Types of Business Entities & Corporations in Brazil
A business entity is the vehicle a person or group of people use to carry on a trade or activity, it is one of the most important decisions to make when starting a business.
To get the most out of your business, choose the right structure. The tax consequences from each legal entity type has a big influence when choosing the right business type. Some types of business require more work to manage regulatory risks and compliance.
EI – Sole proprietorship (Empresa Individual)
The business and the owner are legally the same. All the business assets and liabilities and income are treated as belonging directly to the business owner. The owner remains personally liable for lawsuits filed against the business. This is a one-person business.
MEI – Micro Sole proprietorship (Microempreendedor Individual)
It is similar to the EI. However, the MEI cannot exceed a specific revenue threshold and the types of business that can be an MEI is a limited list. Therefore, not all businesses can be MEI. This is a one-person business.
EIRELI – Single Holder Limited Liability Entity – (Empresa Individual de Responsabilidade Limitada)
This type of business is similar to EI, but has a big advantage: it separates your personal assets from your business debts. However, you need to raise a certain amount of capital in order to create an EIRELI, which is hard to do as a new entrepreneur.
LTDA – Limited Liability Companies (Sociedade Limitada)
This is one of the most common types of business entities in Brazil. The LTDA has independent legal structures separate from their owners and there is no limit on the number of owners, although it should have two owners at least. This type of business must file a corporate tax return. The LTDA gives the owners limited liability for business debts and obligations.
SA – Limited Liability Corporations (Sociedade Anônima)
This type of business entity offers unlimited growth potential through the sale of stocks. In Brazil there are two types of SA, private and public (in the case of publicly traded corporations). This type of business entity requires a large amount of statutory reporting.
Simple Partnership (Sociedade Simples)
This type of partnership is between two or more partners. The partners should provide services linked to the business activity, usually linked to the partners’ expertise. Professionals like physicians, dentists, and lawyers can create a Simple Partnership.
You should always seek the professional advice of your attorney or accountant to choose the best business entity.
Written by Thiago M. Silveira
Thiago M. Silveira is a Brazilian Chartered Certified Accountant (CRC) with more than 10 years of success in the accounting field, with insightful understanding in all aspects of accounting, financial reports preparation, local taxes and compliance in Brazil.
