Startup in Brazil.
Make a good start with Integrance’s startup guide.
Startup in Brazil in a few steps.
How to found a company in Brazil?
Do you need support for your startup in Brazil?
1. Defining business segment and company activity according to the country.
2. Precising exactly business segment and company activity.
3. Defining the legal and company form.
4. Settle the tax base.
5. Seek support from Integrance.
Questions regarding startup and company founding in Brazil:
In order to answer this question, it is decisive that the investor has already defined a business model for his Brazilian branch.
For service companies, the founding requirements are lower than compared to trading or manufacturing companies, which also permits a quicker founding process.
For trading companies, the most important thing is to have premises that permit importation and resale of merchandise. In addition, specific operating licences might be required, according to the types of products.
In the same way, manufacturing companies require premises that permit the production and processing of goods as well as specific operating licences.
The intended activities must correspond to the CNAE chart (Classificação Nacional de Atividades Econômicas, National classification of economic activity).
The correct determination of the economic activity is fundamental for a branch in Brazil since several tax determinations derive from it.
The correct classification can be gathered from the website of the Brazilian statistics authority IBGE (Instituto Brasileiro de Geografia e Estatística): https://cnae.ibge.gov.br/?option=com_cnae&view=estrutura&Itemid=6160&chave=&tipo=cnae&versao_classe=3.0.1&versao_subclasse=4.1.1
The MEI (Microempreendedor Individual, individual microentrepreneur) is the ideal legal form for self-employed persons that need a register number in the CNPJ (Cadastro Nacional da Pessoa Jurídica, national register of legal entities) to make out invoices for their products or services. Frequently, this is the most appropriate legal form since it is easy, quick and unbureaucratic to found this kind of company. On the other hand, the MEI has various disadvantages: He/She may have just one employee, must not turn over more than 81,000 BRL annually, and must not have contributions in other companies.
However, the MEI has, as long as his/her activity is allowed within this legal form, above all several tax advantages since the taxes are very low and being paid with a single monthly payment.
The EIRELI (Empresa Individual de Responsabilidade Limitada, individual limited company) is a relatively new legal form in Brazil. It implies no obligation to have several partners, so that a single entrepreneur may act solely responsible and take any decision alone.
This is in contrast to the need of providing a relatively high company capital (at least hundred official minimum salaries). This point carries weight, but also exempts the entrepreneur from liability with his/her private assets.
Like the EIRELI, the EI (Empresa Individual, individual company) also does not depend on partners. Therefore, the entrepreneur who decides on this legal form is not a partner, but the sole owner. That’s why the company bears the name of the owner to which may be added a trading name in the unofficial, external communication.
Under this legal form, private assets are not separated from the company’s assets which turns the individual entrepreneur personally liable for the company’s debt.
The LTDA (Sociedade Empresária Limitada, private limited company) is the most frequent legal form and chosen by most of the foreign entrepreneurs.
This has three reasons: Firstly, other partners can be integrated by means of the articles of association. Secondly, the liability of each partner is limited to his/her respective contribution, that is, the partners’ private assets cannot be used for the settlement of company debts.
The third reason for the popularity of the private limited company is that the partners, by means of the articles of association, can settle the decision-making powers, responsibilities and the company share of each partner, as well as decide the exit of partners and the entry of new partners.
5. Sociedade Simples
The Sociedade Simples (civil law company) is particularly appropriate for physicians, dentists, lawyers, architects, tax advisers, etc. since it is a service company with at least two partners of the same profession and with the same company purpose.
Within the Sociedade Simples, there are two forms: the so-called Sociedade Simples Pura (pure civil law company) and the so-called Sociedade Simples Limitada (civil law limited company).
The Sociedade Simples Pura implies, like the EI (single company), no separation between the partners’ private assets and the company’s assets.
The Sociedade Simples Limitada however implies this separation, so that the partners, like in the LTDA (private limited company), are liable only with their respective contribution, but not with their private assets.
The S.A. (Sociedade Anônima, stock company) differs from the other legal forms by the fact that the partners don’t have contributions, but divisions of the company capital in the form of shares which turns them into shareholders.
By reason of this characteristic, the shareholders can buy and sell shares at will, as noticed particularly in large groups of companies.
In addition, the S.A.s are divided in two kinds: the public stock companies and the private stock companies.
Shares of public stock companies are traded on the stock market, shares of private stock companies just among their shareholders.
The SLU (Sociedade Limitada Unipessoal, single-member limited company) shows some characteristics of the LTDA: It does not require a high contribution like in the EIRELI, for example, and protects the owner’s private assets. On the other hand, it has no partners, that is, only a sole owner.
This way, the SLU unites the advantages of the legal forms LTDA and EIRELI and is therefore appropriate for stand-alone entrepreneurs.
To choose the appropriate tax base for your branch, it is recommended to consult a tax adviser.
The importance of being guided by a tax adviser consists in that the tax base exerts a decisive influence on the taxes to be paid by the company. Choosing a disadvantageous tax base may result in that you have to pay taxes that would not incur in case of having chosen a more advantageous tax base.
In parallel with the shown legal forms of companies, there are three tax bases between which you can choose:
1. Simples Nacional
The Simples Nacional is the most frequently practised tax base for small companies. It is unbureaucratic since the monthly tax burden is paid with a single payment for which is used the so-called DAS (Documento de Arrecadação do Simples Nacional, Simples Nacional collection document).
The legal forms which the tax base Simples Nacional may apply to, are MEI and EI. In case of EIs, a distinction is made between MEs (Microempresas, micro-companies with an annual turnover up to 360,000 BRL) and EPPs (Empresas de Pequeno Porte, small companies with an annual turnover between 360,000 and 4.8 million BRL). To those companies whose annual turnover exceeds 4.8 million BRL will be applied automatically the tax base of the expected profit.
According to legal form, size and annual turnover, the tax burden of the Simples Nacional comprises the following individual taxes:
PIS (social integration program);
COFINS (contribution for social security financing);
IPI (industrial product tax);
ICMS (value-added tax);
CSLL (social contribution on net profit);
ISS (service tax);
IRPJ (corporate income tax);
INSS (employer’s social security contribution for the national social security institute, optional).
2. Tax base of the expected profit
As the name suggests, this tax base invokes the expected profit to calculate the taxes to be paid. This tax base is obligatory for all companies with an annual turnover between 4.8 and 78 million BRL, and optional for companies with an annual turnover up to 4.8 million BRL.
For companies that are subject to this tax base, the tax authority assesses, according to the company’s profit, the taxes, including IRPJ (corporate income tax) and CSLL (social contribution on net profit).
3. Tax base of the actual profit
The tax base of the actual profit applies to all companies whose annual turnover exceeds 78 million BRL, considering the net profit.
In addition, due to determined economic activities, the following companies are also subject to the tax base of the actual profit:
companies exempted from tax obligations;
companies that receive their capital from abroad; and
all companies of the financial and agricultural sectors.