Starting a business is a challenging step for many entrepreneurs. The dream of putting an idea into practice and the ease of the process helps many companies to open in Portugal, month after month.

Besides registering the idea or the type of company or partners, you also need to know that there is an initial investment for those who open a company.

What types of legal forms are there for companies with only one partner?

Before you really start the process of starting a business, you must first decide: will I be alone or will I have partners?

If you are going to open the company yourself, you can create these types of companies:

• Empresário em Nome Individual
• Sociedade Unipessoal por Quotas
• Estabelecimento Individual de Responsabilidade Limitada

As it is mentioned in this article “Empresário em Nome Individual (ENI) ou Sociedade Unipessoal, Lda?" each of these options has its advantages and disadvantages. However, you must also understand that choosing one or the other will greatly influence the tax benefits you may have or the taxes to be paid.

For example, if you choose to have an activity as an ENI, you can opt for the simplified regime in the IRS and waive the cost of accounting. But you will be taxed under the IRS, which depending on the total income can be up to 42%.

If you have a sole proprietorship (sociedade unipessoal), you will have the cost of accounting but all expenses of the company related to its activity are deductible to profit, thus reducing the company's IRC tax, which does not happen in the ENI under the simplified regime where you will be taxed over 75% of income.

We cannot say that one option is more advantageous than the other, as it depends on the type of business and activity you intend to develop. But it will definitely influence your choice of starting a business.

If you are going to open a business with other partners, you have several types of options, so consulting an accountant or lawyer who will help you with this first question will not be a bad idea. However, the most common types of company are private limited companies (Sociedade por Quotas - LDA) and public limited companies (Sociedades Anónimas - SA).

How to open a company?

Empresa na Hora is a service available in Lojas do Cidadão,

some Conservatories and in the Registries and Notaries (IRN). It is a service that streamlines bureaucracy to form a commercial or civil society. You can create a limited liability company, sole proprietors or limited liability companies in this service. It costs 360 €.

Before going to Empesa na Hora, you need to issue a certificado de admissibilidade da firma for the company to be set up. This certificate acts as a pre-registration of the company where it guarantees a name of your choice, as long as it is not already used, and the company taxpayer number (NIPC) is assigned. It has a cost of € 75 and lasts for 3 months.

During this period you can make the definitive registration of the company in the Empresa na Hora services or any other means. Without this certificate, you will have to choose a name available from a list of names already in the Registries database.

Note: there are some branches of the Registo Nacional de Pessoas Colectivas with the Empresa na Hora service that allow you to register the name of your choice at the time, thus dispensing with the firm's admissibility certificate.

In addition to Empresa na Hora you can register your company also online and in the Registries and Notaries, but with the help of a lawyer. This online registration costs 220 €.

Finally, there is also the possibility that the company may be constituted by a private notary. Normally, a lawyer will write the social pact and all the necessary formalities and the notary will register and communicate with the IRN for public and definitive registration.

What documents do I need at this first stage?

With the Empresa na Hora service, this step is also simplified.

For individual members, only the Citizen Card is required, which contains the identification number, the taxpayer number and the Social Security beneficiary number.

For corporate members, you need the company or corporate card and the access code of the permanent certificate. It is also necessary the minutes of the General Assembly/Ata da Assembleia Geral that conferred the powers for the constitution of companies and identification cards of their legal representatives.

To register the company, you must also provide the following data:

1. Company name: it will be the legal name of the company, different from the commercial name, which you must register with the firm's admissibility certificate or ask to register with the Empresa na Hora service;
2. Legal nature of the company: private limited company, limited company or sole proprietorship (sociedade por quotas, anónima ou unipessoal por quota);
3. Description of all the activities that the company will carry out to prepare the social pact: it is the articles of association, which contain the company's operating rules;
4. Personal identification data of all members;
5. Address of the registered office.

The social pact must include the identification of the partners, amount of quotas or shares, share capital, headquarters, activity, among other aspects. This document is provided by the Registries in the service you choose to set up the company or by a lawyer if you use his help.

How much does this cost?

To register your company in Empresa na Hora, the cost is 360€, which includes the commercial registration and publications associated with the formation of a company. The amount is paid at the time of the company's registration process.

If it is a company with share capital wholly or partially paid up in assets other than money, there are other values ​​to add:

• Certificado de Admissibilidade, previously issued. It can cost between 75 € and 150 €, if requested urgently for a business day. It is valid for 3 months. Only if you choose to register a name of your choice, as explained above;
• 50€ per property, quota or shareholding;
• 30€ for each movable asset;
• 20€ per moped or motorcycle, tricycle or quadricycle with a cylinder capacity not exceeding 50 cm3, up to a limit of 30,000€.

Also think about the extra cost of the brand, if you want to associate it with a class of products or services you have an additional cost of 100€, if done online.

Accounting

A company must hire the services of a Certified Accountant (either through recruitment or with the service of an outside company), who will be responsible for submitting tax returns and handling all accounting. This can cost over 100€ per month, which can also add billing software certified by the Tax Authority/Autoridade Tributária.

There are free billing software versions, although very limited in terms of functionality, but on average good software with full functionality will cost between 5-10€ per month.

We suggest Invoicexpress as an excellent option and for Royaltax customers you will have 30% discount. That is, it is a cost that you have from the first day of the company's creation and that will be inevitable since the accounting and certified billing software are mandatory.

We suggest Invoicexpress as an excellent option and for Royaltax customers you will have 30% discount. That is, it is a cost that you have from the first day of the company's creation and that will be inevitable since the accounting and certified billing software are mandatory.

Insurance

Any employee, including the managing partner, must have a insurance related to professional incidents. It is an insurance that depends on the amount of the salary.

We advise, however, to hire at least one filling insurance (multi-risk) to protect the equipment and the space where the company will operate. This insurance is not mandatory.

IRC

This is the “normal” corporate tax, which is based on profit. The IRC rate in Portugal is 21% and is paid annually.

In the case of SMEs, the first 15.000€ profit is taxed at 17%, and the remainder at 21%.

There are some tax benefits on this rate that may apply, depending on the type of investment or activity. The most common are SIFIDE, RFAI and Zona Franca da Madeira. In the latter, the IRC is 5%, but only on the taxable income (profit before tax) resulting from exports, and for companies based in Madeira.

In other words, this is a cost that you will always have from the moment your company shows profits.

IVA/VAT

Companies pay VAT, but it can be liquidated through deductible expenses. Even so, it is necessary to deliver VAT to the State monthly or quarterly. The value is the difference between input tax and net VAT.

VAT in Portugal varies in the type of goods or services and can have three rates: 23%, 13% or 6%.

It is important to underline that VAT is not really a cost as companies receive and deliver VAT, but we present it as such so that you know that you have to pay it and plan the company's treasury.

Derrama municipal/Municipal bills

It is the tax on profits, the rate of which is fixed by the municipality of the company, but which cannot exceed 1.5%.

Derrama estadual/State bills

Only applicable to companies with profits above 1.5 million euros.

IMT
If there is a transfer of real estate to the sphere of the company occurs, at the time of its constitution, it may involve the liquidation of IMT.

Licenses
There are some companies that need licenses to be open, such as restaurants and retail stores. So, this is also a cost that you should consider from day one, if it applies to your business.

Officies and other costs

If your company needs headquarters, then you will have to put the cost of maintaining that office. You can include in these costs the condominium, the monthly rent and the IMI.

Do not forget that for this office to “be alive”, there are other monthly costs to take into account, such as electricity, water, gas, telephone and internet service, insurance, security team, among others.

Conclusion

The costs of starting a business can start at 360€, but can quickly reach 1000€ of initial investment. In addition, every month it is necessary to have an accountant close to you to help you have all the tax contributions up to date, as well as to help you have tax benefits for your company.