Single-holder limited-liability firm (Empresa Individual de Responsabilidade Limitada)
Since January 2012 it is possible to set up a single-holder limited-liability company in Brazil, the so-called Eireli. The capital requirements are hundred minimum salaries fully paid (R$ 62.200; January 2012). The liability of the company director is ‘limited’ in that the company’s finances are separate from personal finances and assets. Limited company directors are not responsible for any debts run up by the business, although directors may need to guarantee loans or credit taken out in the company’s name. Furthermore full liability occurs in case of fraud. It is not allowed to set up more than one such Eireli per person.
Until recently you either had to set up a Sociedade Anonima or a Limitado (Ltda). In case of the Ltda it was always necessary to involve a “socio”. Involving the “1% socio” has forced entrepreneurs to pay detailed attention to their “social contract”. Especially in cases of divorce, death of the “socio” and disputes the Ltda is a source of risk for entrepreneurs. On top of having a 1% “socio” foreign investors were forced to find a permanent resident to hold power of attorney. This hurdle will still remain.
Advantages of the Eireli
The advantages of setting up a Eirili are significant. For permanent residents and foreign investors who run a small business, but don’t want to get their personal finances fully exposed to the sometimes arbitrary and flighty decisions of the labour courts and tax authorities this promises to be a strong alternative for the Ltda.
By law (LEI Nº 12.441, DE 11 DE JULHO DE 2011), each person can only form and participate in an individual limited liability company, and this should include, necessarily, the expression Eireli, similar to what occurs with the limited company (Ltd) and the corporation (S / A ) or (SA).
Another advantage of the Eireli is that you are able to merge the shares of a Ltda into this new company.