By João Benz and Layon Lopes*
In the last ten years, Brazil has gone through an exponential growth in the number of new startups. Among the reasons for such an expressive growth in this sector, we highlight investor’s increase of capital available for financial support, besides the rise in the number of people who have access to the innovation and technological ecosystem, making them potential consumers of services developed by these startups.
Establishing a startup in Brazil: step by step
Firstly, it is important to highlight that the steps on how to constitute a company in Brazil, with foreign partners, follow the same procedures as constituting a company with Brazilian partners exclusively.
The starting point in establishing a startup in Brazil may be considered the construction of the articles of incorporation and bylaws of the new business. According to legal demands, this document must include several points regarding the company operation.
Among the mandatory information included in the articles of association and bylaws, we underline the need to consider the company name, its business purpose, the amount of its initial capital, distribution of quotas among members, partners’ duties and obligations as well as form of profit distribution.
As soon as the startup’s articles of association and bylaws are concluded, the next step is to register the document in the Junta Comercial (Trade Board Office), the public organ which is responsible for registering all Brazilian corporate activities. In Brazil, each state has its own Trade Board office, therefore, the registration can be carried out in the state where the entrepreneur wishes to open his startup.
Once this is done, the owner of the startup will receive the Número de Identificação do Registro de Empresa (“NIRE”) (Company Registration Identification Number (“NIRE”)). With this number, the Cadastro Nacional de Pessoa Jurídica (CNPJ) (National Register of Legal Entities) can be secured at the Receita Federal do Brasil (Internal Revenue Service – IRS).
Before starting operations, the entrepreneur still needs to provide the business licence, i.e. the document which permits the company to carry out its activities. This document can be obtained in the city where the business will perform its activities. As of this moment, the activities carried out by the company will be formalized and the startup is ready to begin full operation.
Startup created in Brazil in partnership with a foreign company: additional steps
However, in cases where there are foreign companies among the partners of the new constituted company, it will be necessary to consider some additional issues:
1. Initially, the availability of use of the company name and brand must be verified. This step is done by a research at the Trade Board Office in the state where the company will be located as well as at the Instituto Nacional de Propriedade Industrial (National Institute of Industrial Property);
2. All foreign companies that become partners of Brazilian companies must nominate a legal representative to speak on behalf of them in the country. This is a really important position, since this person will be responsible for signing documents as well as representing the foreign company in all meanings in the national territory. Therefore, the foreign company has to grant this representative a power of attorney, and this power of attorney must be duly registered and notarized in the country of origin. The foreign company must also forward copies of the company’s Articles of Incorporation to Brazil, indicating who their administrators are, and all these documents must be properly notarized and registered in the country of origin. Finally, all documents in foreign language must be translated into Portuguese by a certified translator;
3. When all these documents are available in Portuguese, it is necessary to create a CNPJ (National Register of Legal Entities) for foreign companies which associate in order to constitute the new company. This procedure is carried out at the Receita Federal do Brasil (Internal Revenue Service – IRS);
4. The following step is to provide complementary registers at the Central Bank of Brazil (BACEN) so that the foreign company will be able to send and receive values to and from Brazil. The company must also identify the Ultimate Beneficial Owner (UBO) at the Receita Federal do Brasil (Internal Revenue Service – IRS).
After following these steps, it is possible to start writing the Articles of Incorporation of the new company and follow the steps shown before.
Finally, some specific activities may still have additional prerequisites before starting to do business. For example, companies that produce or sell goods need to register their entry in the state where they plan to be established.
As a general rule, the establishment of startups in Brazil is a relatively simple one. However, we do stress that the deadlines and fees charged throughout the process of establishing the business vary greatly because each Brazilian state has its own Trade Board Office.
*Layon Lopes is the CEO of Silva | Lopes and João Benz is a member of the Silva | Lopes team.