How to start an online business in Brazil?
Brazil is one of the biggest markets for online businesses in the world. A United Nations survey showed that in 2017, Brazil had 120 million consumers connected to the Internet. Other numbers show that already 150 million Brazilians are using the Internet. And the numbers are growing. Brazil is among the top 5 of the biggest Internet markets in the world. Given the fact that the country has about 210 million inhabitants there is still an impressive expectation of growth for the next 20 years. Internet companies from all over the world are focussing on South America’s biggest economy. They are investing millions of US dollars every year into e-commerce, fintechs, startups and more. The following paragraphs will provide a number of details Internet and online companies need to take into consideration when starting an online business in Brazil.
How to start an online business in Brazil?
Many entrepreneurs, SMEs, and large established companies are looking at how to start their online business in Brazil. In fact, there is a number of aspects that investors need to consider. They depend on the individual services and structures of the respective companies. Some companies are looking for temporary marketing campaigns in the country to reach out to their users and clients. Others are planning to establish a complete office structure for a long-term presence. In many cases, the company needs to register with the local authorities to set up a legal business in Brazil. This is the case, especially for mid or long-term solutions. Usually, this would be a limited company (LTDA). Depending on the individual situation a local partner could fulfill legal needs.
Brazilian Business Culture
When starting an online business in Brazil one must also consider local business culture as it is common in all forms of international business. In case of Brazil, one important detail is the necessity to communicate in Portuguese. And this could be a challenge for some already. Although it is common that especially in the Internet industry a large part of the individuals and employees understand and read English or Spanish it is still challenging to find a lot of people who are able to communicate in foreign languages. Also, communication with clients and users has to be in Portuguese, all other efforts will lead to little or no success.
However, language is not the only detail one must take into consideration. Also, the Brazilian understanding of time and patience are of utter importance. In some countries, entrepreneurs and employees tend to get in a hurry to resolve everything as fast as possible. This behaviour could be considered offensive in Brazil. Friendliness and patience do open many doors.
Legal aspects for Internet companies in Brazil
Historically, Brazil has been a country of many regulations. What some consider an obstacle for Internet business investors and other forms of entrepreneurs has its logic coming from the colonial past. In fact, it is considered to be a form of respect to show understanding for this historical situation. Brazilians themselves are not very happy about bureaucratic procedures but since they have to deal with them on a daily basis they expect others to do it as well without complaining.
Over the past 10 years, many efforts were made in the country to adapt the complexity of the legal system to the challenges of the digital age. After an intensive public debate that lasted over several years, the Brazilian government passed an Internet framework law. Known as the Marco Civil of the Internet this law addressed a number of aspects including rights and obligations of users and providers. Nevertheless, regulations and legal requirements are still far from standards in other large digital markets like Europe or North America. A growing number of initiatives is training the next generation of lawyers to specialize in questions of the digital economy. Already today, there are a number of advocates focussing almost exclusively on questions of digital law. The numbers of new lawyers in this field show that a large quantity of specialized Internet advocates is ready to attend online businesses in Brazil.
Paying taxes in Brazil
Part of the regulative environment is the Brazilian tax system. Brazil has a complex tax system which is constantly going through changes and reforms. Just as the legal system is adapting to the new challenges of the digital economy so is the tax system. It is very common in Brazil that even small companies or individuals have their own accountant. There is a large market for small accounting firms and depending on the type of online company (or other companies) there might be a legal requirement to hire an accountant.
Building a team in Brazil
When starting an online business in Brazil, entrepreneurs need to choose how to structure the new company. And that includes the question of setting up an office. And hiring a local team or using an already established structure from an office in a different country. Depending on the size of the company it is very common to start with a small structure in Brazil. By the time the business is running and has reached certain objectives, the company can grow its local environment. Another possibility is to use local business partners, agencies and lawyers to fulfill certain tasks. However, there are also large internationally established Internet companies that set up more complex structures already in the very beginning.
Once the company has decided to work with a local team of employees it can set up a legal structure and hire professionals from the Brazilian market. Or it can set up a team of local freelancers and instruct them from outside the country. Both models have their advantages and disadvantages. The freelancer option requires less of a financial investment. However, the company needs to be sure they select the best people possible. That means those who would work from home for example or in a coworking space. And who could be instructed online.
The more complex but also more stable structure is choosing a local individual or sending a business representative to Brazil. This person could then lead the business from a local office. In that case, the company needs to put a focus on the Brazilian labour law CLT. This law is regulating relations between companies and their employees. In some cases, it might be recommended to consult a lawyer regarding Brazilian labour regulations.
Just as every foreign investment or market expansion starting an online business in Brazil requires considering a number of aspects. A few details were presented in the paragraphs above. But of course, there is a lot more information Internet and online entrepreneurs and companies need to be aware of. Important lessons from this article should be to understand and respect local business and social culture in general. And to understand that a number of legal aspects and regulations will require advocates and accounting support on the ground. However, these necessities are nothing unexpected for international entrepreneurs. And it is simply a question of professional attitude that in the end will lead to success.