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.

RequirementLimited liability companyBranchRepresentation Office
Capital RequirementEach country has a minimum required capitalGenerally no capital requirements but there are exceptions.Generally no capital requirements but there are exceptions.
Entity NameNeed not be same as parentMust be same as parentMust be same as parent
Allowed ActivitiesAny legal activityOnly parent company’s business activityOnly market research, coordination etc. No activity with view to profit.
Separate Legal Entity?YesNoNo
Effect on Liability of ParentLiability is restricted to local company – generally no liability for parentParent has full liabilityParent has full liability. In certain countries an RO cannot sue but is allowed to be sued by others
OwnershipCan be 100% foreign owned, 100% locally owned or combination of twoNot a separate legal entity, so is part of parentNot a separate legal entity, so is part of parent
Number of Shareholders/MembersGenerally is cappedNot applicableNot applicable
DirectorsCertain countries require one or more local directorsRequires local officer or resident agentRequires local representative
Powers of DirectorsMay be possible to restrict powers of local directorsMay be possible to allocate specific responsibilities only to local officerMay be possible to allocate specific responsibilities only to local officer
AuditsMay be requiredMay be requiredUsually not required
Filing of accounts on a public registerUsually, yes – annuallyUsually, yes – annually – some countries also require the filing of parent company’s accountsUsually, no
Corporate TaxationNormal local taxes applyNormal local taxes on the branch profits applyGenerally not subject to corporation taxes since profit generating activities cannot be carried out
VAT or EquivalentMust register above certain income thresholdMust register above certain income thresholdCannot register for VAT so VAT on goods or services supplied cannot be recovered
Renewal of RegistrationUsually not requiredUsually not requiredLicense is often required to be renewed
Documentation / FormalitiesCan be extensiveOften simpler than for a companyGenerally simpler
Ability to Employ StaffNo restrictionsNo restrictionsSome 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.