Ltda

The limited partnership (“Limitada”, “Ltda”).

This is the standard choice for most business partners joining forces here, and Ltdas are also found among affiliates of large multinational companies. Traditionally, it is assumed that a partner (“sócio”) works in the company, in which case he is often assigned as a managing partner (“sócio-administrador”) in the charter of incorporation. But it can also be that a partner just invests money in which case he still appears as a partner,but without the distinction as managing partner. And herein lies the weakness of the Ltda: the lines between managing partners and investing partners are blurry; there is no such thing as a board with elected shareholders representatives (“conselho administrativo”), although it would not be impossible to create one. When a company is executed for tax or labor liabilities, all partners are liable, independent whether they were just investors or managers. The opponent’s lawyer will go for the partner that has most (liquid) assets, even if he has only 1% of the shares while someone else has 99%!

And note, contrary to the equivalent of the Ltda in many other countries, in Brazil partners are liable with their private assets for tax and labor liabilities, and also bank loans if they have signed both as a business representative and as a private guarantor, which is almost always the case for managing partners (here, at least, investing partners can often escape).