Setting up a business

There are 3 types of businesses you can open in Portugal:

• Single-member Company (Unipessoal Lda)
• Private Limited Company (LLC - Lda)
• Public Limited Company by Shares (PLC S.A.)

Single-member Company (Unipessoal Lda)
The company has a sole partner/shareholder, liability being limited to the amount of his/her share, and it’s mandatory to appoint a chartered accountant to handle the finances and taxes.

Private Limited Company (LLC - Lda)
The LLC company has a minimum of two partners, liability being limited to the amount of each partners’ share. The minimum share capital is €1 per partner. A chartered accountant must be appointed.

Public Limited Company by Shares (PLC - S.A.)
The company has a minimum of five individual shareholders (or, alternatively, one legal person shareholder). The minimum share capital is €50,000, each share being issued for a minimum amount of € 0.01. Shareholder liability is limited to the total amount of his/her shares. In addition to a chartered accountant, a statutory auditor must be appointed.

If you don't want to open a business in Portugal, there are alternative forms of doing business.

Sole Proprietorship (Empresário em Nome Individual or ENI): Operating as a sole proprietor allows you to run a business without creating a separate legal entity. You are personally responsible for all aspects of the business, including liabilities and taxes.

Self-Employment/Freelancing: You can work as a self-employed individual or freelancer without the need for formal business registration. This option is suitable for many service providers and independent professionals.

Partnerships: Consider forming a partnership (Sociedade em Nome Coletivo or SNC) if you want to collaborate with others in your business endeavors. Partnerships can be between individuals or entities and come with shared responsibilities and liabilities.

Limited Liability Individual Entrepreneur (Empresário em Nome Individual de Responsabilidade Limitada or EIRL): EIRL is a variation of the sole proprietorship where you can limit your personal liability by segregating business assets from personal assets.

Cooperative (Cooperativa): Cooperatives are formed by a group of individuals or businesses with common goals. They operate democratically and distribute profits among their members.

Branch Office: If you represent a foreign company, you can open a branch office in Portugal. While not a separate legal entity, it allows you to establish a presence and conduct business on behalf of the parent company.

Temporary Establishment: For short-term business activities in Portugal, you can establish a temporary presence without full incorporation.

If you want to open a business in Portugal, you have several options, each with its own advantages and disadvantages. The main differences between a branch, subsidiary, and new entity are as follows:

Branch:
• A branch is an extension of the parent company, not a separate legal entity.
• It operates under the parent company's name and legal structure.
• The parent company is fully liable for the branch's debts and obligations.
• Branches are subject to the same tax regime as the parent company.
• Branches are generally suitable for companies that want to expand their existing operations into Portugal without creating a separate legal entity.

Subsidiary:
• A subsidiary is a separate legal entity from the parent company, and it is incorporated under Portuguese law.
• It has its own distinct name, management, and legal structure.
• The parent company's liability is limited to its investment in the subsidiary's shares.
• Subsidiaries are subject to Portuguese tax laws and regulations.
• Subsidiaries are often chosen by foreign companies looking to establish a permanent presence in Portugal while maintaining a degree of legal separation.

New Entity:
• Creating a new entity in Portugal typically involves forming a limited liability company (Sociedade por Quotas or Sociedade Anónima).
• This entity is entirely separate from the parent company and is subject to Portuguese law.
• The parent company's liability is limited to its investment in the new entity's shares.
• New entities are subject to Portuguese taxation and regulatory requirements.
• Creating a new entity allows for full control over the business and is often chosen by startups and companies seeking complete autonomy in Portugal.

In summary, the choice between a branch, subsidiary, or new entity when setting up a company in Portugal depends on your business goals, the level of control and liability that you want, and the extent to which you want to integrate into the Portuguese market. Each option has its own legal and tax implications.