Single-Member Ltda.: a new model for entity creation in Brazil

Updated: May 11

By J. Rubens Scharlack

Article 7 of Law 13.874/2019 brought notable modifications to the Brazilian Civil Code, one of them being the alteration of its article 1.052, which added the possibility of only one person being a member of a Business Entity of Limited Liability (Ltda.).

First, this novelty does not represent a new type of business entity. The Single-Member Ltda. (SLU) follows the same rules as a regular Ltda., which means that a foreign individual or entity may create an SLU.

The Ltda. is the most common type of business entity in Brazil. The abandonment of the legal requirement that more than one partner shall exist in order to create or maintain a Ltda. came in good time.

Indeed, before the new law came into existence, Brazilian Law only recognized two ways to form a business with a single owner: the Sole Entrepreneur and the Individual Limited Liability Business (EIRELI). However, despite exercising a business (i.e., an organized economic activity) the Sole Entrepreneur remains an individual and continues to respond unlimitedly with his/her assets to any debt of the business. Moreover, professional service providers (professions regulated by federal law) cannot be Sole Entrepreneurs. On the other hand, an EIRELI, despite being a legal entity and providing asset protection to its owner, needs a minimum capital of 100 minimum wages, previously paid up, so that it can validly exist.

This legal reality forced businesses and entrepreneurs to create Ltdas with a second partner, which would hold a minimal interest (2%, 1%, or even 0,1%), only to fulfill the formality of the law.