Since January 2012, entrepreneurs have had a new and simpler option for starting a business in Brazil. It’s called an “Empresa Individual de Responsabilidade Limitada”, or EIRELI for short. You may also hear this new business organization type referred to as a single-holder limited-liability firm. Regardless of what it’s called, it opens up new business options for entrepreneurs seeking to invest and do business in Brazil.
Brazilian Business Legal Entity Options
Brazil allows for a wide variety of business entities. The entity you choose depends on your personal and business situation. Prior to the existence of the EIRELI, your options included:
- Simple Company or Sociedade Simples
- General Partnership or Sociedade em Nome Coletivo
- Limited Partnership or Sociedade em Comandita Simples
- Limited Partnership by Shares or Sociedade em Comandita Por Ações
- Overt/Covert Partnership or Sociedade em Conta De Participação
- Limited Liability Company or Sociedade Limitada
- Corporation or Sociedade Anônima
What is an EIRELI?
The EIRELI was formed to give entrepreneurs an opportunity to formalize their business operations by starting an individual shareholder company with limited liability. Prior to the existence of the EIRELI, entrepreneurs had a much more difficult time formally setting up a new business. Now, the EIRELI can be formed by just one person, the quotaholder, who holds the entire share capital. This eliminates the “straw man” who in the past would appear on the company documents only to fulfill certain legal requirement. The share capital is the foreign capital that will be directly invested in Brazil. The minimum amount of the share capital required upon the creation of an EIRELI is equal to 100 times the highest minimum wage in the country.
Why EIRELIs Are so Great for Entrepreneurs
In many ways, the EIRELI follows the same rules as the Limited Liability Company or “Sociedade Limitada”. That means the sole entrepreneur, or director, has the same legal protections enjoyed by Limited Liability Companies. Practically speaking, the entrepreneur experiences reduced risks because their personal assets are protected and not affected by the debt or other liabilities of the EIRELI. However, the director may still need to guarantee loans or credit taken out in the name of the EIRELI.
Before the EIRELI was available, as a foreign investor you would have to set up your company as a Sociedade Limitada and be bound by all of its restrictions. Now, as a foreign investor operating a small business you have the flexibility and security to comfortably operate your business.