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What are the Types of Business Entities in Brazil?

Brazil is emerging to be the most sought-after business destination for entrepreneurs looking to enter the South American market. The major reason is that Brazil is a part of the BRICS^[1] member nation and possesses immense scope in renewable fuel development. Brazil offers a vast market because of its size and immense reserve of natural resources available in this beautiful country, this makes Brazil an ideal destination to do business. This piece of writing aims to list down the different business entities in Brazil that are available for their company registration to a foreigner.

What are the types of business entities in Brazil?    

Broadly, there are two types of business entities in Brazil, viz. Companies and Partnerships. These two types of business entities are further divided into the following sub-types:

Companies are divided into:

1. Limited Liability Company (LLC)
2. Joint Stock Company or Business Corporation
3. Single member LLC (EIRELI)
4. Branch Office of foreign corporations

Partnerships are further classified into:

1. Limited Partnerships
2. Unlimited Partnerships
3. Unincorporated partnerships
4. Consortia 

Limited Liability Company (LLC)

A Limited Liability Company (LLC) in Brazil is also known as Sociedade Limitada. The structure of an LLC in Brazil is similar to that of an LLC in the USA. To set up LLC in Brazil, a minimum of 2 individuals or legal entities are required, there is no bar on foreign ownership in an LLC in Brazil. No minimum or maximum capital requirement is required to set up an LLC in Brazil. They are regulated by the new Brazilian Civil Code. Here, the responsibility of a member/quotaholder is limited to the amount of share/quota he holds in the LLC. There is no minimum or maximum interest ownership percentage between the foreign and Brazilian shareholders. Further, there is no requirement for statutory audit in the case of LLCs. The shares of these entities cannot be traded on the stock exchange.

Sole Shareholder LLCs: In order to increase flexibility and attract foreign investment, an amendment was made to the Brazilian Civil Code, where LLCs have been allowed to be incorporated with a single shareholder. Hence, there is no requirement for minimum share capital and, therefore, should not be confused with EIRELI. 

Limited Liability Corporation/Business Corporation

A Limited Liability Corporation/Business Corporation in Brazil is also known as Sociedade Anonima. This entity is similar to the structure of a C-Corp in the USA. Similar to the case of LLCs, a Business Corporation also requires a minimum of 2 shareholders which may include an individual or legal entity. These entities can be foreign-based or Brazilian, business corporations in Brazil have the option to trade their shares to the public via the stock exchange. They are required to submit annual financial statements with the commercial registry, and a statutory audit is a mandatory requirement for these entities. They are controlled by management comprising two bodies, viz.

• The Board of Directors (BOD) comprises at least three members who are resident in Brazil and
• Administrative Council, where at least two individuals must be residents in Brazil.

Single Member LLC

A Single Member LLC in Brazil is also known as EIRELI. As the name suggests, an EIRELI model is adopted by individual businessmen. This business is owned by a single shareholder with 100% paid-in capital, which should not exceed 100 times the minimum wage. It must be noted that an individual can incorporate only EIRELI, which means that an individual cannot be a member of more than one EIRELI.

Branch Office of Foreign Corporations 

Branch offices of foreign corporations can also be incorporated in Brazil. This entity can be set up by those foreign corporations that want to extend their business operations in Brazil. To open a branch office in Brazil, the branch office must retain the same name as the foreign company in its country of origin. Additionally, a fully responsible legal representative is also required to be appointed.

Limited Partnerships

In limited Partnerships, at least one member is jointly and severally liable for all the obligations of the partnership, and at least one member is liable only to the extent of the capital that the partner in the partnership subscribes. 

Unlimited Partnerships  

The partners in an unlimited partnership are jointly and severally liable for all the obligations of the partnership before the third parties.

Unincorporated Partnerships  

Unincorporated partnerships are those that do not have their own legal personality and hence, not required to follow any formalities except for the terms and conditions mentioned in the partnership agreement between the partners. It must be remembered that such an agreement has not been registered with the Commercial registry. 

Consortia 

When corporations or other companies, whether under the same control or not, come together to form a consortium to perform a specific task or activity, such a cumulative entity is called a Consortium. These are unincorporated entities carried out by a minimum of two partners in furtherance of any trade, financial operation, business etc., with a view to sharing its profits. The partners are not jointly liable; their liability extends to only their respective obligations mentioned in the consortium agreement. The consortium agreement must be registered with the Board of Trade.

Conclusion 

Selection of a business entity from the above mentioned options is entirely dependent on the kind of business purposes that the foreigner wants to carry on in Brazil.  This process can become very tricky with the vast amount of local permissions required from different state authorities. To know which type of business entity would be most suitable according to the requirements of your business purposes, get the consultation offered by global incorporation experts at Enterslice.

Read our Article: Foreigner’s Guide to Setting up a Company in Brazil