There are at least ten different types of business entities in Brazil, but odds are you’ve only heard of the two most common: the limitada and the S/A.

Limitada or Ltda. refers to the Sociedade Limitada, an entity type that’s similar to a limited liability company in the US. They are easy to form and require minimum maintenance.

S/A refers to Sociedade por Ações, an entity type that’s similar to a US corporation. They are often used with larger companies, including those going public and those that need different classes of shares. They also have more corporate formalities, such as board, committee, and public financial publication requirements.

Below are some of the other key differences between the two entity types.

Articles

The governing document of a limitada is the Contrato Social whereas the governing document of an S/A is the Estatuto Social. These are publicly filed documents that include basic information about the company, such as share ownership and administration.

Capital

In a limitada, each of the members owns quotas. In an S/A, ownership is divided into shares. Unlike in the US, an owner who contributes additional capital to a Brazilian company will generally increase its relative percentage ownership in the company.

Liability

For both limitadas and S/As, liability is limited to the extent of the capital that each member or shareholder contributes.

Management

One or more individuals (including members and third-parties) can assume the role of the manager in a limitada. In an S/A, management duties are performed by directors who are appointed by a committee.

Profits

Distribution of profits is optional in a limitada. However, distributions are mandatory for an S/A.

Now that you understand some of the key differences between the two entity types, it’s time to choose one for your next business venture.