If you are looking for a quick checklist about setting up a company in Brazil, click here.

Brazilian corporate law is based on the idea of a partnership: companies are called sociedades (i.e. partnerships). Unfortunately, setting up and maintaining a company in Brazil takes more time and costs more than in most modern jurisdictions, so careful consideration should be given whether to set up a company in BrazilThe type of legal entity to be adopted is also very important, with the main choices being limited liability partnerships (sociedades limitadas) and corporations (sociedades anônimas), but other structures may fit specific circumstances.

Should you set up a company in Brazil?

Unlike the procedure for registering companies in most advanced jurisdictions, registering a company in Brazil and obtaining all relevant licences is a time-consuming and bureaucratic process. It is also expensive when compared to most places around the world, especially when foreign shareholders are involved.

From the time, the decision to register the company is made, until the company is able to actually commence trading, two to six months may pass. Careful analysis should be undertaken in regards to the corporate structure to be adopted. Any mistakes in the way the company is set up can be very costly.

While from a tax point of view often registering a company is advantageous for service providers, the same may not apply for companies looking to sell goods. Seeking advice on tax and customs regulations is especially important for deals involving the importing of importing goods, services all intellectual property rights, given the high tax burden that may apply (see further under Taxation).

A common mistake is to only seek advice when the decision to set up operations in the country has already been made. Depending on the business model, setting up a company will add little other than costs to the foreign company’s balance sheet.

Take a look at this article for a checklist addressing the key issues relating to setting up a company in Brazil.

 Types of legal entities

(i) Limited liability partnership (sociedade limitada)

Brazilian law has various types of legal entities, but the most often-used entity is a limited liability company (sociedade limitada). The limitada has some elements of general partnerships, but it operates as a company for tax purposes. It is an entity somewhat akin to an English limited liability partnership and a Delaware limited liability company.

The “partners” of a limitada hold shares (quotas) in the entity and have the benefit of their personal liability being limited to the amount of unpaid capital. However, this “limited liability” has traditionally been less limited than that afforded to shareholders in common law companies: partners (even those who are not directors or officers) could still be held personally liable for some breaches by the limitada – including for employment, environmental, consumer protection, competition and, sometimes, tax-related obligations.

With the coming into force of Law 13,874/2019, the limitation of liability provided to shareholders was substantially expanded. As the Law is still in its infancy, at this stage it is unclear how courts will interpret the protections afforded to partners by that Law.

A limitada can have one or more partners (shareholders). Limitadas do not require Brazilian individuals or companies to hold any equity – partners (shareholders) may be one or more foreign individuals or entities (or a mixture of the two). However, all foreign partners must appoint a Brazilian resident to hold a power of attorney. Among other formalities, the power of attorney must:

  • be for an indefinite period;
  • set out the attorney’s tax file number (CPF); and
  • grant to the attorney at least the power to be served with legal proceedings on the grantor’s behalf and, in the case of foreign legal entities, to manage the assets and rights of the legal entity in Brazil and to represent it before the Brazilian Federal Revenue Department (Secretaria da Receita Federal).

Foreign parties generally also need to grant the attorney the power to represent them before financial institutions, the Central Bank and tax authorities due to the various filings required to be made.

Limitadas must have at least one director (administrador). However, unfortunately, limitadas require that all executive directors permanently reside in Brazil.

(ii) Corporation (sociedade anônima)

Sociedades anônimas, or “SAs”, are similar to English companies or US corporations. The capital of an SA is divided by shares. Insofar as asset protection is concerned, SAs tend to offer greater protection to shareholders than limitadas.

SAs, even if privately held, have more prescriptive rules than limitadas. Also, SAs often have an executive board and a non-executive board as well an audit committee. Unlike limitadas, non-residents (foreign or Brazilian citizens) can be appointed as directors of corporations. The directors will also need to appoint a Brazilian resident to hold their power of attorney.

Non-executive boards of SAs are responsible for approving the major decisions of the executive directors as well as overseeing the company’s business. They do not, however, control the company’s day-to-day operations.

SAs may be publicly held, becoming subject to the supervision of the Brazilian Securities Exchange Commission (Commissão de Valores Mobiliários , “CVM”) when they do. SAs may also have their shares exchanged in the over-the-counter market or listed on the Brazilian Stock Exchange (the “B3”). The B3 is a very sophisticated stock exchange, operating much in the same way as the large stock exchanges in developed nations.

(iii) Limited partnership (sociedade em conta de participação)

Partnerships in participation are similar to limited partnerships as they are known in most common law jurisdictions.

A partnership in participation is not regarded as an independent legal entity for corporate law purposes (only for tax purposes). In partnerships in participation there is at least one ostensible partner (sócio ostensivo) and one participating partner (sócio participante). Unless the partnership agreement provides otherwise, only the ostensible partner is liable for the partnership’s obligations.

The profits from the partnership are shared with the participating partners. The partnership assets are treated as being held in a special account and they will be divided among the partners in accordance with the partnership agreement.

There are no formalities for forming a limited partnership in participation. Unfortunately, due to its nature as a non-personified partnership the Brazilian Central Bank does not accept that foreign legal entities be partners in limited partnerships. However, foreign legal entities can, for instance, incorporate an a limitada or an SA and use it as a vehicle for being a partner in a limited partnership.

Other structures

There are several other types of business structures available in Brazil. These should be analysed on a case-by-case basis. These include, for instance, structuring joint venture arrangements via consortia (generally used for public procurement processes) which are registered with the Companies Registries and are not taxed as legal entities.


Contact me if you would like further information. My firm is ready to assist you.