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If you’re planning to create a business in Portugal, the type of corporate structure you choose is one of the most important decisions you will make. The business structure you choose influences everything – from how you run things day-to-day, to taxes and even how much of your personal assets are at risk. So, it’s important to choose a business structure that gives you the right balance of legal protections and benefits.
Many entrepreneurs and business owners opt for a “Sociedade por Quotas” (Lda). This is Portugal’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.
In this blog, we’ll walk you through how to create a business in Portugal, show you the best and fastest ways to create an LLC in Portugal, and explore some other common types of LLCs.
(Updated by Lexidy Staff July/2023)
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To start this type of business, you need a minimum share capital of €1. Shareholders are not personally liable for any debts incurred by the LLC. Partners could be liable within the Articles of Association. However, the liability is restricted to funds in the corporate capital. This is important to remember 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. Afterwards, 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.
With this in mind, 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.
1. Online:
The most practical way to incorporate a company is online. To do this, 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 card and payment receipts by regular mail to the company’s registered address.
Overall, this is 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. In order to create a business in Portugal, you must pay these fees.
2. In-person:
The fastest way to open an LLC is to do it in person.
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.
It’s possible within about an hour to set up the three main forms of companies: unipersonal LLC, LLC, or a public limited company.
However, it’s also the most expensive, with a Conservatoria fee of €360 for registering the company.
3. Traditional Process:
Overall, this method is the slowest. 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 LLCs 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 allowed.
When it comes to getting your company up and running, we suggest a minimum of €1,000 to support the initial costs of incorporation. But this cost will vary depending on your unique situation.
If you’re a shareholder, you will not be personally liable for the debts of the company. You are only liable for your contributions to the company’s share capital. However, if you’re a partner it’s slightly different. Partners are liable for all the contributions they’ve agreed to make according to the company’s statutes. Additionally, if you’re a partner in a majority-owned company, you may have certain obligations.
In terms of foreign investment, the rules that apply to you, as a foreign investor, are the same as those for domestic investors. This means that international investment is not subject to any type of registration or special notification to the administration.
It takes approximately four weeks to set up the company, after which it will be fully operational.
Remember, all managers of the company must register in the Portuguese Social Security system. But here’s an interesting perk, 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 legal entities and can be created by a foreign parent company as a sole owner or in collaboration with others. The subsidiary has some autonomy and can hire employers and agree on contracts without the approval of the foreign company.
In essence, a subsidiary provides the foreign company with limited liability over the company’s actions and decisions. So, the shareholders of the company won’t have to worry about being personally liable for things like the subsidiary’s debt. However, it’s essential to know that shareholders might still have some responsibility according to the company’s statutes, for things 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 foreign company has the freedom to either partially or entirely own the share capital, depending on your preferences and needs.
Now that you have this knowledge, you are a step closer to 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 parent company is responsible for the branch’s liabilities. 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 the Commercial Registry.
Create a business in Portugal with Lexidy
Our expert team of Corporate Lawyers in Portugal is here to help all clients, large and small, with their plans for company formation. If you are interested in learning more about LLCs and whether they are the correct structure for your business in Portugal, speak with one of our legal experts at Lexidy to understand your situation better.