Company Structure

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

Audit

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.

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