Do You Know In Brazil A Branch Requires Presidential Approval
Almost worldwide, there are three main choices for structure: a Limited Liability Entity, a local branch of the parent company or a Representation Office (RO). Here’s a quick glance into the main characteristics, advantages and disadvantages of all three.
Please note these are general guidelines – there will always be exceptions e.g. Brazil does allow a branch but it requires Presidential Approval so is very inadvisable. Certain Latin American companies like Chile prohibit setting up a Representative Office for insurance or reinsurance businesses. The chart below provides you with the main characteristics and advantages and disadvantages of the three main choices at a glance. There are numerous unique requirements worldwide; we will of course guide you through them.
| Requirement | Limited liability company | Branch | Representation Office |
| Capital Requirement | Each country has a minimum required capital | Generally no capital requirements but there are exceptions. | Generally no capital requirements but there are exceptions. |
| Entity Name | Need not be same as parent | Must be same as parent | Must be same as parent |
| Allowed Activities | Any legal activity | Only parent company’s business activity | Only market research, coordination etc. No activity with view to profit. |
| Separate Legal Entity? | Yes | No | No |
| Effect on Liability of Parent | Liability is restricted to local company – generally no liability for parent | Parent has full liability | Parent has full liability. In certain countries an RO cannot sue but is allowed to be sued by others |
| Ownership | Can be 100% foreign owned, 100% locally owned or combination of two | Not a separate legal entity, so is part of parent | Not a separate legal entity, so is part of parent |
| Number of Shareholders/Members | Generally is capped | Not applicable | Not applicable |
| Directors | Certain countries require one or more local directors | Requires local officer or resident agent | Requires local representative |
| Powers of Directors | May be possible to restrict powers of local directors | May be possible to allocate specific responsibilities only to local officer | May be possible to allocate specific responsibilities only to local officer |
| Accounts | Required | Required | Required |
| Audits | May be required | May be required | Usually not required |
| Filing of accounts on a public register | Usually, yes – annually | Usually, yes – annually – some countries also require the filing of parent company’s accounts | Usually, no |
| Corporate Taxation | Normal local taxes apply | Normal local taxes on the branch profits apply | Generally not subject to corporation taxes since profit generating activities cannot be carried out |
| VAT or Equivalent | Must register above certain income threshold | Must register above certain income threshold | Cannot register for VAT so VAT on goods or services supplied cannot be recovered |
| Renewal of Registration | Usually not required | Usually not required | License is often required to be renewed |
| Documentation / Formalities | Can be extensive | Often simpler than for a company | Generally simpler |
| Ability to Employ Staff | No restrictions | No restrictions | Some countries: staff above a certain seniority level cannot be employed in an RO. Transfer of an expat into local jurisdiction for employment in RO may be disallowed. |