Pick your Poison:

When setting up a business in Portugal, choosing the right structure is crucial. The most common options are Sociedade por Quotas (Lda.), Sociedade Anónima (S.A.), or a Sucursal (Branch of a Foreign Company). Each has its advantages and obligations:

Lda. (Limitada – Private Limited Company)

✔ Shareholders: Minimum of 1 (Unipessoal Lda.) or 2 (regular Lda.), with quotas instead of shares

✔ Minimum Capital: No fixed minimum (can be as low as €1 per quota)

✔ Liability: Limited to each shareholder’s quota investment

✔ Governance: No board of directors required; can be managed by one or more directors

✔ Flexibility: More straightforward structure, fewer formalities, and lower administrative costs

✔ Statutory Auditor: Required if two of the following are exceeded for two consecutive years: total assets of €1.5M, revenue of €3M, or 50 employees

✔ Profit Distribution: At least 50% of distributable profits must be distributed unless otherwise agreed

✔ Transfer of Shares: Sale of quotas to third parties requires company approval (typically unanimous) unless bylaws state otherwise

S.A. (Sociedade Anónima – Public Limited Company)

✔ Shareholders: Minimum of 5 (unless single-shareholder S.A.)

✔ Minimum Capital: €50,000, divided into shares

✔ Liability: Limited to the value of shares subscribed

✔ Governance: Requires a board of directors and an audit committee (or sole director if capital is below €200,000)

✔ Capital Markets: Can issue shares and be listed on the stock exchange

✔ Statutory Auditor: Mandatory regardless of size

✔ Profit Distribution: No mandatory minimum, subject to shareholder approval

✔ Transfer of Shares: Freely transferable unless restricted by bylaws

Sucursal (Branch of a Foreign Company)

✔ Legal Entity: Not a separate legal entity—operates as an extension of the foreign parent company

✔ Minimum Capital: No minimum capital required

✔ Liability: Foreign parent company is fully liable for the branch’s debts

✔ Governance: Must appoint a legal representative in Portugal

✔ Statutory Auditor: Required if the branch meets the same financial thresholds as an Lda.

✔ Taxation: Taxed in Portugal only on income from Portuguese activities

✔ Flexibility: Easier to set up than an Lda. or S.A., but lacks independent legal status

Key Takeaways

• Lda.: Ideal for SMEs seeking flexibility and simpler administration, but with default profit distribution and restricted share transfers unless modified.

• S.A.: Best for larger businesses needing capital from multiple investors, with stricter governance but greater fundraising potential and more flexible share transfers.

• Sucursal: Perfect for foreign companies wanting a local presence in Portugal without a separate legal entity, but the parent company assumes full liability.

Choosing the right structure depends on your business goals, funding needs, and liability considerations.

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