Find out everything about the limited liability company: what it is, who can be a partner and the existing types. Understand how this business modality works.

 Is a type of corporation that has its own legal personality and limited liability of the partners to the value of their shares, that is, theoretically, their personal assets are not affected by the company’s debts. It is a modality widely used in Brazil, as it offers protection to partners in relation to business activities and a more simplified management.

In this article, we are going to address what a limited liability company is, who can be a partner, what types exist and how this business modality works.

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What is the Limited Liability Company?

The limited liability company, also known by the acronym Ltda, is a type of corporation regulated by Law No. 10,406/2002 (Brazilian Civil Code) and Decree No. 3,708/1919. Its main characteristic is the limitation of the partners’ liability to the value of their shares, that is, theoretically, the personal assets of the partners are not affected by the company’s debts.

In addition, has its own legal personality, which means that the corporation is an entity distinct from its partners, and can carry out commercial and legal activities in its own name.

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Who can be a partner?

Any natural person or legal entity can be partner of a limited liability company, as long as there are no legal impediments to business activity. It is worth noting that Ltda can also be formed by a single partner, in this case an Individual Limited Liability Company (SLU).

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There are two types: simple and business. The main difference between them is in the business activity developed by the company.

The Simple Limited Business Company is the one that carries out intellectual activity, of a scientific, literary or artistic nature, as long as it is not a business activity. This type of company is regulated by Law nº 13.467/2017 (Labor Reform) and can opt for the Simples Nacional tax regime in case there is no shareholder from abroad.

Is one that carries out business activity, that is, commercial, industrial or service provision. This type of company is regulated by Law No. 10,406/2002 (Brazilian Civil Code) and must adhere to the tax regime of Real Profit, Presumed Profit or Simple Nacional.

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How does a limited liability company work?

The limited liability company is constituted by the Articles of Association, which must be registered with the Board of Trade of the state where the company is headquartered. In addition, it is important to emphasize that there are different types of limited liability company, each with its own particularities. Among the main ones, we can mention:

  • Individual (Sole) Limited Liability Company (SLU): it is a type of limited company in which only one person is responsible for the capital and for the management of the corporation. This modality was created in 2019 with the Economic Freedom Act, aiming to simplify the opening of companies for individual entrepreneurs;
  • Simple Limited Company (SLS): this type of limited company is intended for liberal professionals, such as lawyers, doctors, dentists, accountants, among others. In this modality, the partners are responsible for both the capital and the provision of company services;
  • Single-Professional Limited Partnership (SLUP): this type of limited partnership is similar to the SLS, but is intended for only one liberal professional, who is responsible for the company’s share capital and for providing services.

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In short, the limited liability company is a very common legal form among companies in Brazil, as it allows partners to protect assets and provide flexibility in managing the business. However, it is important to evaluate the particularities of each type of limited liability company before choosing the best option for your business. Guidance from an accounting or legal professional is essential in this process.

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