DIFFERENCE BETWEEN BRANCH, SUBSIDIARY, AND LEGAL REPRESENTATION IN BRAZIL

When a foreign company wants to operate in Brazil, it can choose different legal structures: a branch, a subsidiary, or a legal representative. Each has distinct implications in terms of law, taxation, and operations.

✅ 1. Branch

A branch is a direct extension of the foreign parent company, operating in Brazil without legal autonomy, under authorization from the federal government.

Key features:

• Requires prior approval from the Brazilian government.

• Legally linked to the parent company.

• Operates under Brazilian tax and accounting rules.

  
  

Pros:

• Full control by the head office.

• Integrated global management.

  
  

Cons:

• Complex and bureaucratic setup.

• Less local autonomy.

  
  

✅ 2. Subsidiary

A subsidiary is a locally incorporated company, majority-owned by the foreign investor. It has its own legal personality and operates as a Brazilian legal entity.

Key features:

• Doesn’t require government approval to operate.

• Independent CNPJ and full legal rights.

• Limited liability to the capital invested.

  
  

Pros:

• Full legal and operational autonomy.

• Positive perception as a Brazilian company.

  
  

Cons:

• Requires a full corporate structure.

• Subject to Brazilian corporate compliance.

  
  

✅ 3. Legal Representation

This structure is used when the foreign company does not intend to carry out commercial activities but needs a local presence for legal or administrative reasons.

Key features:

• No commercial activity.

• Used for signing contracts, legal appearances, etc.

• Requires a power of attorney to a Brazilian resident.

  
  

Pros:

• Low cost.

• Easy to implement.

  
  

Cons:

• Cannot conduct business or issue invoices.

  
  

📌 Final Thoughts

Choosing between a branch, a subsidiary, or legal representation depends on the business strategy in Brazil. With the right legal planning and paralegal support, foreign companies can ensure a safe and efficient market entry.