Complete Guide to Company Formation in Brazil
Much has been written about company formation in Brazil. In this article we will try to give an overview of the process and answer some of the most common questions.
There is a lot of misinformation about the process of forming a company in Brazil. The World Bank publishes a report every year highlighting how difficult it is to form a company in different countries. Brazil never does very well in this ranking, however the World Bank ranking is distorting the reality significantly.
Before starting the process of forming a company in Brazil you need to have a clear idea about what type of activity the business will be operating and the purpose of registering the company.
There are several types of organisation to choose between when forming a company in Brazil.
Usually the options considered are either a Ltda or a S/A. We have discussed the pros and cons of both of these types of organisations in previous articles. In most cases, Ltda tends to be the preferred option and this is the organisation type that we will be referring to in this article.
Basics for Company Formation in Brazil
Before starting the process of forming a company in Brazil it is important to be familiar with some of the basic concepts around rules and practices related to the company and the registration process.
Differences between a Branch and a Subsidiary in Brazil
The general rule is that any foreign company can be a partner, investor or shareholder in a Brazilian company, making the Brazilian company a subsidiary of the foreign entity. The Brazilian company will then be fully governed by Brazilian law and will have the same rights and responsibilities as any other Brazilian company.
Opening a branch of a foreign company in Brazil is slightly more complicated. This requires a specific authorisation from the Brazilian Ministry of Development, Industry and Foreign Trade. A foreign company that wishes to install a local branch in Brazil will have to send a formal request to the Brazilian Ministry of Development, Industry and Foreign Trade, where the National Department of Trade Registration, known as DNRC, will evaluate the request. You can read more about the requirements of opening a branch in our article "Opening a Foreign Branch in Brazil".
Company Ownership in Brazil
In order to form a limited partnership in Brazil it is necessary to have at least two partners. The general rule is that both partners in the company can be foreign and they can either be individuals or legal entities.
Although the general rule is that foreigners can own companies in Brazil there are some economic sectors that companies owned by foreigners are restricted or prohibited from operating within. This includes sectors like:
- Radio, TV and publishing
- Cable television
- Air transportation
- Health care
- Security services
- Road transportation
For more information about the limitations for foreign ownership in these sectors we recommend that you read the article "Limitation of Foreign Participation in Brazilian Companies".
Investment requirements in Brazil
There are no requirements in terms of the minimum investment for a newly formed Brazilian company.
If the company that is formed in Brazil is going to be used to apply for a permanent Brazilian investor visa there are requirements to the minimum investment. The rules are not black and white regarding the size of the investment, but a direct foreign investment of BRL 150 000 or more will normally qualify for an investor visa.
There are also possibilities to obtain a visa with a lower direct investment if a plan for generating jobs in Brazil is submitted and approved by the Brazilian National Immigration Council. For more information about this topic we recommend that you read the article "Investment Requirements to Obtain a Visa to Brazil".
All direct foreign investment to Brazil will have to be registered with the Central Bank, even though the intent is not to obtain an investor visa. For more information about the process of registering foreign investments in Brazil we recommend reading the article "Registration of Foreign Capital in Brazil".
Fiscal address requirements in Brazil
All companies formed in Brazil need to have a unique registered fiscal address. If you are forming a trading company or a company that operates some type of manufacturing you will need to have a fiscal address that is regulated for this type of activity.
It is important to emphasise that all companies formed in Brazil need a unique address. A regular virtual address is not accepted as a fiscal address. For operations where there are several companies registered at the same office address it is common to specify which room each company is registered to, as this make each fiscal address unique.
Many virtual office providers in Brazil will also offer a fiscal office address option for a higher monthly rate.
Requirements for a Company Administrator in Brazil
Requirements to have a local Company Administrator are usually the most challenging for foreigners who intend to form a company in Brazil. The Company Administrator does not need to be an owner of the company but the company administrator must either be a Brazilian citizen or have a permanent Brazilian visa.
Extremely simplified, the Company Administrator is the person who will have to legally answer all actions that the company performs in Brazil. The appointed Company Administrator will also have the power to perform dispositions on behalf of the company. A lawyer will of course be able to draft a power of attorney to limit the Company Administrator’s power and responsibilities, but there will still have to be a level of trust between the Company Administrator and the owners of the company.
For companies formed with the intent of obtaining an investor visa, you are required to appoint an interim Company Administrator to complete the company formation process. The person that obtains the investor visa can be appointed as Company Administrator after the investor visa is granted.
Company Name in Brazil
There are highly detailed rules for what you can and cannot name your company in Brazil. All company names that are registered in Brazil must at least conform with the following rules:
- Veracity: The activity indication incorporated into the name must also be real, and it must be explicit in the social objective of the company as specified in the Articles of Association
- Novelty: a new name must be adopted, and it must be different from company names that already exist in the region and industry that the company operates
- Identification of Company form: the type of company must be clearly identified, normally this is done in an abbreviation at the end of the name
- Moral Protection: use of words or expressions that are immoral and go against good manners are forbidden
In most states the Board of Trade has a free online tool to research names and to verify the novelty of a company name before moving ahead with the formal paperwork to register the company. For states where the Board of Trade does not offer an online tool you will have to visit their office to verify the availability of a company name. When verifying the company name you can also order a certificate that confirms you have checked the availability, which is one of the documents that will later be required when submitting the paperwork to the Board of Trade.
For a detailed outline on the rules related to company names in Brazil we recommend reading our article "Naming a Company in Brazil".
Trading Name in Brazil
In the Articles of Association and governmental registries it is also possible to register a trading name for the company known in Portuguese as Nome Fantasia.
It is optional to register a trading name and there are very few rules for what you can use as a trading name. It is worth noting however, that registering a trading name does not give any trademark related protection to the name.
Search and registration of trademarks can be done online on the National Institute of Industrial Property’s website. For more information about trademarks in Brazil you can read the articles "How To Search For Trademarks" and "Register a Trademark in Brazil".
The process of forming a company in Brazil
As with everywhere else in the world, the process of forming a company in Brazil can vary based on the type of activity that the company is going to operate. Many industries have their own agencies and specific licenses that are required in order to operate.
Below, you will find the 7 steps needed to have a fully functioning service company formerly registered in Brazil.
1. Articles of Association
The Brazilian Articles of Association, known as Contrato Social in Portuguese, is the official document that is required for formalising a business partnership and is the very first step for legally registering a company.
Similar to other countries, the Articles of Association must outline information about the company that is being formed, who the partners are, how much each partner owns and what type of activities the company is going to engage in.
All minimum requirements regarding the information that needs to be included in the Articles of Association can be found in our article "Articles of Association in Brazil" while a more general overview of the Articles of Association can be found in the article "What is Contrato Social?"
2. Registering with the Board of Trade
Registration with the Board of Trade will get you a Company Registration Identification Number known as NIRE which will be the base for further applications.
In order to register with the Board of Trade you are required to present the following documents:
- Consultation certificate of the company name
- Confirmation of DARF payment regarding the company registration fees
- Formal request for registration known in Portuguese as Capa de Processo
- Company registration form known in Portuguese as Ficha de Cadastro Nacional
- Articles of Association
- Notarised copy of Identification Document and CPF of all the partners
- Proof of residence for the Company Administrator or partners
- Statement informing that the partners are not prevented by law or by conviction to own a company, this is known in Portuguese as Declaração de Desimpedimento dos Sócios
Completing the registration to get a NIRE is in most cases completed within a few days.
3. Registering for the Company Taxpayer Number
After obtaining the NIRE the next step is to register with the National Registry of Legal Entities known in Portuguese as Cadastro Nacional da Pessoa Jurídica.
The CNPJ number is usually considered the most important reference number for any Brazilian company. Confusingly, the abbreviation CNPJ is used both for the National Registry of Legal Entities itself and the registration number that a company gets after registering with the National Registry of Legal Entities.
By means of an agreement between the Federal Revenue Service and most states’ Board of Trade, the process of applying for or changing a registration at the National Registry of Legal Entities can be done entirely at the state’s Board of Trade, simplifying the process.
In order to register with the National Registry of Legal Entities, two documents are needed:
- Basic Entry Form for the CNPJ known as DBE
- Registration Form of Legal Entity known as FCPJ
A new network - REDESIM - the National Network for Simplification of Registration and Legalisation of Business - has been established to simplify the process.
The Basic Entry Form can be generated by downloading free software from the Federal Revenue Service’s website. This form, together with the Registration Form of Legal Entity, can in most states be delivered to the Board of Trade using free software called ReceitaNet which is also available on the Federal Revenue Service’s website.
There are many articles available at The Brazil Business about CNPJ and how it works. To learn more about this topic we recommend reading "CNPJ for Dummies".
After receiving the CNPJ number the company is technically recognised and several of the following processes can be started in parallel.
4. Registering for a Business License
The Business License known in Portuguese as Alvará de Funcionamento, allows the company to operate activity within a municipality. There are a few exceptions for companies that do not need a Business License, but in most cases involving regular businesses you will need a Business License.
To apply for the Business License you are required to submit:
- A real estate clearance certificate
- A formal request for registration for Business License
- A statement of responsibility
- Articles of Association registered at the Board of Trade
- Confirmation of the CNPJ registration
- Notarised copy of the Identification Document for the Company Administrator
- Documento de Arrecadação Avulso or DAR, a document similar to the DARF, for the payment of the registration fee for the Business License application
Some types of companies are required to obtain a sanitary permit, known in Portuguese as Alvará da Vigilância Sanitária or an environmental permit known in Portuguese as Licença Ambiental. You can only apply for both after obtaining the Business License.
If the newly formed company is exempt from Inscrição Estadual, it is now legally ready to commence operation.
5. Registering with Inscrição Estadual
When registered with the National Registry of Legal Entities, the newly formed company is able to pay Federal taxes. The Inscrição Estadual allows the company to pay state taxes within the state the company is operating.
For most states, this is not as complicated as it sounds, since the software and process used is similar to the CNPJ registration with the National Registry of Legal Entities.
The documents required for obtaining a Inscrição Estadual are:
- Registration application known as Documento Único de Cadastro
- Registration application known as Documento Complementar de Cadastro
- Notarized copy of either the lease of the property or property deed proving the right of use of the property that the company is located
- CPF number from the accountant
- Registration Certificate from the Board of Trade
- Articles of Association
- Confirmation of the CNPJ registration
- Business License confirmation
- Identification Document, Proof of residence and CPF of all the partners
Not all companies are required to have an Inscrição Estadual, although generally speaking all companies that are required to collect ICMS need an Inscrição Estadual.
At first glance the CNPJ and Inscrição Estadual seem redundant and we recommend reading our article "Differences Between CNPJ and Inscrição Estadual" to learn more about the differences between these registries. We also have a detailed outline on everything related to Inscrição Estadual in the article named "All about Inscrição Estadual".
6. Authorisation for issuing Notas Fiscais
The newly formed company is, at this point, allowed to operate but still cannot legally issue invoices for any service or product. To be able to issue fiscal invoices you need an authorisation for issuing Notas Fiscais, which is known as AIDF.
AIDF stands for Autorização de Impressão de Documentos Fiscais, and is the authorisation for printing taxable documents. This system controls the authorisation for printing tax documents, the use and manufacture of security forms and the provision of seals for the machines that issue fiscal documents, more specifically Notas Fiscais.
The registration for AIDF is very simple. The registration happens online and the only requirement is the CNPJ and the password given by the Secretaria da Fazenda. All information about the company is completed automatically by the system and the applicant will only have to verify that the registered data is correct.
For more information about Notas Fiscais we recommend reading the article named: "Complete Guide to Issue a Nota Fiscal in Brazil".
7. Registration with Social Security
Registration with the Brazilian’s Social Security Institution known as INSS is obligatory within 30 days from when company starts to operate. The registration is obligatory even if the company has no employees.
The company administrator will have to contact a Social Security Agency to request the registration of the company. This is also a simple procedure and no additional documentation is required beyond the CNPJ number of the newly formed company.
How long does it take to form a company in Brazil?
As explained above, forming a company in Brazil is not an integrated process and therefore it is difficult to give an exact time frame. The term "forming a company" is also not specific enough.
For foreigners that wish to form a company in Brazil, the most time consuming part is often before starting the actual formation of the company in Brazil. Preparing all the necessary foreign documentation and getting the documents translated by a sworn translator and consularized by a Brazilian diplomatic station abroad are often the most time consuming part.
Very few people undertake the job of forming a company in Brazil themselves. Most people hire a lawyer or an accounting firm to handle the process. The advantage of using a lawyer or an accounting firm that have experience with forming companies for foreigners is that they can present you with a list of documents that you will have to prepare upfront. This is an important factor, since each step in the company formation process requires different types of documentation.
Pessimistic - 84 days
The World Bank’s study from 2014 claimed that it takes 84 days to form a company in Brazil. They do not take into account that many of the steps involved in forming a company in Brazil can be executed in parallel and that you can legally start issuing invoices and operate most types of business before the entire company formation process, as defined by World Bank, is complete.
Optimistic - 96 hours
At the other end of the scale you will find service providers that claim they can register a company in Brazil in 96 hours.
They are absolutely correct to say that the registration process with the Board of Trade may take 96 hours, but at the same time they fail to inform you that having a company registered with the Board of Trade is not enough to legally operate a company in Brazil.
Realistic - 3 to 6 weeks
Based on interactions with thousands of companies that used hundreds of different service providers to help them form companies in Brazil, we consider 3 to 6 weeks a very realistic timeframe to form a company of an independent entity in Brazil. This estimate is based on the assumption that the company formed is a simple service company with a fiscal address in a building that has already been inspected by the fire brigade.
As soon as all the paperwork is correctly delivered to the service provider that will assist with the registration, it usually takes no more than 3 weeks for a service provider to go through the process of forming the company. As mentioned before, delays are usually caused by foreigners taking a long time to get the necessary documents translated by a sworn translator and consularized abroad.
Local differences for registering a company
Each state has a Board of Trade and although the general process of forming a company is equal throughout Brazil the interaction of the Board of Trade can vary from state to state. In some states the process is fully digitalised, while in other states, you are required to visit the office of the Board to Trade to submit the paperwork.
How much does it cost to form a company in Brazil?
The cost of forming a company is not outrageous in Brazil, but it is difficult to give an exact estimate.
In the article "Fees charged by Brazilian Boards of Trade" we give an overview of the Boards of Trade fees. If the owners manage the entire formation process themselves, the final cost will normally be around BRL 1.000 plus the translation and consularization costs.
Brazilian business owners that seek professional assistance during the process of forming a company are normally looking at costs of around BRL 2.000. Often, the more remote states of Brazil are, the more expensive it will be to hire service providers, as in these states there is less competition.
If a foreigner is going to form a company with all the additional assistance needed for registering capital, translating documents, etc the cost will normally be between USD 3.000 and USD 10.000. To keep a small company compliant with accounting and reporting services you will be looking at monthly costs of around BRL 800. If a foreign investor does not have a person that can act as a Company Administrator, this service will have to be provided by a Brazilian.
The responsibility of a Company Administrator is difficult to price and different service providers have different ways of pricing this service, but it is becoming normal that this is the most costly expense of keeping a company in Brazil.
Import License to Brazil
A common motivation for forming a company in Brazil is to be able to import products to Brazil. However, if forming a company in Brazil following the process outlined above, the company will only be able to obtain a Limited Radar License. This only allows the company to import goods with a value of up to USD 150.000 over a six month period.
Companies seeking to import goods above the USD 150.000 limit must prove their financial capacity and get an Unlimited License. The financial capacity is a factor calculated from the summed revenue of the company in the five years previous to the license application, discounting any revenue related to foreign trade.
More information about forming a company in Brazil
In this guide we have tried to give a non-legal and simplified overview of forming a company in Brazil. There are many industry specific requirements and regulations that we have not covered and we encourage you to look at the many industry specific articles that we have published here at The Brazil Business.