How to start a company: business entity types and what to consider
Choosing the right entity type at the outset avoids rework, costs and future conflicts. Each structure carries its own implications for liability, management and taxation.
Main business entity types
- Limited Liability Company (LTDA): the most common structure, with partners' liability limited to the capital and broad freedom of organization;
- Corporation (S.A.): suited to businesses with many shareholders or seeking investment, offering a more robust governance structure;
- Single-Member Limited Liability Company (SLU): allows a single partner, with no minimum capital requirement, while preserving the separation of assets;
- Sole proprietor: an individual carrying on a business activity, with unlimited liability.
What to assess before deciding
The choice depends on factors such as the number of partners, growth expectations, the need to raise investment, the intended tax regime and the desired level of asset protection. There is no universally best structure — only the one best suited to your project.
Documents and steps
Incorporation involves drafting the articles of association or bylaws, registering with the Board of Trade (Junta Comercial), obtaining the CNPJ taxpayer registration, and securing the licenses and state and municipal registrations required by the activity. A well-defined structure from the start makes it easier to admit new partners and raise capital later on.
It is also worth considering, right at incorporation, drafting a shareholders' agreement and setting governance rules — matters that tend to be left for later and give rise to avoidable disputes.
Frequently asked questions
What is the difference between an LTDA and an SLU?
Both limit liability to the capital. The key difference is the number of partners: the SLU allows a single owner, whereas the LTDA presupposes two or more (although it may also take a single-member form in certain cases).
Do I need minimum capital to start a company?
In most cases there is no minimum capital requirement. The amount should be consistent with the activity and with the business's initial commitments.
Need guidance on this topic?
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