If you’re planning to open a company in Portugal, the type of corporate structure you choose is one of the most important decisions you will make. This blog explains how to create a business in Portugal.
Many entrepreneurs and business owners opt for a “Sociedade por Quotas” (Lda). This is Portgual’s equivalent of a Limited Liability Company (LLC).
This type of corporate entity is by both individual investors and companies, and it can even consist of just one person.
Table of Contents
- How does the process work?
- What are the best or fastest ways to create an LLC in Portugal?
- What are the common types of LLC in Portugal?
- Other types of company incorporation
To start this type of business, you need a minimum share capital of €1. Moreover, the shareholders are not personally liable for any debts that the LLC incurs. However, the partners can have liability within the Articles of Association, the liability is restricted to funds in the corporate capital. This is important to recall when you create a business in Portugal.
The Articles of Association is essentially a document that states the internal rules that the Portuguese business will follow when operating.
How does the Process work to create a business in Portugal?
To open a Limited Liability Company in Portugal, the first step is gathering the right paperwork, which is as follows:
- Request a Tax ID number (NIF) for you and your foreign partners or administrators.
- Submit a valid company name with the National Registry of Legal Entities (RNPC).
- Draft the company’s Articles of Association.
- File for the company’s registration with the RNPC.
- Open a company bank account.
- Appoint a Chartered Accountant to submit the start-up declaration for tax and Social Security purposes. An accountant submits this declaration, which states that the company has begun its activities.
- Prepare and file the Beneficial Owner declaration. Companies must inform the Registo Central de Beneficiário Efetivo who the company’s owners, or beneficiaries, are within a month of creating the company.
It takes around four weeks for the company to be fully operational.
What’s the best way to create an LLC in Portugal?
There are three ways to create an LLC in Portugal.
Online:
The most practical way to incorporate a company is online. A lawyer uploads the application to the Commercial Registry Portal.
Once submitted, the Commercial Registry has 10 business days to respond to the application. After the incorporation is confirmed, the officials will send the Commercial Registry certificate, company’s card and payment receipts by regular mail to the company’s registered address.
This is also the most affordable method as there is a discount on the Conservatoria, or registration, fees.
The Conservatoria fees range from €50 for registering a shareholder in a Portuguese company to as much as €220 for registering the company. You must pay these fees if you are creating a business in Portugal.
In-person:
This is the fastest way to open an LLC and takes about an hour.
The applicant receives the company’s incorporation documents.
These include:
- Social Security ID number
- the registered Articles of Association
- Access to the Permanent Certificate (known locally as the Certidão Permanente)
- an online code to access the company’s commercial register for a period of three months.
Despite being the fastest method, it’s also the most expensive with a Conservatoria fee of €360 for registering the company.
That’s the fastest way to open a company. In an hour approximately, it is possible to set up the three main forms of companies: unipersonal LLC, LLC or a public limited company.
Traditional Process:
This method is the slowest and most expensive. It entails the same processes as above except the applicant would schedule appointments with each of the administrations, rather than sending them documentation. It takes at least two weeks to complete.
These three ways are the most common when you create a business in Portugal.
What are the common types of LLC in Portugal?
There are two different forms of Limited Liability Company in Portugal. While some appear to be similar at first glance, they have important differences that matter to the future of your business.
A New Company:
Individuals’ investors or companies use the limited liability company (LLC) known as Sociedade por Quotas (Lda) as their corporate form.
Minimum share capital is €2, or €1 if you are a sole proprietor. Only cash or in-kind capital contributions are permitted.
We suggest a minimum of €1,000 to support the initial costs of the company’s incorporation but depends on the specifics vary according to the case.
The shareholders are not personally liable for the debts of the company. Instead, the shareholders are only liable for their contributions to the share capital.However, the partners are jointly and severally liable for all the contributions provided for in the statutes. There may be obligations for the partner in question of a majority-owned company.
For the control of foreign investment, the rules that apply to foreign investors are the same as those regulating domestic investment. International investment is not subject to any type of registration or special notification to the administration.
The timing for establishing the company is approximately four weeks, after which it is fully operational.
All the company’s managers must register in the Portuguese Social Security system. If they contribute to another State Member of the EU, they might be exempt from paying social security in Portugal, for up to two years.
A Subsidiary:
These corporate structures are considered a legal entity and can be created by a foreign parent company as a sole owner or in agreement with multiple parties. The entity can hire employers and agree contracts without the approval of the foreign company.
Essentially, a subsidiary gives the foreign company limited liability over the company’s actions and decisions. So the parent company’s shareholders are not personally liable for things like the subsidiary’s debt. However, the company’s statutes state that shareholders are liable for matters like liabilities or servicing debts.
The minimum share capital needed to create the subsidiary is just €1 but typically the foreign parent company would distribute much more. The share capital can be partially or entirely owned by the foreign company.
With this knowledge, you are a step closer towards creating a business in Portugal
Other types of company incorporation
A Branch: This type of LLC doesn’t have its own legal personality. This means that it’s the same legal entity as the foreign parent company and the branch’s liabilities are assumed by the parent. A branch doesn’t require any minimum share capital when it’s created.
A legal representative of a branch: This corporate structure requires the company to have a legal representative with general managerial powers and be registered with the Commercial Registry. The parent company is liable for any debt from the branch and must work with a Portuguese Chartered Account. The parent company must also file the annual accounts with Commercial Registry.
Our team of lawyers in Portgual is here to help all clients, large and small, with the plans for company formation. If you are interested in learning more about LLCs and whether they are the correct structure of your business in Portugal, speak with the Corporate Team at Lexidy LegalTech Boutique to understand your situation better.
