Limited Liability Company (LTDA): what is it and how does it work?

A Limited Liability Company (LTDA) is one of the most common types of business structure in Brazil, chosen by many entrepreneurs because of its flexibility and legal certainty.

In this article, we'll explore what an LTDA is, how it works, and what its main features and advantages are.

What is a Limited Liability Company (LTDA)?

A Limited companyLTDA, also known as LTDA, is a form of company formation in which the share capital is divided into shares between the partners.

Each partner has a stake proportional to the amount invested in the company's share capital. This structure offers important protection: the liability of the partners is limited to the value of their shares, meaning that they are not liable with their personal assets for the company's debts, except in specific cases of fraud or mismanagement.

How does an LTDA work?

● Incorporation

To set up an LTDA, you need a memorandum of association, which acts as the company's "birth certificate". This document must be registered with the Board of Trade of the state where the company will be based.

The articles of association establish the company's operating rules, such as the corporate purpose (the company's activity), the division of share capital, the rights and duties of the shareholders, and the rules of administration.

● Share Capital

The share capital of the LTDA is divided into quotas, and each partner contributes a portion of this capital, which can be in the form of money, goods or rights.

Each shareholder's stake in the company is proportional to the value of their shares. For example, if a partner contributes 30% of the share capital, they will have 30% of the company's shares.

● Administration

The management of the LTDA may be carried out by one or more partners or by third parties appointed as established in the articles of association.

The directors have the power to manage the company's activities and make operational decisions. It is possible to define in the articles of association that the most important decisions, such as selling assets or taking out loans, need the approval of all the partners.

● Limited liability

One of the main advantages of the LTDA is the limited liability of the partners. Each partner's liability is restricted to the value of the shares they own in the business.

In practice, this means that in the event of bankruptcy or company debts, the partners are not obliged to pay with their personal assets, as long as they have not acted fraudulently or illegally.

Read also: New DIRBI obligation: see how it can impact your business

Advantages of an LTDA

● Legal certaintyLimiting the liability of partners protects their personal assets, reducing the risks associated with entrepreneurship.

● Flexibility in managementLTDA administration can be adapted to the company's needs, allowing for more efficient management.

● Easy entry and exit of membersThe entry and exit of partners in an LTDA is relatively simple, as long as it follows the rules set out in the articles of association.

● Possibility of tax planningCompanies incorporated as LTDA have access to different tax regimes, such as Simples Nacional, Lucro Presumido and Lucro Real, allowing for more efficient tax planning.

● Market credibilityThe legal structure of an LTDA offers greater credibility with suppliers, clients and investors due to its transparency and formality.

Obligations of an LTDA

Despite the advantages, an LTDA also has some important obligations:

● Keeping the books: The LTDA must keep regular accounts, with records of all its financial and property transactions.

● Complying with tax and labor obligationsThe company must be up to date with the payment of taxes, contributions and labor rights.

How to open a Limited Liability Company (LTDA)

So that you understand how the procedures for opening a Limited Liability Company (LTDA)we've prepared a step-by-step guide. Check it out!

1. choosing a company name

The first step is to choose a name for your company. This name must be unique and cannot be the same or similar to others already registered with the Board of Trade state where the company will be opened.

It is therefore important to do some research beforehand to check the availability of the name.

2. drawing up the articles of association

The articles of association are the most important document for setting up an LTDA. It must be drawn up carefully and include the following information:

Name of the company (company name).
Corporate purpose (activity or activities that the company will carry out).
Share capital and the division of shares between partners.
Partners' details (name, CPF, address, nationality, marital status).
Form of administration (who will be the administrator and what their powers are).
● Company headquarters (address).
Rules for members joining and leaving.

This document must be signed by all the partners and notarized.

3. registration with the Board of Trade

Once the articles of association have been drawn up and signed, the next step is to register the company with the Board of Trade of the state where the company will have its headquarters. This registration is what gives the company legal life, allowing it to operate legally.

When you file your articles of association with the Board of Trade, you will have to pay a registration fee, the amount of which varies according to the state.

Read more about: How to calculate the overdue DAS with Simples Nacional interest?

4 Obtaining a CNPJ

After registering with the Board of Trade, the next step is to apply for the National Register of Legal Entities (CNPJ) with the Brazilian Tax Authorities. Internal Revenue Service.

The CNPJ is the equivalent of the CPF for companies, and is essential for the company to issue invoices, hire employees, open a bank account, among other activities.

5. state and municipal registration

Depending on the company's activity, it may be necessary to apply for state registration (for companies that sell products) and municipal registration (for companies that provide services).

● State RegistrationIt is mandatory for companies that sell products, whether industrial or commercial.

● Municipal registration: This is done at the City Hall and is necessary to issue a business license and to pay ISS (Tax on Services).

6 Obtaining an operating license

The business license is the document that authorizes a company to operate at a given address.

It is issued by the city hall of the municipality where the company is located. To obtain it, you need to meet local requirements, which may include safety, zoning and accessibility standards, among others.

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