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Company statutes in Portugal
There are different company statuses in Portugal. Some can be created in a simple way by a single representative and others in a more complex way by different representatives.
Find here the different legal statuses of companies in Portugal and information on the most important ones.
Individually constituted companies
- Individual company (Empresário em Nome Individual): company in which a person allocates his own property to the exploitation of his economic activity. the liability of the shareholder is unlimited.
- Limited liability individual company (Estabelecimento Individual de Responsabilidade Limitada): consists of a single person with limited liability for part of its assets.
- Individual quota company (Sociedade Unipessoal por Quotas): a company with a single shareholder with liability limited to the value of the subscribed quota. It is mandatory that the company has in its name the expression “Sociedade Unipessoal” or Unipessoal before the word “limited” or “Lda”.
Companies constituted by more than one person
- General partnership (Sociedades em Nome Coletivo): a company made up of more than one partner with subsidiary liability towards the general partnership and joint and several liability with the other partners.
- Quota company (Sociedades por Quotas): a company formed by a minimum of 2 shareholders with responsibilities limited to the shares subscribed. “Limited” or “Lda” must be added to the company’s name.
- Public limited company (Sociedade Anónima): a company incorporated with a minimum of 5 shareholders, with a minimum share capital of 50,000 euros and a minimum nominal value of 1 euro. The liability of the shareholders is limited to the value of the subscribed shares. The name of the company must include the expression “Sociedade Anónima” or “SA”.
- Limited partnership (Sociedade em Comandita): the limited partners have limited liability on their registrations and the general partners are liable for the debts of the partnership under the same conditions as the general partnership. The words’em comandita’ or’Comandita’,’em comandita por acções’ or’comandita por ações’ must be added in the name of the company. These companies in Portugal can be Simple or by shares.
Individual companies in Portugal: advantages
Sole ownership may be the best option when it comes to risking your own business. Know the advantages of this legal form.
- Business without minimum share capital: There is no mandatory minimum share capital to start a business as a sole proprietor. This is not necessary since the entrepreneur is always liable for the company’s debts.
- Full control of the company: If someone wants full control over all aspects of the company, it is preferable to opt for the legal form of the sole proprietorship. You are the owner and master of all aspects of the business.
- Low business tax cost: An individual entrepreneur’s income is taxable under the IRS, which means that he or she must file only one return. Taxation is carried out within the framework of category B (Business and professional income) and it is sufficient to choose between the simplified system and organised accounting, depending on the volume of turnover. Regardless of the regime under which he is registered, the sole proprietor has one less expense in the first three years of operation: he is exempt from the payment of the tax instalment.
- VAT exemption: Another advantage that a sole trader can benefit from is the VAT exemption. As long as it is part of the simplified tax regime and does not exceed €10,000.00 of annual turnover.
- Use of company assets: In the same way that the individual entrepreneur is personally liable for the company’s losses, he can also use all the assets allocated to the professional activity in the case of his own debts or even those of his spouse.
- Simplicity: Being an individual entrepreneur in Portugal is one of the easiest ways to start a business. The creation and closure of a company is a simple process and far from the bureaucracy associated with the creation or closure of a commercial company.
Quota Companies in Portugal
Advantages of Portuguese companies by quotas
Analysing the advantages of limited liability companies and their disadvantages will allow you to determine whether or not to go ahead with this legal status as a company in Portugal.
- Company with no minimum capital: Since 2011, there is no longer a minimum limit for share capital and shareholders can set a value for share capital at their discretion.
Low personal risk: One of the main advantages of a limited liability company is that the personal risk is low, since there is a distinction between the company’s assets and personal assets.
- Limited Liability Company: In a limited liability company, liability is limited to the value of the subscribed quota. The shareholders have limited (external) liability in relation to the value of the subscribed share but they may be jointly and severally liable for all contributions agreed in the Articles of Association, in the event that the capital is not fully paid up.
- Increase in investments: The limited liability company also has the advantage of pooling more investments, with more people entering the company. Credit can also be more affordable.
- More knowledge: Other brains also come together in the company’s training, each bringing their own experience. It is not only the injection of money that is relevant for the company.
- Business sharing: The entrepreneur who does not feel able to develop a business by himself wins allies in his project. It is a joint venture, of shared management, which increases the chances of its success.
- Proportional or scheduled gains: In a quota company, shareholders can earn a percentage of profit equivalent to their share in the company but there may also be a non-proportional distribution of profits, if this is stipulated in the articles.
Disadvantages of Portuguese companies by quotas
- Admission with cash: In limited liability companies in Portugal, it is mandatory to have the entry of shareholders with cash or assets estimated in cash.
Shared control of the company: Control of the company is shared since there are several partners. The entrepreneur does not have full control of the business. This can lead to conflicts between partners.
- Lack of minimum capital: The absence of mandatory minimum capital in limited liability companies may lead to the absence of viable economic support, which may lead third parties to seek guarantees and a lack of credibility.
- Complex constitution and dissolution: The formation and dissolution of a limited liability company in Portugal can be complex (lack of agreement between shareholders, formalities required for each shareholder, etc.).
- Response to creditors: The partner may be called upon to answer to creditors for the entire capital, since liability with the company may be joint and several or subsidiary.
- IRS Taxation: A partner cannot record business losses on the IRS tax return.
- Organized accounting: The limited liability company in Portugal requires the audit of the accounting system.
General partnerships in Portugal
The collective corporate name is one of the possible legal regimes for a company in Portugal. By learning more about its characteristics, advantages and disadvantages, you will be able to know whether or not this type of business is best suited to the creation and execution of your business.
Main characteristics of the general partnership
- The Portuguese general partnership company must have a minimum of two partners.
- The partners are liable in an unlimited and subsidiary manner to the company and jointly and severally to their creditors.
- The liability of shareholders includes the value of their contributions and assets, including personal assets.
- Shareholders who fulfil the company’s obligations may demand payment of the portion due to them from other shareholders.
- the company name of the company, where it does not identify all the shareholders, must contain the name or business name of one of them, with the addition (abbreviated or full) of “e Companhia”, “Cia” or any other reference indicating the existence of several shareholders (and brothers, for example).
- All the specific features of a company with a corporate name are set out in Articles 175 to 196 of the Commercial Companies Code in Portugal.
Advantages of general partnership in Portugal
- No minimum amount of share capital required
- Solidarity between entrepreneurs and creditors
- Sharing knowledge and responsibilities among shareholders
- Ease of obtaining a bank loan
- Admission of industrial partners
- Entry of partners by industry, money or other assets
- Industrial partners not responsible for social losses
Disadvantages of general partnership in Portugal
- Although industry contributions are allowed, their amount is not included in the calculation of share capital.
- Dilution of control of the company
- Possibility of conflicts between shareholders
- Subsidiary liability to other shareholders
- Risk of allocation of shareholders’ personal assets to the company’s debts
- Obligation to work under an organized accounting regime
- Complexity of the incorporation and dissolution of the company.
Limited company in Portugal
A limited company (S.A.) is a legal form whose share capital is divided into freely tradable shares. As a corporation, the limited company ensures the generation of profits that are distributed to shareholders.
Partners: To set up a public limited company, five partners called shareholders are required. However, it is possible to set up a limited company with only one shareholder, provided that the shareholder is a company. Shareholders’ liability is limited to the value of the shares they subscribe for and they are not liable for the company’s obligations, other than the capital held in shares.
Share capital: The share capital of the S.A. may not be less than €50,000 and is divided into shares of the same nominal value (never less than 1%). The subscription of shares may be private or public: private if the founders hold all the initial share capital, public if the promoters are not in a position to subscribe all the initial share capital.
Actions can be:
- Nominative when the issuer can know the identity of the holders. They are transmitted by declaration, followed by registration with the issuer.
- In bearer form when the issuer has no way of knowing the identity of the holders and the transfer is made by simply transferring the security to the acquirer.
The statutes must contain:
- Categories of shares created, their number and rights
- The types of shares (registered or bearer) and the rules for their possible conversion
- The period for paying up the subscribed capital
- The possible authorization to issue bonds
- The structure of the management and supervision of the company
The public limited company in Portugal can be created online through the Portal da Empresa or through the Company’s local branches.
The regulation of public limited liability companies is provided for in articles 271 to 464 of the Commercial Companies Code, which was updated by Decree-Law No. 343/98 of 6 November,
A limited partnership is one of the many possible legal forms for the creation of a company in Portugal.
A limited partnership is a mixed liability company that includes unlimited liability partners and limited liability partners who manage and direct the company.
The former are designated as general partners and contribute goods or services. They shall assume liability for the company’s debts, unlimited and jointly and severally, under the same conditions as the partners of general partnerships.
The latter are called commanders and contribute with the capital. The latter are only responsible for their entry into the capital.
In this legal form of company in Portugal, the minimum mandatory amount of share capital is €50,000.00.
The minimum number of partners and liability varies depending on the type of limited partnership and the type of partners (general partner or limited partner).
Types of limited partnerships
There are two types of limited partnerships in Portugal: the ordinary limited partnership and the limited partnership with shares.
Limited partnership simple
- This is the traditional type of limited partnership, where there is no representation of capital by shares. In this company, the minimum number of partners is two.
- Generally speaking, the provisions relating to partnerships apply to this type of limited partnership.
Limited partnership with shares
- In this type of limited partnership, the participation of the limited partners may be represented by shares. The income of these partners must not come from industry.
- The minimum number of partners in the limited partnership is five limited partners and one general partner.
- The provisions relating to public limited companies generally apply to this type of limited partnership.