Basic Guide: How to start a business in Brazil.


Due to the positive economic outlook Brazil has been experiencing, before the scenery of economic crisis facing Europe, the country has become an interesting investment choice. Thus, Brazil has been sought as a destination for investors of all economical sizes.

However, starting a business in Brazil is a bureaucratic process that started without proper guidance, can discourage investors and even derail the operation of the business. Accordingly, Saraiva Barroso Law Firm has prepared a practical guide on how to open a company in Brazil.



1)  Types of company existing in Brazil

Sole Proprietorship Companies
These companies are registered under an individual owner. In this case, the individual entrepreneurs’ assets as well as the company’s assets are the same. That way, the owner will have unlimited liability over the company’s debts.
ATENTION: This type of company only allows as foreigners, the Portuguese people in the enjoyment of rights and obligations laid down on the Equality Statute.

Limited Liability Individual Company (EIRELI)
Consists of a single person holding the entire share capital, fully paid, which shall not be less than one hundred (100) times the highest minimum wage in force in the country. The holder does not respond with their personal assets for the company’s debts.

Limited Liability Company
Sociedade limitada é aquela que realiza atividade empresarial, formada por dois ou mais sócios que contribuem com moeda ou bens avaliáveis em dinheiro para formação do capital social. A responsabilidade dos sócios é restrita ao valor do capital social, porém respondem solidariamente pela integralização da totalidade do capital, ou seja, cada sócio tem obrigação com a sua parte no capital social, no entanto poderá ser chamado a integralizar as quotas dos sócios que deixaram de integralizá-las.

Limited partnership is one that performs business activity, formed by two or more partners who contribute with money or property valued in money for the company’s capital formation. The liability of shareholders is limited to the amount of capital, however, they are jointly liable for payment of the entire capital, ie, each member has an obligation to its share in the capital, but may be required to full pay what is left unpaid of social capital.

Joint Stock Companies
The Joint Stock Company is essentially a mercantile corporation by legal definition, whose capital stock is represented by shares. It is a partnership of capital contributions existing essentially for the purpose of earning profits to be distributed to the shareholders, regardless of the economic activity developed by it. The social capital is divided into shares of equal  nominal value, which can be freely negotiable. The shareholders’ liability is limited to the issue-price of the shares subscribed and acquired by them.

ATENTION: In the case of Corporations with foreign participation, the manager of the company, either partner or a third party must be resident in Brazil, with permanent visa, in the case of foreigners.


2)  Choosing the Corporate Name
The corporate name is the one under which the company carries out its activities and undertake the acts related thereto.
The corporate name must comply with 5 general rules, which are: accuracy, novelty, type identification, protection of morality and prohibited usage of acronyms and designations of public agencies. There are also specific rules for drawing up some of the species of corporate names, which can be explained on a case by case basis. As for novelty, it must be requested a search by corporate name, to avoid any conflicts, before the competent Trade Board.

3)  Choosing the Corporate Purpose
Chosen corporate name, it must be established the corporate purpose, which shall state clearly and accurately the activities to be undertaken by the entrepreneur. Also, it is necessary to point the CNAE code corresponding to the activity to be developed, which is available for consultation on the following link http://www.cnae.ibge.gov.br/.

4)  Drafting and registering the Articles of Association before the Trade Board
Chosen the corporate name and the object of the society, it is time to draft the Articles of Association. This should be done with the participation of a lawyer, which, by legal requirement, will need to sign it, providing his visa.
The Articles of Association is the instrument of incorporation. it shall be duly registered before the competent Trade Board. It shall rule the relationship between the company, its shareholders and third parties, establishing rights and obligations.
Once the Articles of Associationis finished, it shall be taken to registration before the competent Trade Board. Each Brazilian state has its own Trade Board.
In the case of foreign shareholders (individual or company) not resident or headquartered abroad, it is necessary they grant specific power of attorney for their representative in Brazil to receive judicial summons in lawsuits proposed based on the laws governing its corporate type.

5)  Obtaining the Corporate Tax Registration Number (CNPJ)
After registration of the company’s articles of association before the the competent Trade Board. the company must obtain its Corporate Tax Registration Number (CNPJ) with the Brazilian Federal Revenue Office.
 
6)  Obtaining the State Taxpayer Identification Number and the Municipal Taxpayer Identification Number.
The company must also be registered before the State Treasury Office and the Municipal Finance Department according to the developed activities. If the company carries industrial or commercial activities it shall be registered before the State Treasury Office for control purposes of the Value-Added Tax on Sales and Services (ICMS).
In case the activities developed by the company are services only, it should be registered before the Municipal Finance Department, for control purposes of the Services Tax (ISS).

7)  Licenses and Permits
Now that you have a legally constituted company it is necessary to identify which licenses must be obtained so the Operation Permit may be granted.
The required licenses may differ, depending on the company’s activities, however, the most common required licenses are: Fire Department, Sanitary and Environmental. The requirements for granting each of these licenses vary according to the nature of the activity to be performed by the company.  Once granted the Operation Permit, as applicable, the company may start exploring their activities.

RELEVANT INFORMATION
a)    Time spent on the opening of the company: One of the biggest complaints of entrepreneurs in Brazil is the time taken to start a business, ranging from 45 up to 120 days.
b)   Costs: the average cost of starting a business in Brazil is R$ 2,038.00 (BRL). according to data published on the blog do Jornal O Povo. However the variation of these costs in Brazil may range from R$ 963.00(BRL) (in the state of Paraíba) up to R$ 3,597.00 (BRL) (in the state of Sergipe). In Ceará, the cost of starting a company lays around  R$ 1,796.00 (BRL).
c)    restrictions / impediments to participation by foreign (individuals or corporations) in Brazilian companies: The National Commerce Registration Department establishes some restrictions to foreign participation in Brazilian companies, such as:
- Companies of foreign capital in health care;
- Coastal shipping companies;
- Newspaper companies and broadcasters of sound and sound and images;
- Cable operators;
- Mining and hydropower;
- National airlines;
- Companies in the border area (broadcasting of sound and sound and image, mining and colonization and rural allotment).

Links to more information:
National Commerce Registration Department: Departamento Nacional de Registro do Comércio - http://www.dnrc.gov.br/
Brazilian Federal Revenue Office : Receita Federal do Brasil - http://www.receita.fazenda.gov.br/
Portal do Empreendedor - http://www.portaldoempreendedor.gov.br