Holding Company in Brazil

Updated on Friday 23rd July 2021

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If you are looking for information about company formation in Brazil for ways to protect your assets or improve your company's activities, you have probably heard about holding companies.
 
Holding companies in Brazil are a great option for entrepreneurs looking for succession planning, tax planning, or new investment possibilities. However, like any business venture, it is necessary to know the subject to make the right choices. We know Brazil's company formation regulation can be complicated, so if you have any questions on the subject, it is recommended to consult our specialists.
 
Brazil is an excellent destination for investment as it is one of the largest emergent economies in the world, but navigating its legal details can be challenging. However, thinking of clearing up some initial doubts, our experts prepared this post so you can understand how opening a holding company in Brazil works. Let's get into it.
 

What is a holding company?

 
If you want to open a company in Brazil and have heard of a holding company but still can't understand what it is, we will simplify the matter so that you can understand whether it is applicable to your case or not.
 
Holding comes from the English word "to hold," which means to maintain something. In other words, opening a holding company in Brazil is about creating a legal entity formed to control another company or just the shares of another company, being responsible for its management.
 

How are holding companies classified?

 
Contrary to what many people think when they start reading about company formation in Brazil, it is not a corporate structure, such as a limited liability company or a corporation. In fact, the holding company is defined by the activities described in its corporate purpose and may have several functions.
 
In summary, when you open a holding company in Brazil, it can be pure or mixed:
 
  • A pure holding does not have any activities of its own but only holds interests in other operating companies. 
  • A mixed holding, on the other hand, besides holding quotas/shares in other companies, explores one or more activities directly, whether in the services, commerce, industry, or even real estate management area.
 

What are the advantages of setting up a holding company?

 
A holding company can be advantageous for separating routine business from strategic decisions related to the companies' ownership and management.
 
For example, an industrial company whose main partners are individuals could have its activities interrupted if the founding partner dies until the inventory and succession is settled. If a holding company is the shareholder of the operating (industrial) company, then all discussions and settlements required due to the death will take place within the holding company's scope while the industrial company's activities are preserved.
 
It can also bring tax advantages, but this depends on a detailed assessment by a specialized Brazil company formation professional.
 

How to open a holding company in Brazil?

 
If you are thinking of incorporating a holding company in Brazil, it is essential to take certain precautions before making the move. After all, it is about the constitution of a legal entity, and, in this case, making the right decisions can make all the difference in the final result. To help in this process, read our list below. In it, you will find a step-by-step explanation on how to open a holding company in Brazil:
 
  • Analyze the assets and define the type of holding company
  • Partners Agreement
  • Define the company type
  • Organize the documentation
  • Submit the documentation to the authorities
 
Setting up a holding company in Brazil involves a lot more work. If you want to know in detail what documents you will need to do it and to open a bank account for your structure, it’s a great idea to have the right lawyer by your side.
 

Can I open a holding company on my own?

 
For setting up your holding company in Brazil successfully so it can fulfill its objective, it is essential to pay attention to several details. It is no news that the Brazilian bureaucracy and the set of laws, especially taxation laws, can leave the most attentive of entrepreneurs quite confused. However, this is true for most countries around the world.
 
Therefore, to avoid making mistakes, you should hire a reliable company with experience in company formation in Brazil that can assist the process at all stages. This will save you a lot of time and even money because making mistakes in some parts of the process can end up being costly, and we will analyze whether it is the right time to open your holding company, what is the most suitable structure, and how should it be formed.
 

Why establish a holding in Brazil?

 
  • The number of retail stock market investors in Brazil has quintupled since 2017.
  • After years of two-digit inflation, it has averaged 3-4% in the last few years.
  • Brazil is the 12th-largest economy in the world with a GDP of $1.363 trillion.
  • There are over 5 million companies registered in Brazil of which 8 are Fortune 500 companies
  • The Brazilian currency, the Real, has gotten stronger in the last few years and there have been some reforms to increase economic freedom.
 
Hopefully, this will have given you general notions of what to keep in mind regarding your asset protection plan through a holding company. Our team of legal professionals can fully assist you in opening your holding company in Brazil. Do not hesitate to contact us to clarify any doubts you may have.