When it comes to starting a company, it is common to make confusion between corporate type, size and form of taxation. In the end, Individual Company (IS) And are individual microentrepreneur (MEI) the same thing? How much should I earn a year to be hey? What is the best type of company to undertake without partners? These are some of the most frequently asked questions of those who decide to start a business without partnerships.
In this guide, we will focus on the characteristics of the individual company – or individual entrepreneur – showing the concept, how it works, who can and cannot be hey, and other peculiarities of this legal format. Therefore, if you are thinking of starting to undertake alone, or if you already have a company and want to change corporate type for framing or other reasons, continue reading to learn more about the topic.
What is individual company?
Individual company is one of the possible legal formats for those who start a company without partners. In this model, the responsibility of the entrepreneur is unlimited, that is, he responds with his personal assets for the obligations that the company may assume.
Before we enter the details of IS, it is important to understand the concepts of company size, tax regime e corporate type (or legal nature), as all this will influence the management and legal obligations of the enterprise. Follow.
Company size
For tax purposes, Brazilian law measures the size of the company for annual gross revenues.
In Brazil, the most usual classifications are: Microenterprise (ME), small business (EPP), medium company and large company, each with the following annual limits:
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| Porte | Annual gross revenue |
| Microenterprise (ME) | Up to R $ 360 thousand |
| Small Company (EPP) | Above R $ 360 thousand and up to R $ 4.8 million |
| Average company | Above R $ 4.8 million and up to R $ 300 million |
| Large company | Above R $ 300 million |
Tax regime
The tax regime will determine how companies calculate and collect their taxes. The main forms of taxation we have are National Simples, Presumed Profit and Real Profit, which apply in the following situations:
| Tax regime | Permitted annual revenue |
| Simple national | Up to R $ 4.8 million (me and EPP only) |
| Presumed profit | Up to R $ 78 million (includes ME, EPP and some medium companies) |
| Real profit | Over R $ 78 million (or any revenues, depending on the sector) |
We will not go into detail about other peculiarities of each tax regime. What interests us here is to show that there are these three possibilities, and that the same legal type can eventually have different forms of taxation.
Corporate type
Currently, Brazilian law provides for three legal natures for those who want to have a business alone: the Individual companyo and Unipessoal Limited Society (SLU).
Between the three, SLU is possibly less known to people in general. This corporate type emerged in 2019 and replaced Eireli in practice, not requiring minimum capital for opening of the company.
We’ll talk about SLU in a separate guide. As this guide focuses on IS, we’ll cover the top of the top aspects and doubts aimed at this model.
How does the individual company work?
One of the main peculiarities of IS is that there is no separation between the ownership of the holder and the company. This means that if there are debts on behalf of the business (financing, tax debts, labor or others) and the company is in default, the court may enforce the sole partner’s assets to pay off the commitments.
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Other characteristics of this legal format are:
- There is no minimum capital value provided by law to start the business. With any initial value, it is possible to open an IS.
- The individual company must be the name of its owner, complete or abbreviated.
- It is only possible to transfer one IS to another holder in specific situations, such as the death of the holder or with judicial authorization. Other than that, if the owner wants to change state or country, or even sell the business to a third party, it will be necessary to close the company and start a new CNPJ.
- Regarding size, IS can be a microenterprise (with annual revenues up to R $ 360 thousand) or an EPP (annual revenue over R $ 360 thousand and up to R $ 4.8 million).
- The tax regime may be any of the previously seen. Everything will depend on the revenue range and the activity performed.
- EI type cannot be used for regulated professions, such as lawyers, doctors, architects, engineers, among others.
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What is the difference between individual company and MEI?
This is one of the main doubts that arise when talking about individual enterprises.
Although both formats have only one holder, Hey and mei are not the samebecause they meet different legal requirements. Check out the main differences between the two models.
Company size
Depending on the billing range, the individual company can fit as a micro -company or small business. On the other hand, MEI will always be a microenterprise, as its current revenue limit is $ 81,000 per year.
Amount of employees
Who has an IS, can hire how many employees wish. The same is not allowed to the MEI, which, by law, may have only one employee, who must receive the floor of the category or a minimum wage.
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Obligation of accounting bookkeeping
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According to the Civil Code, all companies are required to maintain accounting bookkeeping, including the individual entrepreneur.
The only exception to this rule is the MEI, as it can manage your accounting in a simplified way, directly on the entrepreneur’s portal. There, he finds the monthly report of gross recipes, which needs to be filled even if MEI has not made anything in the month.
Tax regime
As we have seen, IS can adopt Simples Nacional, Presumed Profit or Real Profit, according to what is best suited to the business. The tax regime of the MEI will always be the National Simple, regardless of its revenue or activity performed.
Who can be an individual entrepreneur?
The IS model is quite comprehensive as it includes a wide range of allowed activities. To constitute it, it is necessary:
- Be over 18 or be emancipated;
- Do not have corporate interest in another company;
- Do not perform any regulated activity or that is on the list of restrictions of the legal format.
How much is a tax paid per month?
This will depend on the tax regime adopted by the company.
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In the case of Simples Nacional, there are five attachments for different categories of activities (services, industry, commerce, among others), and the rates of these attachments range from 4% to 33% of annual gross revenue.
In presumed profit, the form of calculation for each tax is different. For example, PIS and Cofins have monthly rates on revenues of 0.65% and 3%, respectively. The Income Tax (IRPJ) and the Social Contribution on Net Income (CSLL) fall every quarter in the 15% and 9% rates, respectively, on the percentages of profit presumption, according to the company’s activity.
Finally, real profit involves four taxes directly, with the following rates:
- IRPJ: 15% over the profit plus 10% of net profit plus 10% over the amount exceeding $ 20,000 per month.
- CSLL: 9% to 12%, according to the company’s sector.
- PIS and COFINS: 1.65% and 7.6% over gross revenue respectively.
Is it better to be a MEI or individual company?
In certain cases, this is not a choice, as the law establishes some rules for each model.
In MEI, for example, there is an annual revenue limit and only one employee can be hired. Therefore, this legal format may not be the most suitable for those who want to grow in the future.
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On the other hand, those who are MEI have tax burden and simplified tax obligations compared to IS. Therefore, the best model will depend on the analysis of all the factors we have seen so far.
How to open an individual company?
In general, we can define the following step by step to open an IS:
1 – Choose the best legal nature, from me or EPP. This will depend mainly on the revenue you want to achieve in the future.
2 – After that, you need to make an appointment to check CNAE best suited to the business.
3 – The next step is to formalize the registration request of the IS on the Board of Trade of the municipality or region where the company will open. This is where you choose microenterprise or small business.
4 – Once the registration is made, it is time to arrange the business license and all the necessary licenses for the performance of the commercial activity.
5 – After that, it is necessary to register in Social Security, even if there are no employees. This should be done within 30 days after the company’s opening.
6 – Finally, it is necessary to request the issuance of invoices. This request must be made to the State Department of Finance in the case of industry and commerce, or to the Municipal Secretariat of Finance, when the activity is the provision of services.
