Are you planning to set up a business in Portugal? With its significant consumer market, important trade links, tax incentives for international businesses, and interesting destinations, Portugal offers a great environment for company expansion. Learn more about the most common types of corporate entities that individuals and groups can register for commercial purposes, in order to carry out business in Portugal.
Types of business entities in Portugal
Public Limited Liability Company (PLC)
The PLC is one of the most common types of companies registered in Portugal for establishing a business and performing commercial transactions.
It limits the liability of shareholders, particularly their participation in the company’s share capital, and qualifies their investment as negotiable securities.
A PLC must be incorporated by at least five individuals or corporate shareholders. One exception to this rule is if all outstanding capital stock is owned and held by another corporation. Another exception is when the State or a State holding company owns 50% of the capital stock, in which case, only two founding shareholders will be required for incorporation.
The minimum capital stock for the incorporation of a PLC is EUR 50,000. Shares in a PLC may be listed on the Lisbon Stock Exchange.
Private Limited Liability Company (LTD)
The LTD is the most common type of corporation for small businesses in Portugal. Participation in this type of corporation is not represented by shares. As such, it cannot be listed on the Lisbon Stock Exchange.
Meanwhile, the incorporation of an LTD needs only two partners to be established. There is no minimum capital requirement to incorporate an LTD.
Single-Member Private Limited Company (SMLTD)
This is another type of LTD wherein a sole partner, either an individual or another company establishes a corporation for business purposes. An individual can only be part of one SMLTD and cannot hold another corporation of this kind.
The sole partner is free to appoint other people to manage the company. Agreements between the company and the sole partner must be executed in written form or they will be considered null and void.
In case the company files for bankruptcy, so long as the sole partner has complied with all the rules related to handling the SMLTD, they will not be liable to pay for the company’s debts.
A holding company must be incorporated either as a PLC or an LTD. Its corporate name must include the reference SGPS which stands for “Sociedade Gestora de Participações Sociais”.
The purpose of a holding company is to own and manage the capital stock of other companies. The law requires a holding company to hold at least 10% of the voting stock of its subsidiaries and keep its participation for a minimum of 1 year.
Every holding company is required to appoint an independent audit company or a chartered accountant for fiscal reporting.
Steps in Registering a Corporation
- Choose the company name – the shareholders or their legal representatives must first file for the name approval certificate. This includes the name, scope of activity, and the business address of the corporation.
- Contribute to the company’s capital – it must be deposited in a bank account under the name of the company to be incorporated. Contributions in kind must be evaluated by an independent auditor.
- Incorporate the company – officially register and go through the incorporation process.
- Register as a commercial entity – the incorporation of the company is yet to be submitted for commercial registration. The incorporation and the appointment of the directors and auditors will only take effect once the registration is approved.
The registration request, along with other required documents, must be submitted to the Commercial Registry Office. Submission can be done by any shareholder or their legal representatives.
Meanwhile, the Commercial Registry Office will publish the registration online and forward the application to the National Register of Legal Entities to have the company name registered in the Central File of Legal Entities. Once completed, the access code to the online commercial registry certificate will be given by the Commercial Registry Office.
- Register for tax purposes – application for tax purposes must be filed within 15 days of the commercial registration filing.
- Register for social security – which must be done within 10 days of the tax registration filing.
- Open the minutes’ books – When all the previous steps have been completed, the company shall open its minutes’ books to draw up resolutions. It usually takes two to three weeks to set the company up, and around four weeks to open the company bank account. Take note of the validity of each document when filing for incorporation to avoid exceeding the prescribed period indicated in them.
Your Expansion Partner in Portugal
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