How to transform an Individual Entrepreneur into a Limited Company?
When it comes to entrepreneurship, many people follow this path alone, creating an individual company. However, the possibility of including one or more partners in the venture may be advantageous. In this situation, it will be necessary to transform an Individual Entrepreneur into a Limited Company.
The more knowledge you have about this topic before making the change, the greater the chances that everything will go exactly as expected. Furthermore, it is essential that the process is done correctly to avoid irregularities and problems with business registration. So, see in this article everything you should know about the topic! Check out:
What are the differences between the two formats?
In the Individual Entrepreneur regime , as the name suggests, there is a legal entity made up of just one natural person. The social contract states, for example, that all responsibilities and profits belong to the entrepreneur.
As there is no separation between personal and business assets, in the case of debts incurred by the legal entity, the entrepreneur may have to use his own assets — and vice versa.
The Limited Company is a regime that allows the inclusion of partners within the company. In addition to the number of people, one of the differences is in terms of responsibility.
If in the case of the Individual Entrepreneur it is unlimited, the same does not happen for this company. Therefore, partners need to respond to debts in a limited manner and stipulated by the articles of incorporation.
When is it worth making the change?
The transformation from an Individual Entrepreneur to a Limited Company is not mandatory, as happens when the MEI exceeds the annual revenue limit, for example. If the entrepreneur wishes, the establishment can remain individual indefinitely.
However, there are cases where the change is extremely positive . When the possibility arises of having a partner who will really add to the enterprise, for example, the transformation takes on beneficial contours.
Another scenario is when the company faces growth or even financial problems. Since two heads are better than one, the arrival of a partner can help turn the tide.
Changing the regime, therefore, is especially recommended when the entry of at least one more person proves to be advantageous for the business.
How to make this transformation? What are the steps to follow?
Okay, you already know when to make the change, but how do you deal with the bureaucracy? This is a crucial moment because it will ensure that the project remains fully regularized.
The procedure is carried out at the Commercial Board of the State where the company operates and can be carried out online, in most cases. To do so, simply access the Board’s services portal and log in with your email or CPF and password.
It’s different on each platform, but normally, you only need to choose the part of the constitution linked to the Individual Entrepreneur. From there, select the transformation event to change the legal nature.
Then, simply fill in the information requested in each document correctly, such as the member’s identification. Applications must be printed, as well as payment slips.
Next, it is necessary to draw up a social contract that covers all partners. It needs to be signed by a lawyer and mark the start date of joint activities.
You also need to check the availability of a new business name. The process can then be sent digitally to the Commercial Registry.
The company’s CNPJ is maintained and a new registration will be made, completing the transformation from Individual Entrepreneur to Limited Company.
How to add another partner to your company?
When it comes to entrepreneurship, many people follow this path alone, creating an individual company. However, the possibility of including one or more partners in the venture may be advantageous. In this situation, it will be necessary to transform an Individual Entrepreneur into a Limited Company.
The more knowledge you have about this topic before making the change, the greater the chances that everything will go exactly as expected. Furthermore, it is essential that the process is done correctly to avoid irregularities and problems with business registration. So, see in this article everything you should know about the topic! Check out:
What are the differences between the two formats?
In the Individual Entrepreneur regime , as the name suggests, there is a legal entity made up of just one natural person. The social contract states, for example, that all responsibilities and profits belong to the entrepreneur.
As there is no separation between personal and business assets, in the case of debts incurred by the legal entity, the entrepreneur may have to use his own assets — and vice versa.
The Limited Company is a regime that allows the inclusion of partners within the company. In addition to the number of people, one of the differences is in terms of responsibility.
If in the case of the Individual Entrepreneur it is unlimited, the same does not happen for this company. Therefore, partners need to respond to debts in a limited manner and stipulated by the articles of incorporation.
When is it worth making the change?
The transformation from an Individual Entrepreneur to a Limited Company is not mandatory, as happens when the MEI exceeds the annual revenue limit, for example. If the entrepreneur wishes, the establishment can remain individual indefinitely.
However, there are cases where the change is extremely positive . When the possibility arises of having a partner who will really add to the enterprise, for example, the transformation takes on beneficial contours.
Another scenario is when the company faces growth or even financial problems. Since two heads are better than one, the arrival of a partner can help turn the tide.
Changing the regime, therefore, is especially recommended when the entry of at least one more person proves to be advantageous for the business.
How to make this transformation? What are the steps to follow?
Okay, you already know when to make the change, but how do you deal with the bureaucracy? This is a crucial moment because it will ensure that the project remains fully regularized.
The procedure is carried out at the Commercial Board of the State where the company operates and can be carried out online, in most cases. To do so, simply access the Board’s services portal and log in with your email or CPF and password.
It’s different on each platform, but normally, you only need to choose the part of the constitution linked to the Individual Entrepreneur. From there, select the transformation event to change the legal nature.
Then, simply fill in the information requested in each document correctly, such as the member’s identification. Applications must be printed, as well as payment slips.
Next, it is necessary to draw up a social contract that covers all partners. It needs to be signed by a lawyer and mark the start date of joint activities.
You also need to check the availability of a new business name. The process can then be sent digitally to the Commercial Registry.
How to add another partner to your company?
To add a partner to your business, it is essential to plan the decision very well, as not every good friend is an excellent business partner. Before making the change, see if the person has the capacity to add to the venture.
If so, you have already seen that the social contract will need to be drawn up. At this point, define the division of profits, each person’s responsibilities and how the decision-making process will take place.
As much as the idea is to achieve success, it is also worth defining what will happen if the partnership, the company or both do not work out.
As what is written and recorded is worth it, you need to be very careful to avoid worries and headaches in the future.
What are the legal issues like with the new legal format?
With the transformation of an Individual Entrepreneur into a Limited Company, there are some changes regarding legal issues. From now on, the most important decisions need to be made together, so that no one is harmed. That’s why to choose an administrator, for example, all partners have to reach a consensus.
Furthermore, the actions of one partner can affect the other and the entire company, so it is necessary to have an alignment of actions. Labor, fiscal and tax obligations are also divided.
In a way, the legal nature has mixed elements, since partners only respond up to certain limits.
What precautions should be taken before making this change?
Changing the format can be very beneficial for the business, as it often allows for accelerated growth. However, you need to take some care to avoid problems in the future.
Assess whether the transformation is really positive, necessary and supported by the business. When the company still doesn’t make enough profit , for example, including a partner can make it less profitable for you.
The choice of partner, as seen, has to be very well planned, as this is an important decision. Don’t be afraid to ask questions and consider whether the decision is the best possible.
As the bureaucratic process needs to be done correctly, don’t give up having an accounting office nearby. With the right and specialized professionals, this transformation will happen in a much simpler and safer way!
By recognizing how, when and why to transform an Individual Entrepreneur into a Limited Company, this process is no longer a difficult task. In addition to all the precautions, be sure to have the support of professionals so that everything is simple and accurate!