How to Open a Company
“I don't know how to start a company. Can you help me?". I have heard this question thousands of times in the past few years, and almost always the answer, at first simple for the beginning entrepreneur turned into a conversation of more than an hour, and that he leaves with many answers, but also with many questions to ask about your own business. The act of entrepreneurship in Brazil is still not a very clear path for new entrepreneurs, and it often discourages the formalization of start-up businesses.
We will use this space to understand and demystify this stage of your business, and associate legal and legal terms with your practical needs. This is a first barrier that we have to take down to proceed. Yes, the legal terms are sometimes boring, it may not even be yours praia, but are part of the business environment. There's no getting around that.
The Steps for Starting a Business
Coming from the premise that you already have a good business idea and just want to legally open your business, let's now see the general steps that all businesses need to go through. Of course, it is always important and obligatory that this process be accompanied by your accountant:
- Creation of the Social Contract
- Registration at the Board of Trade
- Issuance of CNPJ and Choice of Activity
- Municipal and State Registration
- Operating Permits
For some types of companies and activities, some of these steps are exempt or not applicable, but in general, all companies go through almost all of these steps. Let's see one by one:
1) Creating the Social Contract
The social contract is the most important document of a business, since it is where all the main definitions of the business will be, such as social capital, partners, functioning of society as a whole, activities developed, etc. Let's see below some important definitions that will be in your social contract.
1) Definition of Social Purpose
What is the company going to work with? This should be clearly described in your contract, as many future definitions were based on and limited by what is defined. It is not enough to explain your work process, or the facilities that will be presented to the client, but what your company will do to receive money in return. Let's look at a case to illustrate this confusion:
Once, a customer came to us telling us that his site would assist in arranging weddings. You see, in that sentence, he said what the site was going to do, but not how it would generate revenue. In the end, the company had several activities, such as BUSINESS INTERMEDIATION (charged a service provider fee for a closed business), and PUBLICITY VEHICLES ON THE SITE (who wanted to pay to display their brand on the site). In other words, this is what actually describes the corporate purpose of the company.
It is important to know that you can have as many activities as you want in the corporate purpose of your company, such as website development, book trading and yoga teaching.
2) Definition of Social Rationale
Every company has a social name. The corporate name is the formal name of the company, and consists of 2 parts: i) a proper identification, for example GLOBEX; and ii) indication of its area of activity COMERCIO S / A, then we have the corporate name GLOBEX COMERCIO S / A.
In parallel, the company can adopt a fancy name, such as COLD POINT which is the case of the example above. The fancy name is not mandatory, and may be included after the company's incorporation. In the case of a fancy name, it is recommended to register the name in the INPI (www.inpi.gov.br). We'll talk about this with more depth in the future.
3) Definition of Capital Stock
O capital represents how much (in cash), the entrepreneurs will put as collateral of the company before third parties. There is no legal formula or limitation (minimum or maximum) required by law. Even if there is no formula, some indicators are useful for determining it:
a) What is the investment capacity of each partner when the company is created?
b) How much does the market require capital to close business with your company? This issue is more relevant in commercial enterprises than in service companies.
c) What is the guarantee that the members intend to provide to third parties? Suppliers, banks, etc ... The higher the capital, the higher your credit limit, but also the greater the liability of the members.
Frequently, I see the services company constituting a share capital of less than R $ 5.000,00, which would be the minimum required to start the operation. I emphasize that this is not a rule, but an observation about what is practiced.
4) Definition of the Type of Company
The types of companies allowed are defined by the civil code. They are more of 10 types, the most usual being THE COMPANY LIMITED. This type of company consists of at least 2 partners. At the moment it is necessary to define who will be the participants and what the participation of each one in the SOCIAL CAPITAL of the company. This represents the right and responsibility of each one of the shareholders' equity.
5) Definition of Business Managers
It is through the contrato social which defines who can sign for the company. Who can buy, sign contracts, borrow, hire or fire employees, ultimately make the decisions of the day-to-day business. The company may have multiple administrators and each with different powers. You can even determine that more complex operations such as buying a vehicle can only be signed together by all managers.
In this case, the civil code is also broad, and allows for numerous combinations. What is important is to understand that the choice can not make up the day-to-day business. Reflect well on the powers that will be given to each versus the agility that the company needs to run its business. This is also an extensive topic that we will address in the future.
7) Where Will the Company Headquarters
The place of operation is important for obtaining the operating authorizations. Many municipalities allow the company to be installed in the residence of one of the partners, when there is no movement of people or merchandise in these addresses. This practice is services and technology companies that do not have employees. This option minimizes the cost of renting business rooms when the actual operational size of the company is not yet known.
Answered these questions, you have just written your social contract. This is the primary document for the formalization of the company. All actions of the company are based on this document and the information signed on it.
2) Registration with the Board of Trade
Following the drafting of the social contract, you must register it in the commercial or legal board of legal entities of your state. It is important that before you do so, you should research if your business name is available, as this may make your entry noticed. We always suggest that you consult the Board of your state before proceeding with the registration, as each one has its own particularities. In any case, you typically need to bring the following documents:
- 3 Authenticated Social Contract Paths
- Copies of the RG and CPF of all the authenticated members
- Completed Board Enrollment Form
- Proof of payment of registration fee
3) Issuance of CNPJ and Definition of Activity
When your company has been approved and enrolled in the Board, you will receive an NIRE (Company Registration Identification Number). With it, you can go directly to the IRS and to enter your application process.
It is also in that moment that you will define the activities of your business. You must have a primary activity and up to 14 secondary. This will define the type of invoice you can issue and operations you may have.
4) State and Municipal Registration
Both the municipal or state registry may end up being made along with the issuance of the CNPJ or registration with the Board of Trade. However, this depends on state to state. In some cases, they must be made separately in the federal (state) revenue or in the city hall of your city (municipal)
5) Operating Permit
The charter is the document that will prove that your company can literally open its doors to the market. It should be issued to your city hall. At that point, it is important before renting any property, check if your location is according to the activity of your business!
6) Operating Licenses
Finally, depending on the type of activity of your business, including your city and state, there are some licenses that must be taken for the business to operate. They are complements to the operating license. Although there is a wide variety, in general there are 3 types of licenses:
The good planning of this step eliminates costs and gives agility to the company, in addition to the tax and business planning appropriate for your business.
If symptoms persist, look for a counter.
If you have any questions about accounting or how to start a business, leave a comment on this post and we will respond back to you!
If you need tools to help you resolve your "how to start a business" question, be sure to check out our Package with Worksheets for Business Opening!