Company Formation for Dummies
Opening a company in Brazil can be extremely complicated and takes a lot of time. What we aim with this article is to present the bureaucracy and procedures related to this enterprise.
Background
Foreigners and locals face several bureaucratic procedures when trying to start a business in Brazil. Such deficiency is the result of old regulations and restrictive laws that together create a barrier to foreign investments.
Just to give an idea, it takes up to 152 days to start doing business in Brazil and 43 documents must be presented, whereas in other countries, such as Russia, the process takes 31 days and the number of documents to 10.
Such complicated process requires a step-by-step orientation, which is what this article will provide.
1. Placement
The first step is to write down everything necessary to the operation, such as place, machinery, number of employees and facilities. Then check the legislation of the city where your company is going to operate. It is important to be sure that the building you have chosen to establish your business is in line with your line of business.
Consider the kind of operations of your company is going to perform and the materials that will be used, as environmental impact may become a serious obstacle to your business.
2. Registration and Operation
Before getting the article of association, it is important to check with the board of trades if there is no other company already registered with the same name you are planning to give your company.
The next step is to have your company included on National Department of Commerce Registration.
For this registration it is necessary to present the article of association and each partner's tax ID and ID card, (in Brazil, CPF and RG). You will then receive an identification number known as NIRE (Número de Identificação do Registro da Empresa).
Now you can obtain a CNPJ (National Register of Corporate Taxpayers) and a DECA (Registration Declaration). Both documents state that the company is now able to pay taxes. CNPJ is your company's federal taxes ID and DECA is your state one.
These registrations are the easiest ones as both of them are requested online. Both must be requested at the Receita Federal website. The required documentation is sent through Sedex to the Receita Federal and the reply to the founder will be made online as well.
3. Business License
The next step is to go the city's prefecture and request a business license. This document is obtained at the municipal finance department and it allows the localization and operation of commercial, industrial, agricultural, services establishments, as well as institutions and associations related to legal entities or private people.
4. Registration at the Social Security
Now that the business license was approved, the company is ready to start operating. However, in order to hire employees, the company has to register at the Social Security, as it is necessary to handle labor requirements.
The entrepreneur or his representative must go to the board of trade or the public recorde, in possession of the CNPJ and the article of association, and request the registration of the company and its accredited representative. The registration deadline is of 30 days after the company has started to operate.
5. Fiscal Equipment
To finally begin to operate, the company has to request the printing of invoices and the authentication of accounting books.
For that, service providers will have to go to the local prefecture, whereas companies related to industry and commerce must go to the State Department of Taxation and Finance.
Once the fiscal equipment is ready and registered, your company can finally start to operate.
Costs
Costs related to opening a company in Brazil vary a lot from state to state, but in general, the process is expensive, besides taking too long, as it involves the assistance of some professionals. If you decide to do everything on your own, the average cost to open your company is of BRL 2.038,00, still much higher than in countries such as Colombia (BRL 1.213,00) and Canada (BRL 315,00).
Differently from what many may think, the most expensive state to open a company is Sergipe, in the Northeast, and not São Paulo, which is the wealthiest state in the country.
Rio de Janeiro is another expensive state too, as it has the highest costs related to authentication of documents within the public records.
Lawyers can also be very expensive in different regions of the country. As the Brazilian Bar Association (OAB) does not establishes national rules regarding how much a lawyers can charge for their services, prices vary 1.241% throughout Brazil.