Weigh up the pros and cons of a Portuguese entity set up versus using a global PEO partner when expanding your business internationally.
In order for your business to operate compliantly from Portugal and to establish your long-term business interests there, you will need to set up a legal entity. However, doing so is not a simple or quick process. Instead, the process of setting up a legal entity can be laden with red tape, costly and time-consuming. Consequently, growing businesses often turn to an EOR company when looking to expand into a new territory.
Here we look at who needs to set up an entity, how to set up a legal subsidiary and how a PEO can help you expand into Portugal without a legal entity.
Who needs to set up a Portuguese entity?
All foreign businesses looking to operate with a physical presence in Portugal must set up a legal entity.
The most common types of businesses operating in Portugal are Public Limited Companies (Sociedade Anónima) and the Private Limited Liability Company (Sociedade Por Auotas). These are both regulated by the Portuguese Companies Code (PCC) which highlights guidelines for registration, share capital, investors to name but a few.
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How do I set up a subsidiary in Portugal?
As with any aspect of business expansion, the process of setting up an entity will vary from each business depending on what type of subsidiary is required as well as other determining factors. However, as a general rule, to set up an entity in Portugal you will need a:
- Portuguese residency card
- Tax Number (NIF)
- Social Security Number
- Company bank account
Before you start operating in Portugal, you will also need to submit a detailed business plan to a Portuguese Consulate in your home country.
Following this you will also need to:
- Decide on and then register a unique company name with the Institute of Registries and Notaries (Instituto dos Registos e do Notariado, IRN)
- Obtain a Certificate of Admissibility from the IRN
- Submit passports of founders or partners (depending on nationality)
- Register with Tax and Customs Authority (Autoridade Tributária e Aduaneira) and the Social Security Institute (Instituto de Segurança Social)
- Pay a membership fee to Empresa Na Hora
As you can see, establishing a subsidiary in Portugal is a complex, not to mention lengthy process that starts before you even land in Portugal back in your native country. By using a PEO, you can instead focus on growing your business as opposed to the lengthy, time-consuming process of setting up a legal entity.
Portuguese entity laws
In order to ensure the compliant operation of businesses in Portugal, subsidiaries are regulated by the Portuguese Companies Code (PCC). In addition to the PCC ensuring compliant operations, businesses are also regulated by the Tax and Customs Authority (Autoridade Tributária e Aduaneira) and the Social Security Institute (Instituto de Segurança Social). On top of business compliance, companies must also adhere to the rules set out by the Labour Code (Código do Trabalho) and the Portuguese Constitution (Constituição da República Portuguesa) for employment laws such as employment contracts.
Portuguese business regulations involve a continuous journey, spanning from the initial registration phase to ongoing compliance. Additionally, businesses must navigate through foreign employment laws and other regulations synonymous with operating in an unfamiliar territory.
Compliance with all of the above requires an in-depth knowledge of Portuguese entity laws which can cost you considerable time, money and resource. Meanwhile, non-compliance causes an abundance of risk for your business including fines, penalties and even the possibility of being unable to operate in Portugal.
The benefits of setting up a Portuguese entity
With a resilient economy and fantastic geographic location for trade, Portugal has seen a surge in new business expansions in recent decades.
By setting up an entity in Portugal, your company establishes its long-term intentions for growth within the country, making your business appealing for prospective clients and employees alike.
Why use a PEO partner instead of setting up a legal entity?
With such standout benefits to setting up a subsidiary in Portugal, you may wonder why you should instead partner with a PEO.
Despite its benefits, setting up a legal entity in any country is a costly and high-risk process. From initial registration to ongoing compliance, businesses need to be able to dedicate repeated resource, money and time to setting up an entity. This is on top of the day-to-day logistics of expanding your business into a new territory. Meanwhile, setting up an entity in Portugal can take considerable time, delaying your business operating in Portugal.
By outsourcing your business expansion to a PEO or EOR, you can begin operating in Portugal's resilient economy quickly, without the arduous process of setting up an entity. This can not only save you time, resource and money but can allow your business greater flexibility within its operations and set up. Likewise, opting for a PEO means you can focus on the key aspects of business growth knowing that the legalities of tax, national insurance, onboarding employees, work permits and employment contracts are handled compliantly.
With Leap29's expert PEO services, you can rely upon our years of experience to support your expansion into Portugal. To discuss how our specialists can assist you in your company’s Portuguese expansion, contact our expert team now.
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"For the last few years, we have worked very closely with Simon and the team at Leap29 on a number of different projects in multiple countries across the globe. Leap29 have been a fantastic partner for us and are always willing to think with us to find the best solution. The communication with the team at Leap29 has always been excellent and Simon, in particular, is great to work with! They come highly recommended from us!"
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