When it comes to starting a business, one of the decisions to make is what your legal type will be, as this will determine important aspects, such as the responsibilities of the partners, form of organization, among others. In Brazil, one of the best known types is the Limited Society (Ltda)which covers most business activities.
In this guide, we will explain what a limited society is – how it works, for those indicated, advantages, risks, opening process, among other peculiarities. If you are thinking of constituting a company, regularizing your activity or simply interested in entrepreneurship, read on and learn more about the topic.
What is a limited company (LTDA)?
Limited Society – or Ltda – It is a business structure formed by members who can be individuals or legal entities. The social capital of this type of company is divided into quotas, which are distributed among the partners equally or not.
What are the characteristics of a limited society?
The main feature of a limited company is the separation between the personal assets of the partners and that of the company. As its name implies, the partners’ responsibility regarding the company’s legal and financial issues is limited to the value of the quotas that each one has integrated into the business.
Originally, it was necessary at least two partners to constitute this business type. In 2019, it was created Unipessoal Limited Society (SLU)to serve businesses formed by only one person. This model replaced the, which required a minimum assets of 10 minimum wages for opening, unfeasible value for much of the population they wanted to undertake.
In addition to the separation between the heritage of the partners and the company, other characteristics of the limited company – whether with members or unipessoal – are as follows:
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- Capital social: There is no mandatory minimum value for social capital. Therefore, partners are free to define how much they want to invest in the company, and can do it in different ways, as not everyone needs to have the same amount of quotas.
- Partners: They must be over 18 or emancipated. According to current legislation, people married under universal communion regimes or mandatory separation of goods cannot participate in the same limited company.
- Administration: It can be done by one or more partners or a professional from outside the company hired specifically for this purpose.
- Results: The profits and losses of a limited company will be distributed among the partners in proportion to the quotas that each has.
How does a limited society work?
Like other types of companies, the limited company is born from a social contract. In this document, the partners (or the only entrepreneur at SLU) will dispose of the characteristics and operation of the business in all aspects.
According to the Civil Code, the following items cannot be missed in the social contract of a limited company:
- Company denomination: At the end of the name, the expression LTDA should be included.
- Corporate purpose: It should be clear and specific and may contain secondary activities.
- Full address: Plogado with number, city, state and zip code of headquarters and branches, if applicable.
- Qualification of members: Full name, ID, CPF, nationality, marital status, residential address and professional registration number of each partner (when applying).
- Capital social: Value, form of integralization (whether in cash or other assets), number of quotas of each partner and nominal value of the quota.
- Responsibility of the partners: It is necessary to make it clear in the social contract that partners are limited liability to their quotas.
- Administration: The form of management (if done by one or more partners, or by third party) must be included in the social contract, as well as the identification of the administrator, its powers and limitations in management.
- Results Distribution: The periodicity and the form of distribution of results must be clearly expressed in the contract. Normally, partners receive earnings proportional to their quotas, but they can also elect other criteria.
- Term of the company: It is usually undetermined, but there are societies created for specific projects. In this case, it is possible to establish a determined period.
- Dissolution conditions: Possible situations of the end of society, such as will or death of one or more partners, insolvency or court decision, for example.
If changes occur in the business (entry or departure of members, increase or reduction of capital, change of the corporate object, opening or closing of branch, among others), it will be necessary to make a change in the social contract that reflects the new form of operation of the company.
For whom is LTDA indicated?
The limited company model is quite flexible as it covers most business activities and different revenues.
Family businesses, beginner or growing enterprises, larger and more sophisticated projects with various partners or unipessones, they can all be constituted in the form of a LTDA. Basically, this type of company is indicated when there is proximity and confidence between partners, when it seeks flexibility in management, and when there is a concern to separate personal assets from the goods from the organization.
What are the advantages of a LTDA?
As advantages of limited societies, we can highlight:
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- Limitation of responsibilities: As we have seen, the responsibility of each partner is limited to the value of their quotas in the capital. That is, except in cases of fraud, the private assets of the partners do not respond for debts or losses that the company will suffer.
- There is no minimum value to open a ltda: Both the value and the form of integralization of social capital is at the discretion of the partners, which makes the model quite accessible.
- Ltda can join Simples Nacional: Limited societies with annual revenues of up to R $ 4.8 million can opt for Simples Nacional. This tax regime unifies federal, state and municipal taxes in one tax rate and collection guide, bringing practicality and economy.
- Flexibility in Administration: The model allows partners or third parties to manage society. This can be advantageous in many situations – when there are inexperienced partners or if you need a qualified professional for a certain specificity of the business, for example.
- Ease of transferring quotas: The social contract can also provide rules for transfer of quotas. With this, one can reduce internal conflicts when one partner decides to transfer to another (or third parties) his participation in the company and, at the same time, sets limits on the entry of new people in the business.
What are the disadvantages (or risks) of a LTDA?
On the other hand, some disadvantages and risks of the model are:
- Less strict governance: Compared to an anonymous company (s/a), LTDA has less strict governance criteria, which makes it less transparent for accounting and management information. This can be a disadvantage especially when there are plans to attract investors to the business.
- Growth can lead to difficulties: It is not uncommon for family businesses that started small and had problems when the operation grew. In such cases, the causes of failure are usually overly centralized and non -professional management.
- Disregard of the legal entity: In LTDA, the limitation of the responsibility of the partners is not absolute. In cases of fraud or confusion that brings losses to third parties, the law can reach the patrimony of partners to honor the company’s debts.
How to open a limited society? See the step by step
Although not mandatory, it is highly recommended to participate in an accounting advisory in the opening of a company, whatever its legal nature. This is because the process involves a considerable bureaucracy and several steps – and the chances of errors are great when there is not enough knowledge about each of them.
Basically, starting a company involves the following step by step:
1 – COAL Choice
CNAE (National Classification of Economic Activities) is a seven -digit code that serves to identify and standardize business activities in the country.
It is through CNAE that the government knows which taxes should collect, according to its industry. If it performs more than one activity, it should have secondary codes beyond the main one for each of them.
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This step can be laborious as the list of CNAES is quite extensive. You need to be careful to choose the correct code and be careful not to leave out any secondary activity.
2 – Definition of the tax regime
In Brazil, there are three main tax regimes, which are real profit, Oeo Simples Nacional.
At first, legal types such as LTDA, and may adopt any of the three regimes. It will all depend on the company’s activity and revenue range.
The correct choice is important to ensure compliance with tax obligations and the use of tax advantages that some types of companies have.
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3 – Locality Analysis
Regarding location, it is necessary to evaluate points such as infrastructure, target audience, ease of access, competitors in the neighborhood, rental costs, and others that can directly impact business performance.
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In addition, a prior feasibility analysis must be done to find out if the government authorizes the opening of the company in the locality – and what are the conditions for it. One of the sources of consultation is the site of the local city hall.
4 – Preparation and registration of the social contract
The next step is to elaborate the social contract of the limited company. In addition to formalizing the business, it gives legal certainty to the partners and to the parties who come to relate to the company and, therefore, it is very important that it is well prepared.
Once ready, the document must be taken to register with the Commercial Board or the Civil Registry Office of a legal entity, depending on the company’s activity.
This step involves the payment of fees for the Commercial Board, the Registry and other bodies (such as professional categories), if applicable.
5 – Issuance of the CNPJ
After registration of the social contract, the entrepreneur receives the Identification number of the Company Registration (NIRE). In possession of the NIRE, it is necessary to register as a taxpayer in to request the issuance of the CNPJ.
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6 – Licenses for operation and digital certificate
After release of the CNPJ, it is time to get all licenses so that the company can go into operation.
Here includes documents such as business license, health surveillance licenses, the Fire Department, the Secretariat of the Environment, among others. According to the state, city and type of activity, there may be different legal requirements.
This is also the time to arrange the digital certificate for issuing electronic invoices and digital signature of various documents.
