of the management team must be a Brazilian citizen.
Can a Foreigner Open a Company in Brazil?
Yes. According to Brazilian law, foreign persons, foreign businesses, or a combination of both can open a new company in Brazil. Plus, you can decide to keep control of the majority of the business while giving a local partner (also the in-charge of local management) a minimal or insignificant share of the ownership.
How Long to Register a Company in Brazil?
It almost takes 30 days to establish and register a Brazilian business in Brazil. The following factors can cause the timescale for company openings involving international stakeholders to be extended to 45 to 90 days:
- In Brazil, a sworn translator is required to translate foreign documents. Sworn translators are someone who has successfully passed one of the numerous state boards of trade in the country’s public examination (concurso publico). Documents such as identification for the original stockholders, corporate documents for companies taking part as stockholders, proof of address for the partners, and other documents will be translated by the sworn translator.
- A particular department with expertise in procedures involving foreign partners typically reviews the company registration with the board of trade.
The total time needed to establish a business in Brazil with foreign partners ranges from 45 to 90 days, depending on how quickly the necessary documents are given and how well the law firm handling the opening handles things.
Is it hard to start a business in Brazil?
Yes, it is somewhat hard to start a business in Brazil.
Can foreigners own a business in Brazil?
Yes, foreigners can own a business in Brazil.
Is Brazil a good country to start a business?
Yes, Brazil is a decent country to start a business.
What business is booming in Brazil?
Businesses such as fintech, agrotech, different marketplaces, and digital commerce are booming in Brazil.
Please Note: We do not provide any assistance regarding business setup in Brazil. However, If you are looking to start your business in the UAE, get in touch with RIZ & MONA CONSULTANCY.