There has been a growing number of self-employed people in Brazil between 2012 and 2018. In 2018, around one-third of Brazil’s workforce is self-employed; the remuneration is a direct result of the profits made from the goods and services provided.
If you aspire to become self-employed in Brazil, this is a guide with all the steps you need to take during the registration process. Other business models in Brazil allow you to structure a business having partners (such as sociedades limitadas or sociedades anônimas), but this article will focus on the alternatives you have available to organize your business individually.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Qualifying as an Independent Contractor
An independent contractor can be either an individual or a legal entity. The independent contractor has full independence to work, has the possibility to work for other clients, and is free to determine the way the work should be done. Furthermore, the independent contractor relationship is regulated by the Brazilian Civil Law. It is advisable that companies who hire independent contractors establish a written agreement with the independent contractor.
Different types of business structures
Self-Employed Individual (Trabalhador Autônomo)
In this case, the activities are developed by the individual and not by a legal entity meaning no corporate registrations are required. The services provision by the Self-Employed Individual shall solely demand regular individual enrollments for tax and social security purposes with the Federal Revenue Service and, depending on the case, a municipal tax payer’s registration for the collection and inspection of the service tax due upon the services rendering.
The Self-Employed Individual (trabalhador autônomo) undertakes all the obligations and is personally liable for all financial commitments agreed without limitations.
Sole Proprietorship / Individual Entrepreneur (Empresario Individua - EI)
In the Empresário Individua business structure, the entrepreneur carries on business activity in their own name, as a business owner. The business and the owner are legally considered the same. The assets, liabilities, and income of the individual and the business are treated as the same. Therefore, in case of debts, the business owner is personally liable for unlimited financial commitments.
The business name can be the owner's civil name. It is also possible to add another name in reference to the economic activity or the way it is known in the business environment. There is a wider range of economic activities for your business. You can hire any number of employees you want.
The Empresário Individual can also be classified as Microenterprise (ME) with a maximum annual billing of R$360,000 or as a small business (EPP) with a maximum annual billing limit of R$4,8 million per year, for purposes of benefiting from Simples National plan, or, in case its gross income exceeds R$4,8 million per year, you may choose between the ordinary presumed profit regime (billing up to R$ 78 million per year) and actual profit regime (general, though bureaucratic tax regime).
Individual Micro-entrepreneur (Microempreendeor Individual MEI)
Similar to the Empresàrio Invididual, it's also a one-person business. There are, however, differences:
- The MEI can't exceed a specific revenue (you have to earn up to R$81,000 a year)
- The type of activities you can engage in as an MEI is limited by a list that you can find by clicking on this link.
- You can hire a maximum of one employee
- You can't be a partner, director, or owner of another company.
- MEI is subject to a special tax treatment provided in Complementary Law No. 123/06 (Simples Nacional plan), with a surplus exemption of specific federal taxes, e.g., income tax, social contribution on net profit and PIS and COFINS social contributions
You can register online as a MEI through Portal do Empreendedor which is a government website with information for business owners.
Individual Limited Liability Company (Empresa Individual de Responsabilidade Limitada - EIRELI)
Law No. 12441/11 amended the Civil Code, creating the Empresa Individual de Responsabilidade Limitada (EIRELI, Individual Limited Liability Company), which created a new possibility for entrepreneurs to incorporate a legal entity without the involvement of a second partner. The EIRELI isn't to be confused with the Sole Proprietorship/Individual Entrepreneur (Emprasario Individual) which is not a legal entity.
The EIRELI’s minimum corporate capital shall be of at least one hundred times the sum of the highest minimum salary applicable in Brazil (approximately R$105,000.00 or CAD26,000.00). Corporate Capital shall be fully paid up in the moment of the incorporation of the EIRELI.
The EIRELI is a legal entity distinct from the person (or entity) of its holder, which represents surplus protection to the latter and an advantage as compared to EI. EIRELI can also be classified as Microenterprise (ME) with a maximum annual billing of R$360,000 or as a small business (EPP) with a maximum annual billing limit of R$4,8 million per year, for purposes of benefiting from Simples National plan. In case its gross income exceeds R$4,8 million per year, it may choose between the ordinary presumed profit regime (billing up to R$78 million per year) and actual profit regime (general, though bureaucratic tax regime).
Single-Member Limited Liability Company (Sociedade Limitada Individual)
Sociedades Limitadas are mainly ruled by the Brazilian Civil Code (Law no.10.406/2002) and it is the most common corporate type in Brazil. Originally, at least two quota holders were required to form a sociedade limitada. However, in April 2019, the Civil Code was amended to allow sociedades limitadas to be formed by only one quota holder (individual or legal entity), the sociedades limitadas individuals (single-member limited liability companies).
The single-member limited liability company is a legal entity distinct from the person (or entity) of its holder and its main characteristic is that the liability of the quota holder is limited to the corporate capital that has been paid in, which separates such quota holders’ personal assets from the company’s debts and obligations.
In view of the modification of the Brazilian Civil Code to permit the incorporation of a single-member limited liability company, it is likely that self-employed individuals will prefer to establish their business as single-member limited liability company, considering that (i) the company is a legal entity distinct from the person of its quota holder, (ii) the quota holder has limited liability for the debts of the company; and (iii) differently fromEIRELIs, there is not the requirement of minimum corporate capital. Limited Liability Companies can also be classified as Microenterprise (ME)with a maximum annual billing of R$360,000 or as a small business (EPP) with a maximum annual billing limit of R$4,8 million per year, for purposes of benefiting from Simples National plan, or, in case its gross income exceeds R$4,8 million per year, they may choose between the ordinary presumed profit regime (billing up to R$ 78 million per year) and actual profit regime (general, though bureaucratic tax regime
Simples Nacional - Tax Regime
Simples Nacional is an optional taxation regime that allows the unified collection of municipal, state, and federal taxes. It is a simplified tax system provided by law, which aims to facilitate the collection of taxes for micro and small businesses that cannot afford the bureaucracy of an ordinary tax regime.
All legal entities described above (MEI, EI, EIRELI, and Limited Liability Companies) are entitled to benefiting from Simples Nacional plan once the maximum annual billing of R$4,8 million per year is observed.
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This article was created with the support from our legal partner in Brazil Araújo e Policastro Advogados.