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What are the most common type of companies in Brazil?

Although you could find a lot of types of company’s structures in Brazil, the most common ones are: LTDA, EIRELI and SA. On this present article my intention is to present them and to give a general idea about their structure:

LTDA

The LTDA (or “Sociedade de responsabilidade limitada”) is by far the most used type of company in Brazil. The reason is the flexibility that it has regarding the capital, ownership structure and liability of each shareholder.

Capital: There’s no minimum capital required. You can start your company with a very low capital and increase it after. The only thing to consider is that if you start with a big capital and consider to decrease it, you might find some difficulties.

Ownership and Shareholder structure: A LTDA company in Brazil has the minimum requirement for 2 shareholders (you can include as many as you want, but it has to have at least 2). Those shareholders can be natural person or other entities, as well they can be nationals or foreigners and there’s no mandatory requirement to have a Brazilian as shareholder nor any legal or tax advantages. As well there’s no specification for the % of shares that each should have.

Example: A company can have as shareholders: A Brazilian and foreigner ; 2 (or more) foreigners people ; a foreigner person and a national entity; a foreign entity and a foreigner person; etc.

Liability of the shareholder: The liability of the shareholders lies over the amount of capital contributed. If happens and your company brokes and it owes money to someone, this person only can ask for the amount equivalent to the capital you and your partner(s) invested. You will be asked to use your personal funds only in case you didn’t capitalized the amount you’re supposed to do OR in fiscal matters and labour cases (if you are being issued by an employee and lost the case. If the company by itself has no way to pay, the justice may asks for you to pay from your personal account)

In order to keep the company in compliance and good standing is important to know that every company in Brazil has to have a Brazilian (or foreigner with permanent residency) as director, an attorney in fact Brazilian (or foreigner with permanent residency), a servicing office (address) and an accountant (even if the company has no activity

EIRELI

The EIRELI (or “Empresa Individual de Responsabilidade Limitada”) works in a very similar way than the LTDA when the subject is liability of the shareholder. The rule is same, the debts of the company is limited to be charged only against the capital contributed by the owner of the company. However, there are considerable differences when we look to the shareholder/ownership structure and and the minimum capital to be invested.

Ownership/Shareholder structure: The EIRELI is becoming popular because of its shareholder structure. It allows a single person to create a company, it means that is not required to have a partner. The sad news is that only brazilians or foreigners with permanent residency (PR) are allowed to create this type of company (however it’s possible to open a LTDA and when you become PR - if it’s the case - you can do an amendment and change it for EIRELI, “excluding” one of the shareholders)

Capital: Because of it’s nature of having only one shareholder and the liability lies 100% over the capital invested by him, there’s a minimum requirement of 100 minimum Brazlian wages. In 2017 for example, the minimum wage is R$(brl)937,00 so the minimum investment would be  R$93.700

SA

SA (or Sociedade Anonima) between those 3 types is less usual model of company. The reason is mainly because of it’s complexity. While the others types of companies are considered “People’s company”, the SA is considered a “Capital’s Company”, considering that on the first ones the personal capacity is involved on the activity and the on the second one the investors are more worried with the values of their “Scrip” and on maximizing the value of the company.

Capital: The minimum capital is 10% of value of the papers that the company opens to the stock market  

Ownership/Shareholder structure: This kind of company can have as much as a partners as defined by the constitutional document (minimum 2). It can be an “open capital company” or a closed one. On the first case It means that a certain group can holds the scrip, and on the other anyone can buy the papers on the stock market.

Liability of the shareholder: The liability of each shareholder is limited to the value of his investment

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