5 steps to incorporating a business in Brazil
In our Global Business Complexity Index (GBCI) 2024, Brazil ranked as the 7th most complex jurisdiction to do business, dropping from 3rd most complex in 2023. This shift can be attributed to increased complexity in other jurisdictions rather than to any internal changes in Brazil. The prime complexity drivers in Brazil are its intricate tax laws and varying legislation at different administrative levels.
Starting and operating a business in Brazil can be challenging, requiring an in-depth understanding of local rules and regulations.
To operate locally, companies must navigate the long process of incorporation in five major steps, along with smaller tasks involved in each step. The entire process of incorporating a new entity in Brazil can take 60-90 days, excluding the time needed to open a bank account.
5 steps to setting up a business in Brazil
1. Planning to ensure readiness
The first step to incorporating your business in Brazil is to gather the information you will need to submit to various authorities during the process.
You’ll need to define the type of entity you want your business to operate under in Brazil. Options include corporation, limited liability company (LLC) or a branch; about 90% of the businesses in Brazil choose to become LLCs.
Choosing the right type of entity depends on factors such as the level of corporate governance; whether it will be a wholly owned entity or have multiple shareholders; specific activity requirements and future plans. These particulars must be defined beforehand, including the company’s activities and the location of the activities. This is crucial as different business activities are governed by different tax codes and rules in each state and municipality.
During the planning stage, businesses must also choose an address for their operations that is compatible with their activities. For example, an industrial company cannot operate in a commercial or residential area. An address must be listed to register the articles of incorporation, which is why this task must be completed in advance.
The articles of incorporation must also include the amount of corporate capital that will be used to start the company and state when the capital will be paid. Shareholders can amend these details after incorporation, subject to certain requirements and limitations.
2. Prepare and register the articles of incorporation
Once the planning stage is complete, and the relevant information has been gathered, the articles of incorporation can be submitted to the Board of Trade. Registration costs can vary, depending on the state.
The articles of incorporation must include:
- the name of the entity
- the address of the business
- shareholder details
- capital information
- the business activities that will be undertaken
- company administration details.
3. Enrolment of foreign shareholders with the Brazilian authorities
Foreign shareholders must be enrolled with the Brazilian Federal Revenue’s taxpayers’ registry (CNPJ). This process can be carried out online and must be completed within 30 days of the initial filing; it involves submitting ultimate beneficial owner (UBO) information, along with any relevant supporting documents.
Foreign shareholders must also electronically register their investments with the Central Bank of Brazil in order to comply with foreign direct investment regulations.
Keep in mind that foreign shareholders must appoint an individual resident in Brazil with powers to represent them before the CNPJ and to manage their assets in Brazil; and to receive summons of process on their behalf as shareholders of a Brazilian entity.
4. Registering at the public authorities
The next step in the incorporation process involves mandatory registration of the newly organised Brazilian entity with multiple authorities, including the Federal Revenue Bureau and the municipal authority.
Depending on its activities, the company must also be registered with the state authority and individual unions. Certain businesses, such as financial institutions, law firms, accounting firms and pharmaceutical companies are required to register with additional public authorities, and may be subject to specific licencing requirements, prior approvals, foreign investment restrictions and other requirements. There are varying fees and procedures for registrations at every authority, which adds to both the complexity and the time it can take.
In addition, entities with foreign investments may need to occasionally or periodically report to the Central Bank of Brazil via its electronic system, disclosing capital contributions from their foreign shareholders and/or specific financial information according to certain thresholds set forth by the Central Bank’s regulations.
5. Opening a bank account
Though this step can be carried out at the same time as some of the mandatory registrations with the public authorities, it can be time-consuming and cumbersome. Know Your Client (KYC) bank processes can be lengthy and can take anywhere from a few days to up to a few months to complete depending on your relationship with the bank and your financial situation.
The following documents are required to open a bank account (banks may request further documentation at their discretion):
- shareholder documents (such as articles of organisation and evidence of the relevant UBO)
- articles of incorporation of the Brazilian entity
- taxpayer ID of the Brazilian entity
- financial statement of the Brazilian entity
- personal documents of the Brazilian entity’s officer.
Talk to us
Our experts on the ground offer services across the three core business lines of accounting and tax, global entity management, and human resources and payroll. In addition to assisting with incorporation procedures, we help you streamline your operations and stay compliant.
To learn more about how we can help you set up a company in Brazil, make an enquiry today.
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