Five steps to incorporate a business in Brazil
Starting and operating a business in Brazil can be complex, requiring an in-depth understanding of all the rules and regulations.
To operate locally, companies must navigate the long process of incorporation through five major steps, along with smaller tasks involved at each step. The entire process of incorporating a new entity in Brazil can take 60-90 days, not including the time needed to open a bank account.
The first step in incorporating your business in Brazil is planning and gathering all information you will need to provide to authorities through the rest of the processes.
You must define the type of entity you want your business to operate under in Brazil. There are a few options, including corporation, limited liability company (LLC) or a branch. About 90% of the businesses in Brazil choose to become LLCs.
The type of entity you chose is based on a number of factors, such as the level of corporate governance intended, whether it will be a wholly owned entity or have multiple shareholders with different needs, specific requirements for certain type of activities and the future plans for the company in Brazil. These plans must be defined ahead of time, including the specific activities and where they will be performed in the country. This is imperative as each state and municipality has different tax codes and rules depending on type of business activities undertaken, which will become relevant when registering with the authorities at these levels.
During the planning stage, businesses must also choose an address for their operations that is compatible with their activity. For example, an industrial company cannot operate in a commercial or residential area. An address must be listed in order to register the articles of incorporation, which is why this task must be completed prior to registering.
The articles of incorporation themselves must also include the amount of corporate capital that will be used to start the company and when the capital will be paid. This means the company must decide these amounts of money and time during the planning phase.
After the planning stage is complete, the information to complete the articles of incorporation will be ready and the forms can be submitted to the Board of Trade. Depending on the state the company is being established in, there are varying costs associated with registration. Among other things, the articles of incorporation must include:
- The name of the entity
- The address of the business
- Information on the shareholders
- Information on capital
- Information the business activities that will be undertaken
- Details on the administration of the company.
Foreign shareholders must be enrolled with the Brazilian Federal Revenue’s taxpayers’ registry. For that purpose, they must appoint an individual resident in Brazil with powers to represent them before such authority and to manage their assets in Brazil. This process can be initiated online but must be completed within 90 days as of the initial filing by submitting the information about the ultimate beneficial owner (UBO) of the company, along with any relevant supporting documents.
It is also important to bear in mind that in case the relevant shareholders and/or managers are not resident in Brazil or intend to become resident in Brazil, certain actions will also be necessary in advance. This includes appointing an attorney in Brazil to represent any non-resident individuals for corporate and tax purposes.
The next step in the incorporation process involves mandatory registrations with many different authorities, including the Federal Revenue Bureau and the municipal authority.
Depending on the activities of the employees, the company must also be registered with the state authority and individual unions. Specific types of businesses also require other registrations at different public authorities and may be subject to specific licensing and other requirements, like financial institutions, lawyers, accountants, pharmaceutical companies, and so on. There are varying fees and procedures for registrations at every authority, which adds to both the complexity and time it can take.
In addition, entities with foreign investments may need to occasionally or periodically report to the Central Bank of Brazil via its electronic system, disclosing capital contributions from their foreign shareholders and/or specific financial information according to certain thresholds set forth by the Central Bank’s regulations.
While this is the last step in the process of incorporation, it is very complex and may take a significant amount of time. With extensive KYC procedures to be completed by the bank, this process can take anywhere from a few days to up to a few months depending on your relationship with the bank and your financial situation.
The documents needed to open a bank account are (among others, that each bank may stipulate at their discretion):
- Documents from the shareholders (such as articles of organisation and evidence of the relevant UBO)
- Articles of incorporation of the Brazilian entity
- Taxpayer ID of the Brazilian entity
- Financial statement of the Brazilian entity
- Personal documents of the Brazilian entity’s officer.
TMF Brazil can guide your business through the entire process of incorporation. We know how important each step is and how not getting it right can impact your business and tax burden.
Our experts excel at navigating through each step of the process and make sure all documentation is correct for all the relevant authorities leading to a much faster turnaround for your business.
Instead of the usual 60-90 days to incorporate a business in Brazil, our experts can cut the time down to 15-20 days. Our local knowledge makes us the perfect partner for your business needs in Brazil.
If you need a helping hand getting established, talk to us.
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