Published by Hector Lopez | SetupGlobal.Com
What is an "Incorporation"
Incorporation is the legal process used to form a corporate entity or company. A corporation is a separate legal entity from its owners, with its own rights and obligations. Corporations can be created in nearly all countries in the world and are usually identified as such by the use of terms such as "Inc." or "Limited" in their names.
Throughout the world, corporations are the most widely used legal vehicle for operating a business. While the legal details of a corporation's formation and organization differs from jurisdiction to jurisdiction, most have certain elements in common.
Organization of Corporations
Incorporation involves drafting legal documents called "Articles of Incorporation" that list the primary purpose of the business, its name and its location, and the number of shares and class of stock being issued, if any. Incorporation also involves jurisdiction-specific registration information and fees.
Companies are owned by their shareholders. Small companies can have a single shareholder, while very large and often publicly traded companies can have several thousand shareholders. As a rule, the shareholders are only responsible for the payment of their own shares. As owners, the shareholders are entitled to receive the profits of the company, usually in the form of dividends. The shareholders also elect the directors of the company.
The directors of the company are responsible for the day-to-day activities of the company. They owe a duty of care to the company and must act in its best interest. They are usually elected annually. Smaller companies can have a single director, while larger ones often have a board comprised of a dozen or more directors. Except in cases of fraud or in some specific tax statutes, the directors do not have personal liability for the company's debts.
Advantages of Incorporation in General
Incorporation has many advantages for a business and its owners, including protection of the owner's assets, because the company is liable for its own debts. Other advantages include easy transfer of the business ownership to another party through the sale of shares; the possibility of tax planning for the owner through the use of a lower tax rate than ones for personal income; and access to financing for business activities through, among others, the sale of stock.
Incorporation effectively creates a protective bubble, often called a corporate veil, around a company's shareholders and directors. As such, incorporated businesses can take the risks that make growth possible without exposing the shareholders, owners and directors to personal financial liability outside of their original investments in the company.
The most Important Things to Know about Starting a Company in Brazil
Limited liability Company (Sociedade Limitada/Ltda in Brazil) is the most common legal entity for foreigners starting in Brazil. ● Minimum Two Quotaholders (partners can be Foreigners, Brazilian, Individuals or a Legal Organization) ● No minimum start-up capital (however with R$150k or R$600k capital you may apply for permanent visa) ● It takes 20-60 days, (from time properly prepared documents are ready) ● Company can be Formed Remotely (No need for Quotaholders/Partners to come to Brazil) ● Company can be Administered Remotely (Setup Global can provide this service) ● Company needs a domestic Address (on the state of the company formation, Setup Global can Provide this Service) ● Partners need a legal representative (Residence in Brazil, Setup Global can Provide this Service) ● Partners have to name an Administrator (administrator not necessarily a partner but has to be resident in Brazil - Setup Global can Provide this Service) Document preparation for Quotaholders is relatively not that complicated. You usually need a Passport copy and a POA for personally owned LTDA, and AOI, Company letter and a POA for legal organization/for LTDA owned by two or more legal organizations/companies.
Documents Needed for the Company Formation in Brazil
For personally owned Brazilian Ltda: ● Passport copy ● POA ● AOI ● Company Letter (Setup Global will provide template) ● POA ( Setup Global will provide template)
In addition, the provision of a Curriculum Vitae/legal entity brochure is sometimes mandatory and always useful. Documents must be notarized, and then registered / apostilled at the Brazilian consulate.