Legal Options for Opening a Small Business

Legal Options for Opening a Small Business in Portugal ...

And their application in obtaining residence visas

By Rosário Vital

Portugal, a historically bureaucratic country, has made a huge effort in the last decade to speed up the incorporation of companies and the opening of businesses. With a business fabric mostly made up of microenterprises (companies that employ fewer than 10 people and whose annual turnover or balance sheet total does not exceed 2 million euros) and comprising most family-owned businesses, it was urgent to expedite the turnaround time and soften the requirements … even though they follow very strict legal rules in force to protect creditors and the socio-economic balance. There are two ways for anyone to incorporate his or her business: as a self-employed professional or through the constitution of a company. Which option depends on one’s personal situation and aim; type of business; license(s) necessary; business risk; and billing value. Although incorporating a business as a self-employed professional allows you to save on certain operating costs, the self-employed professional—unless he or she develops an activity regulated by law for which there is specific insurance—tends to respond unlimitedly with personal assets. In turn, although the development of a business under a corporate identity entails higher operating costs, it also allows for greater tax deductions with these same costs … but limits the company’s liability to its shareowners. Only in the event of a judicial conviction for intentional insolvency, or if there is a mixing of the partners’ personal and corporate assets, can the personal assets of the partners be sought by creditors. As a self-employed professional, you are required to begin business activity with the Tax Services (Finanças) and register it at the Social Security Services. For each service provided or sold, you must bill a customer by issuing an

photo: movingtoportugal.com

electronic invoice (fatura) and receipt (recibo) through the Tax Services site. The most common corporate forms in Portugal are limited liability companies and single-member limited liability companies; publicly traded companies are rarer. A single-member limited liability company is made up of a single partner, a “natural or legal” person, who holds the entire share capital. The name of these companies must be formed by the expression sociedade unipessoal or by the word unipessoal before the word limitada or the abbreviation Lda. In a limited liability company, the capital is divided into shares and the partners are jointly and severally liable for all contributions agreed to in the articles of association. The name of these companies must be formed by the expression limitada or by the abbreviation Lda. In both cases, liability is limited to the share capital, which, since 2011, can be as small as one euro (€1), even though that’s not really advisable. Very small share capital does not give enough trust to clients; it also provides and weighs on the decision of banks to make loans. In “share” companies, the capital is divided into easily transferable representative securities (shares) and in which each partner limits his responsibility and participation to the value of the shares he has subscribed. However, specific legal requisites rule this type of company: among others, it is mandatory to have a minimum of five partners designated by shareholders who can be natural or legal persons … and the share capital cannot be less than €50,000.00, divided into shares of equal par value; As in limited liability companies, only the company’s assets are liable to creditors for the company’s debt. The name of the company must contain the expression sociedade anónima or SA. All these options can be considered as different routes for residence visas or authorizations to legally live and work in Portugal, as well as a a ladder to expand (international) businesses in Portugal or throughout Europe—truly thrilling experiences for foreigners. As said, your personal situation should be taken into account when considering the best option for you. Complying with the law and all regulations is crucial for a successful visa and residence in Portugal. It is best to stay safe by avoiding illegal powers of attorney or making decisions that later can bring you grief and unnecessary expenses. Engage a trusted attorney when creating or registering your company!

Rosário Vital is a dual citizen of the USA and Portugal, as well as an accredited lawyer in Portugal with over 20 years of experience, including 15 of each in multinational law. She also serves as legal coordinator for www.relocatorportugal.com.