Starting A Business In Brazil - Seven Steps To Set Up Your Local Operating Company

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The basic type of limited liability company in Brazil is that Sociedade Limitada (LTDA): This is the most common form of company in Brazil

. It is also the simplest and most flexible and inexpensive type of company to operate. It is governed by a Contrato Social (Articles of Association) and its capital is divided into quotas (shares). There are no minimum capital requirements and the company is managed by one or more managers, resident in Brazil and appointed by the quota holders.

Most foreign companies setting up local operating companies establish Ltdas. In order to own interests in the local operating company, the foreign company will need a CNPJ, or federal tax identification number. The local operating company, once established, will need a CNPJ in order to conduct business and open a bank account.

In order to set up a Ltda. in Brazil it is necessary to do the following:

1) Ownership of the Ltda and Minimal Local Partner Requirement. The foreign company is allowed to have a participation up to 99,9% of the shares from the Brazilian Ltda. So it is necessary to have a local partner in Brazil to hold the remaining 0,1%. This local partner could be either a natural person or another company. A "nominee partner" can be arranged if your company will not have your own local partner.

2) Foreign Company must provide documents: The foreign company will need to prepare and provide the following:

- A copy of its Articles of Incorporation/Organization (Certificate of Formation) duly legalized by the Brazilian consulate on the country where it was issued;

- A copy of its Articles of Association/Operating Agreement duly legalized by the Brazilian consulate on the country where it was issued;

- A Power of Attorney (POA) issued on behalf of a Brazilian to be the representative of the company before RECEITA FEDERAL (Brazilian Tax Authority) in order to obtain a CNPJ (the federal tax identification number), and the POA must be duly legalized by the Brazilian consulate in the country where it was issued. A local representative can be arranged and it could be the same person as the "nominee partner";

- A Power of Attorney (POA) issued to a Brazilian attorney that is duly legalized by the Brazilian consulate on the country where it was issued for the sole purpose of representing your company on the formation of the Ltda.

3) Legal Translation of documents: After receiving the documents provided above, all of the documents will need to be legally translated into Portuguese by a Sworn/Public Brazilian translator;

4) CNPJ for Foreign Company that will be Holding Company: Having these documents translated into Portuguese, a CNPJ will then be procured for the foreign company;

5) Incorporation of the Ltda: After getting the CNPJ for the foreign company, the incorporation of the foreign company's Brazilian Ltda. can be initiated.

The foreign company will need to make several decisions including:

* Name suggestions for the Ltda;

* Amount of the Paid Up Capital;

* Purpose of the company (activities);

* if the foreign company will provide the address for the company or if they will a "virtual address" to be arranged;

* if the foreign company will need a "nominee partner" to hold the 0,1% participation or if he will indicate one;

* also inform if the foreign company will provide a manager for the Ltda. The manager could be a foreign or Brazilian person but he must have a CPF (the Brazilian tax identification for individuals). Again someone can be arranged to be the local "manager" -- this person that could be the same "nominee partner". The foreign company would run the business through your own manager or through a POA giving an individual authority to act on behalf of the Ltda. The POA will limit what a non-employee manager can do.

6) CNPJ for Ltda: After the incorporation of the Ltda., a CNPJ can be procured for the new Ltda.

7) Ready to Conduct Business: Once the Ltda has been established and then CNPJ has been procured, the company is ready to conduct business. Then the foreign company will need to select an accountant to keep the monthly tax, accounting, and financial maintenance for the Ltda. Taxes and fees will be assessed and need to be addressed.

Timeframe: As you can see, the process is quite taxing and can be time-consuming. There is a fair amount of work to be done even before filing to create the Ltda. Getting the documents, having POA's signed and having documents translated can take 1-3 weeks. Setting up the Ltda. can take about 4-5 weeks, and then obtaining the CNPJ can take another 2-4 weeks. The process will involve an attorney, an accountant, a translator and other service providers (e.g., couriers), involving fees and expenses.

How to Get Started: In order to set up your company, you will need to retain an attorney, accountant and translator, or if you hire an attorney or accountant they may be able to retain the other providers. A great source for identifying attorneys, accountants and translators is B2Brazil. B2Brazil is an online directory of Brazilian service providers and exporters. B2Brazil also directly provides company start up services for foreign companies that want to conduct business in Brazil. B2Brazil would be the single-point-of-contact that the foreign company will interface with and will take care of all of the legal, accounting and other aspects relating to setting up your company.

How Much Will it Cost?: Fees can vary depending on the providers you select. Online, you can see fees from US$1,000 to $50,000. If you work through several providers it may or may not cost more than a single-point-of-contact, but it will be uncoordinated and frustrating. A one-stop service is preferable and fees will depend on where the foreign company is registered, how much translation is needed, responsiveness to information requests, and so forth. B2Brazil has its own network of service providers and can provide the entire service for a flat fee. The fee is payable in US Dollars (US$) or Brazilian Reais (R$). For more information, go to B2Brazil's website.

by: John Gardner

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