Do you want to start a business in Brazil as a foreigner? If YES, here is a complete guide plus legal requirements for starting a profitable business with no money in Brazil. Judging from the World Bank ranking of Brazil as regards ease of doing business, it can be concluded the Brazil is a tough place to start a business. The country ranked 120th out of 183 countries in the ease of doing business. But that does not take away from the fact that Brazil is a profitable country where businesses, if started well, can thrive.
The fact that the country has a huge economic potential and it is an eager domestic market, including the fact that it is the third most advanced industrial sector of the Americas, makes it a viable country to start a business in. If you want to start a business in Brazil, the following steps are what you have to take to set up your business entity.
Starting a Profitable Business in Brazil as a Foreigner
Table of Content
- 1. Name the company
- 2. Select your company type
- 3. Prepare your Articles of Association
- 4. Register with the Board of Trade
- 5. Obtain your CNPJ number
- 6. Register for a Business License
- 7. Confirm your taxpayer enrollment
- 8. Get Authorization for issuing Notas Fiscais (Invoices and receipts)
- 9. Register with the National Registry of Legal Entities
- 10. Registration with Social Security
- 11. Settle TFE tax
- 12. Apply for operations permit
- 13. Register your employees
When starting a business in Brazil, the first step to go through is to get a name for your company. You have to pick a name and verify the name of the company in the Sao Paulo state and pay the registration fees. 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 to the following rules:
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
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 in
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
Use of words or expressions that are immoral and go against good manners are forbidden in the country. In most states in the country, 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 the name you have chosen for your company.
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.
2. Select your company type
There are two basic types of Limited Liability Company in Brazil:
Sociedade Limitada (LTDA)
This is the most common form of company in Brazil. It is also the simplest, 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 Administrators resident in Brazil and appointed by the quotaholders. To ensure total control of the company, a quotaholder must own at least 75 percent of its quotas.
Sociedade Anônima (SA)
This form of company is not as flexible as a Limitada, is considerably more expensive to operate, and is more transparent, since all corporate acts and its annual financial statements must be published in newspapers. It is governed by Estatutos (By-laws) and its capital is divided into one or more classes of shares.
An SA is managed by a Management Board and a Fiscal Council, each composed of two or more Brazilian residents. If an SA is listed on the stock exchange or has authorized capital, it must also have a Board of Directors, made up of shareholders.
3. Prepare your Articles of Association
The Brazilian Articles of Association, known as Contrato Social in Portuguese, is the official document that is required for formalizing 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.
4. Register 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 done within a few days. Based on the nature of the industry though, the company has to register with either the Board of Trade or the Registry of Civil companies.
5. Obtain your CNPJ 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 – was recently 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. After receiving the CNPJ number the company is technically recognized, and it can start setting things up.
6. Register for a Business License
The next step to go through when setting up your company is to apply for your business license. The Business License known in Portuguese as Alvará de Funcionamento, allows the company to operate actively 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.
7. Confirm your taxpayer enrollment
The taxpayer enrollment needs to be confirmed. Information regarding the company needs to be entered for this, and the legal representative has to confirm the same through the Office of Federal Revenue. If the company deals with sales or purchases, registration with state authority is also required.
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 authorization for issuing Notas Fiscais, which is known as AIDF.
AIDF stands for Autorização de Impressão de Documentos Fiscais, and is the authorization for printing taxable documents. This system controls the authorization 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 is 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.
9. Register with the National Registry of Legal Entities
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. 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.
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.
11. Settle TFE tax
To proceed further with setting up your company, you have to take care of your TFE tax. The TFE tax needs to be paid to the Municipal Taxpayers Registry for it to be valid. This tax pertains to the operation permit and is dependent on the corporate purpose of the company.
12. Apply for operations permit
After all this, one needs to apply for an operations permit from the municipality. Without an operations permit, your business would not be allowed to run. A 30-day gap is provided to fill out these forms after registration with the Secretaria de Finanças e Desenvolvimento Econômico. This license is essential for any operations to be initiated. But since this is a long process, municipalities allow initiation if the TFE has been paid.
13. Register your employees
In Brazil, you cannot set up your business without registering your employees. Employees need to be registered in the social integration program by setting up a fund for unemployment (FGTS) in any bank. Next step is to register with the employees union and notify the labor ministry.
This is the basic procedure for setting up your business in Brazil. Once set up, you can reap the multiple benefits of investing in the country.