Why formalize your business?
Before understanding the step-by-step process of starting a business, it's important to highlight the benefits of formalization:
- Legal protection and market recognition
- Issuing invoices
- Access to credit lines and financing
- Possibility of participating in public tenders
- Social security rights such as INSS and pensions
- Easy to expand, hire and grow
In addition, those who operate informally run risks such as tax assessments, difficulties in commercial partnerships and limitations in providing services to larger companies.
Documents required to open a business
To open a company in Brazil, you will need some essential documents. These include:
- ID and CPF of partners;
- Proof of residence of partners;
- Articles of Association registered with the state's Board of Trade;
- CNPJ application, obtained from the Receita Federal website;
- Proof of business address, important for issuing a business license.
Depending on the company's economic activity, it may be necessary to obtain special licenses, such as a health license (for companies in the food or health sector) or an environmental license (for businesses that have an impact on the environment).
How to choose your tax regime
Choosing the right tax regime is one of the most important decisions for any entrepreneur. There are three main options in Brazil:
- Simples NacionalThis system is aimed at micro and small companies with annual turnover of up to R$ 4.8 million. It unifies several taxes into a single monthly bill, simplifying the company's tax management.
- Presumed Profit: Suitable for companies with turnover of up to R$ 78 million a year, this regime is based on a presumption of profit on gross revenue. It is recommended for companies that are able to forecast their profits on a stable basis.
- Real ProfitUsed by companies with a turnover of more than R$ 78 million a year or which operate in specific sectors, such as finance. Taxation is calculated on the company's actual profit, which can be advantageous for businesses with smaller profit margins.
The correct choice of tax regime can avoid an unnecessarily high tax burden and guarantee the company's long-term financial health.
The importance of the CNAE when starting a business
The CNAE (National Classification of Economic Activities) is a code that defines the economic activities that a company can carry out. The correct choice of CNAE is fundamental, as it directly affects the company's tax burden, as well as determining whether the business can fit into Simples Nacional, a simplified tax regime. The company can choose more than one CNAE, categorizing both main and secondary activities. This classification also impacts the need to obtain special licenses, such as health or environmental licenses.
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Strategic Planning
Stages of starting a business
Step 1 - Define the type of company that's right for you
The first step to starting a company from scratch is to understand which legal type is best suited to your reality. There are different legal types in Brazil, and choosing the right one will have a direct impact on how your company operates.
MEI - Individual Microentrepreneur: The individual micro-entrepreneur is ideal for self-employed professionals who are just starting out and earn up to R$ 81,000 a year. It is the simplest form of formalization.
Advantages:
- Free and simplified opening process
- Low fixed monthly tax payments
- Access to INSS benefits
- Possibility of issuing invoices
However, not all activities can be MEI, and the entrepreneur can hire a maximum of 1 employee. In other words, not every business can fall into this category.
Attention: If you are looking for information on how to open an MEI company, the ideal thing to do is to consult the permitted CNAEs.
Individual Entrepreneur (EI): This type of company allows a single entrepreneur to formalize the opening of a company, i.e. it is not necessary to have partners.
The EI also does not have the limitations of the MEI, but it has the disadvantage of not separating the entrepreneur's individual assets from the company's assets, meaning that debts owed to the legal entity can be collected from the individual.
Sociedade Limitada Unipessoal (SLU): This is currently the most suitable option for those wishing to open a sole proprietorship, i.e. without partners.
The great advantage of the SLU is the separation of assets, a feature that protects the entrepreneur's personal assets from the company's debts.
Limited Company (LTDA): Ideal for those starting a business with partners. This is the most widely used model in Brazil, as it allows the division of shares and has a flexible structure.
As with SLU, LTDA-type companies protect the entrepreneur's assets from possible company debts.
Step 2 - Choose the best tax regime
After defining the type of company, the next step is to choose the ideal tax regime for your business. This is essential if you want to pay less tax and ensure that your company complies with the tax authorities. Check out the options:
Simples Nacional:
This is the model most used by small businesses in Brazil. It brings together up to 8 taxes in a single form (DAS), with progressive rates according to turnover.
- Turnover of up to R$ 4.8 million per year
- Ideal for small businesses and service providers
- Effective rates from 4% to around 19.5%
- Framework may vary according to the R Factor (in the service area)
When it comes to starting a simple company, Simples Nacional is usually the most advantageous choice.
Presumed Profit:
Suitable for companies that do not fall under the Simples system or have a high profit margin.
- Annual turnover up to R$ 78 million
- Rates of IRPJ and CSLL fixed on the estimated percentage of profit
- Separate taxes: PIS, COFINS, ISS, IRPJ, CSLL
- Can be advantageous for service providers with low costs
Real Profit:
Mandatory for companies with a turnover above R$ 78 million or specific activities (e.g. financial institutions).
- Calculation based on the profit actually made
- More bureaucratic, but can generate tax savings in certain cases
- Ideal for companies with low margins and strict expense control
The choice between Presumed Profit or Real Profit should be done with the support of an accountant for a complete analysis.
Step 3 - Gather the necessary documents
Now that you understand the type and regime, it's time to put together the documentation to formalize your company.
Documents and information from the entrepreneur:
- ID and CPF
- Proof of residence
- Voter ID or digital certificate
- Proof of marital status
Company documents and information:
- Business address (can be residential in some cases)
- Fancy name and company name
- Activities performed (CNAE
- Share capital
Important: For those looking for how to open a CNPJ or how to create a company, this stage requires special attention. The choice of CNAE, for example, directly influences taxation.
Step 4 - Registration with the Board of Trade and the Federal Revenue Service
With the documents in hand, the accounting department will make the records:
- Commercial Registry - where your company will be formally incorporated
- Receita Federal - issue of CNPJ card
- City Hall - to obtain a business license
- Health Surveillance and Fire Department - if the activity requires it
- State Registration - for companies that sell products (require IE)
This process is known as starting a businessThis should be done with the help of a reliable accounting firm to avoid errors and delays.
Starting a business online
The digitalization of the process of starting a business in Brazil has made life easier for entrepreneurs. The Redesim system, which integrates various bodies responsible for registering companies, allows much of the process to be done online, such as registering with the Board of Trade and obtaining the CNPJ. For MEIs, the process is entirely online and can be completed in a few hours. For larger companies, however, the time can vary due to the need for additional approvals, such as specific licenses.
The importance of the social contract
The Articles of Association are the document that formalizes the creation of the company, establishing the rules of operation, the responsibilities of the partners, the share capital and the division of profits. It is mandatory for most companies (except MEIs) and must be registered with the Board of Trade of the state where the company will be based. A well-drafted articles of association avoids future conflicts between the partners and ensures that all aspects of the company are clear from the outset.
Spreadsheet
Presumed Profit
How much does it cost to start a business in Brazil?
A very common question among new entrepreneurs is how much it costs to start a business. The truth is that costs can vary according to the city, the type of activity and the desired structure. However, it is possible to list the main items involved:
Mandatory registration costs
- Board of Trade fee: Between R$ 100.00 and R$ 500.00 depending on the state;
- Issuing a digital certificate: Varies between R$ 150.00 and R$ 300.00 per year;
- Accounting fees: The amount may vary according to the accounting firm hired, company size, activity, turnover and number of employees
- Permits and licenses: some city halls exempt small businesses, others charge fees that can reach R$ 1,000 or more, depending on the segment.
Those looking to find out how to start a business with little money can start with a simpler structure (such as SLU or ME) and expand as they grow.
Average time to start a business
The average time it takes to open a company in Brazil varies depending on the state and the type of business. In some states, the process can be completed in less than 2 days, while in others it can take up to 5 days. This time includes stages such as formalizing the Articles of Association, obtaining the CNPJ, state and municipal registration, and obtaining a business license. For MEIs (Individual Microentrepreneurs), the process can be even quicker, often carried out entirely online.
How to pay less tax when starting a business?
Many entrepreneurs wonder if there are legal ways to pay less tax. The answer is yes - as long as good tax planning is carried out, based on IRS rules.
Here are some strategies that make a difference:
Choosing the right tax regime
O Simples Nacional can be more advantageous for those who make up to R$ 4.8 million, while Presumed Profit can be better for service providers with a high margin. Real Profit, on the other hand, is ideal for companies with lower profits or that can write off a lot of expenses.
Separate pro-labore from profit distribution
Many entrepreneurs confuse salary and profit. The ideal is to define a compatible pro-labore and the rest to be distributed as profit, exempt from IRPF - as long as it is duly accounted for.
Taking advantage of tax incentives
Some municipalities and states offer tax benefits for technology, innovation and export companies, among other segments.
These actions are possible with the support of a specialized tax consultancy.
Common mistakes when starting a business
Knowing how to open a simple business also involves knowing what to avoid. Here are the most common mistakes made by those starting out:
- Choosing the wrong type of company or tax regime;
- Not having accounting support;
- Failure to regularize activity with permits and licenses;
- Ignoring monthly and annual tax obligations;
- Mixing personal and company finances.
Avoiding these mistakes can be the difference between success and failure for your business.
Operating permits and special licenses
The Operating Permit is the document that authorizes a company to operate legally. It is issued by the town hall and proves that the business meets the municipality's zoning and safety requirements. The time it takes to obtain a permit can vary, but it usually takes up to 30 days.
In addition to a license, some companies need special permits to operate. For example:
- Health license: Required for companies operating in the food, pharmaceutical or health sectors.
- Environmental licenseRequired for companies that may have an environmental impact, such as industries.
- Fire Department Safety CertificateEssential to ensure that the company complies with fire safety regulations.
Depending on the line of business, it may be necessary to obtain permits issued by federal, state or municipal bodies.
Tips for keeping your company regular after opening
Once you've understood how to set up a company, the next challenge is to keep it compliant with all legal and tax obligations. This is essential to ensure the smooth running of your business and avoid fines, blockages or assessments.
Here are some essential tips:
- Issue invoices correctly.
If your company provides services or sells products, issuing an electronic invoice (NF-e or NFS-e) is mandatory. Check with your accountant which system to use and the specific rules of your municipality or state.
- Pay your taxes on time.
Simples Nacional companies pay the DAS monthly. On the other hand, Presumed Profit or Real Profit companies have other specific forms such as IRPJ, CSLL, PIS, COFINS and ISS. Don't fail to meet these commitments on time.
- Keep your payroll organized
When you hire employees, you need to correctly calculate charges such as INSS, FGTS and IRRF, as well as submit obligations such as eSocial, GFIP, CAGED and others.
- Organize your accounts.
Companies must keep their accounting books up to date. Even for those with low turnover, complete accounting helps to control income, expenses, profits and distribute income correctly.
- Comply with ancillary obligations.
In addition to taxes, there are various mandatory declarations such as:
- DEFIS (for Simples Nacional companies);
- DCTF, ECD e ECF (for Presumed Profit and Real Profit);
- DIRF e RAIS (related to payroll).
With the support of an accountant, you don't have to worry about this on a daily basis.
Spreadsheet
Simples taxes
How to keep your company growing with the right accounting support
After understanding how to start a company and formalize your business, the next challenge is to ensure consistent and sustainable growth. To do this, it is essential to adopt efficient management practices, maintain financial organization and, above all, choose an accounting firm that is aligned with your company's needs.
One of the first steps to growing your business safely is to control your cash flow well, recording your inflows and outflows on a daily basis. It is also essential to keep personal and business finances separate, avoiding confusion that could compromise the business's financial balance. In this process, relying on specialized accounting makes all the difference.
Choose an accounting firm that has experience in your sector. This avoids mistakes and allows you to identify opportunities for savings, especially in relation to the tax burden. More than just "doing the accounting", the ideal is to have a partner who offers ongoing tax consultancy, adjusting the tax regime according to the company's growth and guaranteeing legal tax savings.
Another important point is the use of digital systems, which make it easier to send documents, issue invoices and control finances in real time. Good support is also essential: opt for accountants who offer humanized service, who are available to answer questions and guide decisions.
Finally, with the support of accounting reports, performance indicators and clear targets, you will have more confidence to make strategic decisions and take advantage of market opportunities. With planning and technical support, your business will be ready to evolve in a solid and structured way.
Explanatory video
To make it even easier to understand, check out the video by Beatriz Oliveira and Ricardo Moraes, specialists at CLM ControllerIn the video, they explain in detail each stage of the process of starting a business. In the video, they cover everything from choosing a CNAE to obtaining special licenses, including valuable tips on the tax system and the documents required.
Conclusion
Now that you know how to open a company, understand what documents are needed, the types of company and the best forms of taxation, it's time to put everything into practice.
Whether you're a beginner looking for how to open an MEI company, someone who wants to understand how to open a company from scratch, or an entrepreneur looking for how to open a CNPJ to scale your business - the support of specialized professionals will make all the difference on this journey.
A CLM Controller Accounting offers complete company start-up services, accounting for all sizes of business and tax consultancyhelping you choose the best tax regime for your company.
