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Expats Owning and Operating a Business in Portugal

Author: Jim Newham
Submitted: April 2015

Portugal has successfully modernised and diversified its economy over the last three decades or so. As proof of this, it was ranked a very respectable 25th in the world in the 2015 World Bank Group’s Ease of Doing Business survey. In the ‘starting a business’ category, Portugal was 10th, which means that it is a very smooth process. Indeed, you can set up a business in Portugal in three days, or even on the same day in some cases! Nevertheless, for best results, make sure to do thorough research and start planning well in advance.

Immigration Matters

If you want to start your own business in Portugal, the first step is to ensure you have the legal right to live and work in the country. You will generally need to obtain a residence permit before you can operate a business in Portugal. For more information on residence permits and immigrating into Portugal in general, see our Immigration section.

Business Plan

Before starting your business, it is essential to create a business plan that will give you the best possible launch into the Portuguese market. First, make sure you have a clear view of what it is you want to do, and how feasible that business idea is. You will need to research the businesses that already operate in your field in the local area, and determine your potential customers and partners. Additionally, you should think through your best financing options.

Based on your research, you can then develop a full business plan of around 3-5 pages. This should set out your business objectives, target market and commercial strategy, and include potential obstacles and financial projections. For a full breakdown of the stages of creating a business plan, see the SME Innovation & Support (IAPMEI) website. Note that the text is in Portuguese only.

Legal Structure

Another important step is to decide which legal structure your business will adopt. A legal structure determines the benefits you enjoy and the nature of your legal, financial and tax obligations. The two most common legal structures in Portugal are the quota company and corporation. These and the other most common entity types are detailed below.

Single-Person Business Types

The advantage of setting up your business is that it is cheap and easy to set up. Furthermore, you have full ownership and control over the business, and that all after-tax profits are yours. There are three types of one-person business in Portugal. The basic one is the sole proprietor (empresário em nome individual); the other two are the individual limited liability establishment (EIRL) and the single person limited liability company. Whereas in the sole proprietorship, liability is unlimited, in the other two it is not. The EIRL is composed of shares and the other of quotas. As both have advantages over the standard sole proprietorship, this is little used. Note that there are not many sole entrepreneurs in Portugal.

Partnership

There are two types of partnership in Portugal: the regular partnership and the limited partnership. Both require at least two members, and the main difference between them is that liability is limited in the limited partnership.

Quota Company

The quota company or private limited liability company (sociedade por quotas) is a simple form of company that is preferable to smaller businesses as it is flexible and has less compliance requirements than the corporation. It is distinctive because quotas are issued rather than shares. Each quota is worth a minimum of €100. The minimum starting capital is €5,000 and there must be at least two founders. A managing director is required, but a board of directors is not; all directors must be individuals. Any major decisions must be aired at a general meeting.

Corporation (SA)

The Portuguese version of the corporation or joint stock company is the sociedade anónima (SA). It requires a minimum of five founders and €50,000 start-up share capital. Unlike quotas, these are regular shares with no minimum value. There is an option for a single- or dual-board structure. There are no residence or nationality restrictions on the setup of corporations.

Other Structures

There is also the Europe-wide societas europaea, which is specifically designed to be competitive across EU borders. The minimum starting capital for this company type is €120,000. Those wanting to expand into may start up representative office or branches. In tax terms, there is not always a difference between the two. Note that branches do not require start-up capital.

Setup and Registration

Once the above stages are complete, you should be ready to set up your company. At this point you should consider hiring a lawyer to help guide you through the intricacies of Portuguese company law.

You will need to register your business at the nearest Business Formality Centre and the Registrar of Commerce. If your starting capital originates from overseas, you will also have to inform the Portuguese Trade, Investment and Tourism Office. Additionally, to set up a business in the Azores or Madeira, you need to register with the Regional Finance Secretariat.In certain cases, it may be possible to register your company in one day, using the Empresa na Hora (On-the-spot Firm) scheme.

Next, all businesses have to register for tax and obtain a VAT number. To read more about tax for expats in Portugal, see Taxation. For more information about setting up a business in Portugal, see the World Services Group website.

Employing Staff

If you want to employ someone (including yourself) to work in your business you will have to register as an employer at the local tax office. As employer, you will have to ensure that your business complies with Portuguese labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunity policies, work permits, insurance payments and recruitment options. Note that if you employ freelance workers, you will not have so many legal obligations as they will be liable to pay tax and insurance themselves.

 

 

 




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If you are considering moving to Portugal or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated Portugal section including; details of immigration and visas, Portuguese forums, Portuguese event listings and service providers in Portugal.

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