Learn everything about a limited liability company: what it is, who can be a partner, and the existing types. Understand how this business structure works.

A limited liability company is a type of company that has its own legal personality and the partners’ liability is limited to the value of their shares, meaning, in theory, their personal assets are not affected by the company’s debts. This is a very popular model in Brazil as it provides protection for the partners regarding business activities and offers more simplified management.

In this article, we will discuss what a limited liability company is, who can be a partner, the existing types, and how this business model operates.

What is a Limited Liability Company?

A limited liability company, also known by the acronym Ltda, is a type of company regulated by Law No. 10,406/2002 (Brazilian Civil Code) and Decree No. 3,708/1919. Its main feature is the limitation of the partners’ liability to the value of their shares, meaning, in theory, the personal assets of the partners are not affected by the company’s debts.

Additionally, a company by quotas has its own legal personality, which means that the company is an entity distinct from its partners and can perform commercial and legal activities in its own name.

Who Can Be a Partner?

Any natural person or legal entity can be a partner of a limited liability company, provided there are no legal impediments to their business activity. It is noteworthy that an Ltda can also be formed by a single partner, in this case called a Single-Member Limited Liability Company (EIRELI).

Types of Limited Liability Company

There are two types of limited liability companies: simple and business. The main difference between them lies in the business activity carried out by the company.

The Simple Limited Liability Company is one that performs intellectual activity of a scientific, literary, or artistic nature, as long as it is not a business activity. This type of company is regulated by Law No. 13,467/2017 (Labor Reform) and can opt for the Simples Nacional tax regime if there is no foreign shareholder.

A business limited liability company is one that carries out a business activity, that is, commercial, industrial, or service provision. This type of company is regulated by Law No. 10,406/2002 (Brazilian Civil Code) and must adhere to the Real Profit, Presumed Profit, or Simples Nacional tax regimes.

Read too: Accounting Firm for Multinationals in Brazil: Why Outsource This Service?

How Does a Limited Liability Company Operate?

The limited liability company is constituted by the Articles of Association, which must be registered with the Board of Trade of the state where the company is headquartered. Additionally, it is important to emphasize that there are different types of limited liability companies, each with its own particularities. Among the main ones, we can mention:

• Individual (Sole) Limited Liability Company (EIRELI): This is a type of limited company where only one person is responsible for the capital and for managing the company. This modality was created in 2019 with the Economic Freedom Law, aiming to simplify the opening of companies for individual entrepreneurs.
• Simple Limited Liability Company: This type of limited company is intended for professional services providers, such as lawyers, doctors, dentists, accountants, among others. In this modality, the partners are responsible for both the capital and the provision of company services.
• Single-Professional Limited Partnership: This type of limited partnership is similar to the Simple Limited Liability Company, but is intended for only one professional service provider, who is responsible for the company’s share capital and for providing services.

Conclusion

In summary, the limited liability company is a very common legal form among businesses in Brazil, as it allows partners to protect their assets and streamline business management. However, it is important to evaluate the particularities of each type of limited liability company before choosing the best option for your business. The guidance of an accounting or legal professional is essential in this process.

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