Before setting up a subsidiary in Brazil, you need to consider the time frame involved and thoroughly review every aspect of the country’s subsidiary laws. Brazil has a complex tax system, a lack of centralization, and strong employee protections that can pose difficulties when opening a subsidiary.
How to Set up a Brazil Subsidiary
You can choose from nine types of corporate structures when establishing a Brazilian subsidiary. The most common include Sociedade Anonima, which is similar to a US corporation, and the Sociedade Limitada, similar to an LLC. Once you decide on a Brazil subsidiary setup option, you must:
- File articles of organization
- Register with the Board of Trade
- Get a tax ID
- Establish your own Brazilian visa and bank account
- File for a business license to operate within a municipality
- Register with Brazil’s Inscricao Estadual to pay taxes
Newly formed companies should also apply for authorization to issue Notas Fiscais (AIDF), which allows you to print taxable documents, use and manufacture security forms, and more.
You must register with Brazil’s Social Security Institution (INSS) within 30 days of beginning operations, even if you do not have any employees. A company administrator should contact a social security agency to register the company with the CNPJ — an identification number issued to Brazilian companies.
Brazil Subsidiary Laws
Brazil subsidiary laws state that a company needs at least two shareholders, or “quotaholders,” to establish a Sociedade Limitada. You can also incorporate a Limitada using Articles of Association — locally known as Contrato Social — by complying with regional registration requirements.
At least one resident in Brazil must manage the Limitada, whether they are a quotaholder or not. Quotaholders should appoint this person in the Articles of Association or another corporate document.
You must also produce quotaholder-approved annual accounts at an Annual Quotaholders’ Meeting. The minutes from that meeting must be publicly filed at the Commercial Registry in Brazil.
Benefits of Subsidiary Setup in Brazil
Setting up a subsidiary in Brazil offers many advantages over opening a branch. Any foreign company can invest in, partner with, or become a shareholder of a Brazilian company to make the Brazilian company a subsidiary. The subsidiary becomes fully covered by Brazil subsidiary laws and must operate like any other Brazilian company.
Opening a branch, on the other hand, requires complex special authorization from the Brazilian Ministry of Development, Industry, and Foreign Trade. The National Department of Trade Registration (DNRC) must evaluate the request. Due to this complexity, most third-party companies prefer setting up a subsidiary over opening a branch.
A Limitada is the simplest and most flexible type of company you can start in Brazil. As a limited liability company, the parent company is responsible for any debts, litigation, or other compliance issues. You can also operate under a certain degree of independence from a parent company. The subsidiary in Brazil can run the business differently than the US parent company to match the country’s cultural customs.
What Do You Need to Set up a Subsidiary in Brazil?
First, you will need a significant amount of time to set up your Brazilian subsidiary. On average, the setup process takes about three months. Although, because Brazilian laws differ by state, opening a company in one location may be easier than another spot.
It is also expensive to create a subsidiary. You will need between $3,000 and $10,000 to form a company as a foreigner. You’ll also pay around BRL 800 each month to keep your subsidiary operating.
With this in mind, it is often helpful to work with a global PEO. Working with a global PEO such as Globalization Partners takes away the stress and time commitment of setting up a subsidiary in Brazil. We do everything from hiring employees on your behalf to acting as the Brazil employer of record.
We take the burden of compliance off your shoulders and put it on ours. Contact us today to learn more about our Brazil subsidiary outsourcing services.