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Madeira Private Limited Liability Company / Lda Formation

Madeira Private Limited Liability Company / Lda Introduction

A Madeira Private Limited Liability Company (Lda) is regulated under Portuguese laws and European Union regulations.

Madeira Background

Madeira is a Portuguese archipelago (consisting of three islands) on the North Atlantic Ocean. It is located near the Canary Islands. Its official name is the “Autonomous Region of Madeira”. Its capital is Funchal located on Madeira Island. The estimated population is 300,000. Since 1976, Madeira is an autonomous archipelago administered by Portugal, but is guaranteed its autonomy by the Constitution of Portugal. Its political system consists of a president and a legislative assembly. As part of Portugal, Madeira is a member of the European Union (EU).

Madeira Private Limited Liability Company (Lda) Benefits

A Madeira Private Limited Liability Company (Lda) has several benefits including:

  • Low Taxes: New companies qualifying under the International Business Centre of Madeira (IBC) program could only pay a corporate tax rate of 5% on their profits. However, U.S. taxpayers and those from countries taxing global income must declare all income to their tax authorities.
  • Limited Liability: A member’s liability is limited to the subscribed share capital.
  • One Member: A minimum of one member is required to form a LLC.
  • Low Minimum Authorized Capital: The minimum authorized capital is very low.
  • Low Costs: Madeira company operating costs are amongst the lowest in the EU. Real estate, minimum wages, electricity, and telecommunications costs are very low.
  • Simple Company Structure: Compared to the other Madeira and Portugal company and corporate structures, the Lda is very simple.
  • EU Member: As a member of the EU, Madeira opens new opportunities to conduct business with other EU members.

Madeira Company Name

The company name must not be identical to or resemble any other Madeira company name. It must contain either the word “Limitada” or its abbreviation “Lda” at the end of the company name.

However, if this is a one member LLC, then the company name must end with either the words “Sociedade Unipessoal” or “Unipessoal” before “Limitada” or “Lda”.”

The company name may not infer a different object or purpose than the actual business conducted.

Articles of Association

The Articles of Association determines how the company is managed. If no provisions exist in the articles pertaining to company management, the majority of the managers must sign documents detailing these matters.

Limited Liability

Member’s liability is limited to the share capital subscribed by each member.

Members are jointly and severally liable for all capital contributions of expelled members established in the Articles of Association.

Registered Office

Every LLC must have a registered office in Madeira. However, a registered agent is not required.

Members

A minimum of one member is required which can be a natural person or a legal entity of any nationality. If only one member, the company is considered a “Single Partner Limited Company”.

Minimum Authorized Capital

The minimum authorized capital is 2 Euro per share (1 Euro for a one member company). A member’s capital contribution can be in cash or other assets constituted by a pledge. Cash contributions must be paid in full by the end of the first fiscal year.

Quotas

There are no issued shares. Instead, the company maintains Registered Quotas whose value cannot be less than 1 Euro. The quota represents a member’s part ownership percentage in the company. A quota is evidenced by a registration certificate from the commercial registry.

Management

A minimum of one manager is required. The Articles of Association determines how managers are appointed, the scope of their duties, and how they can be terminated.

Managers must be natural persons (not corporations or other legal entities) and can either be members or non-members.

Managers can be held jointly and severally liable to the company, its members, and third parties for acts or omissions which intentionally infringes upon their contractual and legal duties. When the company’s assets are insufficient to pay all creditors resulting from manager’s infringements on their contractual duties and legal obligations, the managers are held liable. This also applies to the failure to pay the company’s tax debts with the burden of proof upon the managers to prove the non-payment of taxes is not attributed to them.

Officers

The company is not required to appoint officers such as a President, Secretary, or Treasurer.

Audits

The company is not required to appoint s Supervisory Board. But, if it does, then the same rules and regulations pertaining to public limited companies shall apply to the Supervisory Board.

If no Supervisory Board exists, then a statutory auditor must be appointed if the company has two out of the following three minimum limits:

  1. Total revenues of 3 million Euros;
  2. Total Balance Sheet of 1.5 million Euros; and
  3. At least 50 employees.

However, the statutory auditor will not be required if two out of the three limits are not met over two consecutive years.

Taxes

The current corporate tax rate is 21%.

However, new legal entities may qualify for a corporate tax reduction to 5% until the end of 2027 if they qualify under the International Business Centre of Madeira (IBC) program available until the end of 2020.

The 5% corporate tax rate applies to companies conducting international services activities where their income is gained exclusively with non-resident legal entities or with other companies coming under the authority of the IBC of Madeira.

However, U.S. taxpayers and those from countries taxing global income must declare all income to their tax authorities.

Annual General Meetings

A yearly general meeting for members is required.

Public Records

Every document filed with the Madeira government registry is available for public inspection.

Time for Registration

The estimated time to become registered may take up to one month.

Shelf Companies

Shelf companies are available to purchase to speed up the registration process.

Madeira Private Limited Liability Company (Lda) Conclusion

A Madeira Private Limited Liability Company (Lda) has several benefits including: low taxes, limited liability, only one member required, low minimum authorized capital, low operating costs, simple company structure, and EU membership.