Brazil is part of the “BRIC” economies, an acronym used to designate Brazil, Russia, India and China. These four economies were identified in 2001 by Terence James O'Neill, a British economist as part of Goldman Sach's "Global Economic Paper" series as the four economies most likely to challenge the current economic dominance of the United States. . It is therefore not surprising that it is currently the largest economy in terms of gross domestic product (purchasing power parity) among all the countries of Latin America and the Caribbean. The size of their economy and the fact that they are the sixth most populous country in the world make them a good choice for you to register a company in Brazil to exploit their domestic market. More outward-looking investors may choose to register their company in Brazil to serve as a conduit for future expansion in the Latin America and Caribbean region. Whichever option you choose, there are certainly some preparations to be made in order to ensure a smooth business creation process. Here is a quick checklist before starting your business in Brazil.
Choosing the right type of business There are many different corporate structures in Brazil, each suitable for different types of businesses. When deciding on the most appropriate business structure, it is important to consider a variety of factors which include, but are not limited to, the availability of personal liability protection, tax ramifications, ownership and management flexibility and compliance requirements. Foreigners would also be limited in terms of the business structure they can choose. Indeed, some business structures such as the Sole Proprietor Limited Liability Entity or the Empresa Individual de Responsabilidade Limitada (EIRELI) can only be created by Brazilians or permanent residents of Brazil.
Therefore, common and possible options for your business are:
Resident Director A resident director or local business representative would be needed for almost any business structure, making this an important task on your checklist to complete before starting your business in Brazil.
Preferably, this person should be knowledgeable about doing business in Brazil so that they can help mitigate some of the additional costs for businesses starting out in Brazil due to unfamiliarity with navigating its business environment. Commonly referred to as “Custo Brasil”, these costs can come either from distribution costs, social benefits or taxes. This person will also serve as your local contact person and liaison with government and banking authorities, ensuring that all your financial reports and tax returns are filed correctly and on time. For this reason, it is also advantageous to have a resident manager fluent in Portuguese.
It is also recommended to perform a basic KYC check on the appointed director to ensure their good reputation and clean criminal record. Typical documents needed for a KYC check include names of administrators, certified passport copies, proof of address, bank reference letter, and CV. You can also perform forensic searches and public database searches for further verification.
Finally, it is important that you draft a nominee administrator agreement adapted to Brazilian law. This will ensure that your appointed director will have no decision-making power in your business and will not compromise any authority or control you have over the operation and management of your business.
Apply for additional licenses and work visas Some business activities would require additional licenses, while you would need a work visa to enter the country for the purpose of conducting business activities. Therefore, another important item on your checklist before starting a business in Brazil would be to ensure that your business has the necessary licenses and that your workers have the necessary work visas. This would ensure that your business is able to operate legally and save you from penalties or fines.
It is important to know in advance what licenses are needed because the process of applying for these licenses would require additional time which could delay the start of your business operations. Due to the lack of centralization of these processes, there is little cooperation between regional and federal authorities to facilitate or standardize requirements. This may mean that your business has to go through several registration cycles and also has to prepare different sets of documents. This makes it all the more important that you consider in advance what license your business would need and factor in time and costs when planning your business.
It is also important to note that certain sensitive industries such as radio, television and publishing, air transport, health care and security services could face additional restrictions on foreign ownership or foreigners could be banned entirely from their activities. It is important to ensure that your business is able to meet the minimum local ownership requirement before starting a business, and more importantly, you should not attempt to start a business in an entirely restricted area.
Language barrier Another important item on the checklist before starting your business in Brazil is taking into account the possible language barrier. Since the official language of Brazil is Portuguese, it is important that your staff and management are fluent in this language to ensure that they can communicate with customers and authorities. With Brazil ranked 53rd on English First's 2020 English Proficiency Index, with a standard of "low", communication between these parties would otherwise be difficult.
Due to the need to hire a certified translator, the cost and time of the processes would also be increased. More importantly, the translation may also create minor inaccuracies that distort the actual meaning, leading to misunderstandings.
