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.
How to establish a Brazil subsidiary
You can choose from various types of corporate structures when establishing a Brazil subsidiary. The most common include Sociedade Anonima and Sociedade Limitada. Once you decide on a Brazil subsidiary structure, you must:
- File articles of incorporation
- Register with the Commercial Register (Board of Trade).
- Get a tax ID.
- Establish your own Brazil 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 may also need to apply for authorization to issue Notas Fiscais (AIDF), which allows you to print taxable documents, use and manufacture security forms, and more.
You also might need to register with Brazil’s Social Security Institution (INSS) within 30 days of beginning operations, even if you do not have any employees.
Brazil subsidiary laws
Brazil subsidiary laws do not require companies to have more than 1 shareholder or “quotaholder,” to establish a Sociedade Limitada; however, depending on your business model, you still might decide to have more than 1 shareholder. You can also incorporate a Sociedade 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 Sociedade 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 establishing a Brazil subsidiary
Setting up a subsidiary in Brazil may offer advantages over opening a branch. Any international company can invest in, partner with, or become a shareholder of a Brazil-based company to make the company a subsidiary. The subsidiary becomes fully covered by Brazilian subsidiary laws and operates like any other Brazil-based company.
Opening a branch, on the other hand, requires complex special authorization from the 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 Sociedade Limitada is usually the simplest and most flexible type of company you can start in Brazil. As a limited liability company, the parent company typically is not liable for any debts, litigation, or other compliance issues. You can also operate under a certain degree of independence from the parent company. The subsidiary in Brazil can run the business differently than the parent company to align with the country’s cultural customs.
Other important considerations
You will need a significant amount of time to set up your Brazil subsidiary. On average, the setup process takes more than 3 months. Although, because Brazil’s laws differ by state, opening a company in one region may be easier than in another region.
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