Legal Magazine

Brazil Company Formation: Demystifying the Myths

Posted on the 05 July 2013 by Angelicolaw @AngelicoLaw

Forming a company in Brazil can be a challenge.  It can be an even greater challenge if you are a foreigner or non-resident.  Unfamiliar with the laws of Brazil and the procedures for company formation, foreign investors are left to tackle Brazil’s infamous bureaucracy on their own.

Everyone wants to take advantage of the enormous investment opportunities present, but nobody knows quite where to start.  Perhaps it is best to start by debunking the following three common myths to company formation.  Brazil has requirements that make forming a company more difficult and time consuming than other countries.  But to say that it cannot be done is one gigantic myth.

I Cannot Have My Own Company

Wrong.  I cannot tell you how many times I have heard this myth.  There are absolutely no prohibitions on foreigners owning a company in Brazil.  While it is true that restrictions may apply to certain industries, a prohibition on company formation simply does not exist.  Foreigners can form, own, and operate their own companies in Brazil.

I Must Live In Brazil To Have A Company

Wrong.  A foreigner can have a company in Brazil without ever stepping foot in the country.  Being present in Brazil will help speed up the company formation process and eliminate some of the bureaucratic red tape, such as legalizing documents abroad.  But residing in Brazil is not a requirement to forming a company.  It can all be accomplished with a power of attorney.

I Must Have a Brazilian Business Partner

Wrong.  Perhaps the most common myth is this … “but I’m required to have a Brazilian shareholder.”  Brazilian law does not require a Brazilian partner, but rather an administrator who is a permanent resident in Brazil.  What is the difference?  A shareholder owns the company; an administrator manages the company.  Hence, a foreigner can own 100% of a Brazilian company, while hiring a resident administrator to handle its activities.

Company formation for foreigners in Brazil can be time consuming and process intensive.  In its 2013 Doing Business Report, the World Bank identified 13 procedures that take an average of 119 days to complete.  For foreigners, the number of procedures can increase to 21 and the timeframe can increase to 180 days.  Those numbers are according to a fantastic article written in 2012 about the difficulties faced by foreigners opening companies in Brazil.

So if you are thinking about forming a company in Brazil, you can ignore the myths and focus on the facts.  Expect to battle the bureaucracy, but with a little help, you too can take advantage of the numerous business opportunities present in Brazil.

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