Brazilian Business Structures and Legal Requirements

Economic Activity Organization

Company: Economic activity organized. Requirements: Headquarters staff, technical knowledge, and seeking profits. Brazilian law stipulates that anyone can be an entrepreneur, preventing those who are bankrupt, insane, incompetent, minors, public officials, and military personnel on active duty. A minor may engage in business if it is an inheritance.

Society (Partnership)

Two or more persons who come together to create an asset or business entity.

Simple Society (Sociedade Simples)

Subscription to the civil registry of legal entities is required. The Social Contract must detail:

• The partners' skills (parts)
• Location
• Object (purpose)
• Term
• Name
• Company capital
• Share of members
• Each member's service contribution
• Profit/loss distribution
• Administrator
• Responsibility

Dissolution of the Simple Company

Dissolution occurs only under these conditions:

1. Upon reaching a specified period.
2. By unanimous vote of the members.
3. By bankruptcy.

Limited Partnership (Sociedade em Comandita)

Formed by two types of partners:

• Comanditados: Individuals with unlimited liability.
• Comanditários: Liability is limited up to the value of their shares.

The social contract must discriminate between these partners. Administration can only be exercised by the comanditários. The comanditários may participate in deliberations and act as agents for specific businesses. They cannot perform any management acts or have their names included in the firm name, under penalty of incurring unlimited responsibility.

Limited Company (Sociedade Limitada - Ltda)

Over 90% of companies in Brazil are Ltdas because in this type of society, the responsibility of each partner is limited to the value of their shares. However, they are jointly and severally liable for paying the capital not yet paid by other members.

Name Requirements

The name must include the proper name or fancy name, trade name or corporate name, followed by "Ltda."

Share Capital Adjustments

• Increase of Share Capital: Possible only when the entire issued capital has already been paid.
• Reduction of Share Capital: Allowed only in two cases: when there are irreparable losses, or when the capital is considered excessive in relation to the business operations.

Council Tax (Conselho Fiscal)

This council is optional, but it becomes compulsory if the members deliberate so. It consists of 3 members (elected annually from members or third parties). Its function is to analyze the financial statements presented by the administrator, aiming to leave the company and society more transparent.

Member Liability Limitations

Although liability is generally limited to the capital, the liability of shareholders may become unlimited in cases of:

• Misuse of company assets.
• Confusion between the company's assets and the shareholders' private assets.
• Lawlessness and abuse by directors, where there is disregard for the legal entity status.
• Accounting for partners' private property alongside company property.

Exclusion of a Partner

If a majority of members determine that an expelled member is jeopardizing the company's continuity, and if the social contract provides for exclusion for cause, they may take the expelled member's quota themselves. The excluded partner will then receive the value they originally paid for their quota.

Directors (Administrators)

If the social contract does not permit administrators who are not shareholders, their appointment will depend on the unanimous approval of the shareholders.