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

Brazilian corporate law is based on partnership concepts: companies are called “sociedades” (“partnerships”). Operating a company in Brazil is more compliance-intensive than 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 types being limited liability partnerships (sociedades limitadas) and corporations (sociedades anônimas). Other structures may be suitable for specific cases.

Should you set up a company in Brazil?

While from a tax point of view registering a company can be advantageous in many instances, setting up a company in Brazil can be costly, especially on an ongoing basis.

Seeking advice on tax and customs regulations prior to the decision to incorporate a company is made is especially important where goods are to be imported and where services and intellectual property rights are to be supplied from abroad, as these are generally heavily taxed (see further under Taxation). Depending on the chosen business model, setting up a company will add little other than costs.

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)

The most common legal entity in Brazil is a limited liability partnership (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. Limitadas are primarily governed by the Civil Code.

The “partners” (shareholders or “sócios”) of a limitada hold shares (quotas) in the entity. The shareholders’ personal liability is 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.

Since the Economic Freedom Law came into force this has been changing, with shareholders being provided with greater protection. As the Economic Freedom Law has not been in force for long, it is unclear how courts will interpret the protections afforded to shareholders by that Law.

A limitada can have one or more shareholders. Limitadas do not require Brazilian individuals or companies to hold any equity – 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 the power to manage the assets and rights of the legal entity in Brazil and to represent it before Brazil’s Federal Revenue Department.

Non-residents 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 only need one director (administrador) but can have more. Directors no longer need to be permanent residents of Brazil and do not need to be shareholders of the entity.

(ii) Corporation (sociedade anônima)

Sociedades anônimas, or “SAs”, are Brazil’s equivalent to English companies and US corporations. The capital of an SA is divided by shares. SAs tend to offer greater protection to shareholders than limitadas. They are mainly governed by the Corporations Law.

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. As with the case of limitadas, non-residents (foreign or Brazilian citizens) can be appointed as executive directors of corporations. Like limitadas, SAs only require one director.

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. Non-executive board members also do not need to be Brazilian or reside permanently in Brazil.

Only SAs may be publicly held. When they do, they are subject to the supervision of the Brazilian Securities Exchange Commission (Commissão de Valores Mobiliários , “CVM”). 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 countries.

(iii) Partnerships in participation (sociedade em conta de participação)

Partnerships in participation are similar to limited partnerships as they are known in most common law jurisdictions. Partnerships in participation are governed by the Civil Code.

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 in Brazil and use that entity as a vehicle to act as the limited partner in a Brazilian 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 (Boards of Trade) and are not taxed as legal entities.


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