Starting a Business in Brazil

Introduction 

Brazil, a land known for soccer, beaches, and samba, has much more to offer than its breathtaking scenery and vibrant culture. It is also a thriving country for entrepreneurs and businesspeople to seek business growth. 

Brazil is not only one of the largest countries in South America but also has the largest economy in South America. Moreover, cities like Rio de Janeiro and São Paulo have a thriving startup ecosystem in agriculture, e-commerce, and fintech. Concerning foreign investment, it increased in July 2023 to 4244.21 USD Million. 

With all that it has to offer, it’s not surprising that more businesses are looking up to Brazil when considering starting a company. This article will help you understand the process of starting a business in Brazil and highlight the benefits it can offer.

Advantages of Starting a Business in Brazil

Brazil has the eleventh-largest economy in the world and the second-largest economy in the Western Hemisphere. 

The abundant natural resources and raw materials, a relatively young workforce, and a solid manufacturing base make it an ideal destination for starting a business. Moreover, the country has opened doors to foreign investment.

Besides the above, the advantages of starting a business in Brazil are as follows: 

1. Huge Consumer Market 

The population of Brazil is nearly 216,422,446. This creates a huge customer base to cater to. So, no matter the industry, setting up a company in Brazil gives you immense business opportunities and allows you to tap into this diverse market. 

2. Favorable Geographical Location 

Brazil’s geographical location makes it a region highly connected to other thriving countries in South and North America. This allows for strategic trade agreements and easy supply chain management, making the country attractive for setting up a business.  

4. Attractive Government Schemes 

For starting a business in Brazil as a foreigner, the government has implemented many foreign investment schemes for entrepreneurs. These schemes create a secure and safe environment for potential business people and investors. 

One example is the Export Promotion Program (PEIEX). It offers financial support to Brazilian companies looking to gain an international reach. Another one is SEBRAE, a government agency that promotes and supports micro and small businesses in Brazil.  

5. Optimal Infrastructure for Business Operations 

The upcoming facilities and infrastructure make Brazil a favorable destination for business. It’s a hub due to its well-connected roadways and railway system. Moreover, the Brazilian government has pushed for private investments in these domains, especially freight and cargo. One such example is the privatization of the Santos Port Authority (SPA) privatization.

Business Types in Brazil

You can establish many different types of businesses as an individual or corporation. Each one has its own distinct characteristics, advantages, and requirements. Here are a few common types of businesses you will find in Brazil. 

1. Public Corporation (Sociedade Anônima (S.A.)

This type of company or corporation operates with shareholders who hold company stock shares. It is a publicly traded corporation that’s apt for larger companies that want to issue shares in the stock market and raise capital. Here, you need a board of directors and a minimum number of shareholders. 

2. Limited Liability Company (LLC) (Sociedade de Responsabilidade Limitada (Ltda. or L.L.C.)

Owners have limited liability, which means their personal assets are protected from the liabilities and debts of the business. It is one of the most common entities in Brazil. 

3. Individual Limited Liability Entrepreneurship (Empresário Individual de Responsabilidade Limitada (EIRELI)

Here, a single individual can create this entity with limited liability. 

4. General Partnership (Sociedade em Nome Coletivo (S.N.C.)

This is akin to a general partnership where all partners have unlimited liability for the debts of the company. 

5. Individual Microentrepreneur (Microempreendedor Individual (MEI)

Similar to a sole proprietorship, it’s a one-person business. It’s frequently used by freelancers or individual entrepreneurs.

6. Cooperative (Cooperativa)

Here, members own and operate this business entity. It’s often found in consumer cooperatives, credit unions, and agriculture sectors. 

7. Foreign Branch (Filial)

Here, foreigners are allowed to operate as an extension of their parent company, following the taxes and regulations of Brazil. 

8. Startup (Sociedade por Ações - SPA)

A specific type of stock corporation designed for innovative businesses and startups. This offers government flexibility and tax benefits to owners. 

Every structure mentioned here has its own governance rules, tax implications, and legal requirements. Experts will help guide you through the process. 

Steps To Start a Business in Brazil

Here are some general steps you can refer to when starting a business in Brazil.

1. Business Idea and Planning: First, you need a clear business idea and check its viability. Then, create a business plan outlining the goals, objectives, finances, etc. 

2. Choose a Legal Structure: Choose from the different business structures Brazil has to offer, like LLC, Sa, EIRELI, etc. 

3. Name your Business: Pick a unique name for your business and ensure you check if it’s available with the commercial registry in the specific state in which it’s located. 

4. Register with the Junta Comercial: Register your business with the Junta Comercial or a similar state agency. 

5. Obtain a CNPJ (a tax identification number): Apply for the CNPJ Cadastro Nacional da Pessoa Jurídica, which is a federal tax identification number. 

6. Register for Municipal and State Taxes: You may need to register for ISS (Imposto Sobre Serviços de Qualquer Natureza), which is a municipal tax, and ICMS (Imposto sobre Circulação de Mercadorias e Serviços), which is state-level tax.  

7. Register with the Social Security System (INSS): You must register with the INSS if you plan to hire employees globally. This manages social security contributions. 

8. Tax Compliance and Registration: You must register your business for federal taxes, including corporate and income tax. 

9. Operation Setup: Depending on the nature of your business, you can set up your virtual or physical office and hire and train employees to start operations. 

10. Ongoing Compliance: Labor and employment laws, rules, and regulations continually change. You must ensure you and your business always stay updated. 

This should give you a sense of the steps involved in a Brazil company registration process. However, consider working with professionals to ensure a smoother and more compliant setup.

Documents Required for Company Registration in Brazil

The documents you need may vary based on the type of business, location, and other factors. However, the list below will give you an idea of what’s needed to get the ball rolling.  

• Business plan - A comprehensive plan that outlines details of your company, like objectives, activities, market analysis, financial projection, etc. 
• Identity proof - All individuals, partners, and shareholders must provide identification documents like passports, national identity cards, etc. 
• Address proof - Like the ID proof, address proof is mandatory via documents like rental agreements, utility bills, passports, etc. 
• CPF and CNPJ - Official documents like Cadastro de Pessoa Física (unique individual tax identification number) and Cadastro Nacional da Pessoa Jurídica (registration number for legal entities) are required by individuals and the company, respectively. You can get this from the Federal Revenue Service.  
• Contrato Social or Estatuto (Articles of Incorporation) - You need a notarized document that outlines the company's structure, objectives, and bylaws. 
• Business name reservation certificate - You need a certificate showing your business name is approved and reserved by the commercial registry. 
• Fees and tax receipts- Receipts proving you’ve paid all the applicable fees and taxes. 
• Additional documents - You may need many documents based on your business type. 

It’s advisable to contact a professional who can help you with the necessary paperwork based on the location and specific type of company you’re registering.

Timeline for Company Registration in Brazil

The timeline for starting a business in Brazil is based on several considerations, such as the business's legal structure, location, and complexity. 

• The initial stages involve planning and preparing to develop your business plan, choosing a legal structure, and gathering the necessary documents. This will take one to two weeks if your idea is solidified in the initial stages.

• The following stages of document collection and preparation, naming the business, applying for permits, licenses, tax identification numbers, etc., can take anywhere from 6 to 10 weeks. 

• Setting up a bank account and other paperwork will take about 4 weeks. 

It can span several weeks to a few months, from ideation to inception.

Setting Up a Company vs. Partnering with an Employer of Record in Brazil

When setting up a company in Brazil, you can go through the entire process yourself or partner with an Employer of Record (EOR). The table below will give you a better understanding of a more suitable option.  

This shows that the two are very different. However, partnering with EOR saves you from the complex compliance and HR-related challenges while allowing you to focus on your core business. 

‍Read Now: The Pros and Cons of Hiring International Employees With an EOR

Hire Talent in Brazil Compliantly 

The journey of starting a business in Brazil is exciting, mainly because it’s a rapidly evolving market. Some things to look forward to are the rich cultural landscape, diverse opportunities, and the vast consumer base. 

While there are many advantages, the business environment may be challenging, such as understanding and complying with local rules and regulations. You can easily circumvent this complexity by partnering with Skuad.   

With Skaud, an EOR platform, businesses can enter the Brazilian market without setting up a legal entity. It allows you to access a global talent pool without hassles. You can manage your global payroll, hiring, and onboarding processes with us. Skuad also ensures 100% compliance with employment and labor laws in the country you hire while you focus on other crucial aspects of your business. 

‍Talk to our experts to know more.

FAQs

1. Can an American own a business in Brazil?

Ans: Yes, Brazil allows Americans to own and operate a business. However, foreign nationals may have different requirements, permits, etc., compared to locals for starting a business in Brazil.  

2. Is there an income tax treaty between the US and Brazil?

Ans: Brazil and the USA have a bilateral income tax treaty. This treaty aims to prevent double-income taxation and ensure better economic relations between the two countries.     

3. Do expats pay taxes in Brazil?

Ans: Yes, expats (foreign nationals who live and work in Brazil) are subject to tax in Brazil based on the income they earn in the country. Typically, the country taxes residents on the income they earn worldwide at 0% to 25%, depending on their tax bracket. And non-residents pay a flat 25% tax on income they earn in the country. The taxes you must pay include specific types of income, like capital gains, rental income, employment income, etc.