Latitud Formation: offboarding guide

Filing a trademark for your brand is important to protect it, and to make sure others don't take advantage of it. It's usually a very simple process, but you'll likely need legal counsel to make it happen. You can learn the basics about it from the Brazilian Government website, or go in depth with this Branding Manual.

Before applying for a trademark, consider having a look at the Industrial Property Registry to save you the trouble of having to discard possible names.

Our friends at BHub can help you with the trademark setup, or you can lean on the lawyer of your preference for support.

TL;DR: you'll need the following documents to apply for a trademark:

And you can apply here.

Founders have three options for paying their salary, all with different tax and process implications, and they can also set up combinations of all three.

We see many early stage startup founders set up a combination of pro-labore and independent contractor payments through their own pessoas jurídicas. As companies become profitable, paying with dividends is the most beneficial.

Founders can pay their own compensation as company employees through a bank transfer from the operating company in Brazil – this monthly payment is known as a "pró-labore". There's no specific amount set for this payment by law so long as it's not inferior to the current minimum monthly wage.

Your monthly wages will be subject to INSS contribution and the corresponding percentage of Imposto de Renda according to Receita Federal.

It's important to note that Brazilian legislation mandates that companies have a pró-labore set up for all of its administrators, so if you're appointed as one, this will be a hard requirement.

In some cases, founders opt for rendering their services through a pessoa jurídica of their own, which implies in hiring themselves as services providers instead of becoming employees of the company. This is something you should run by your local counsel first, to make sure what the best option is for you and the company.

If you've hired BHub's accounting and back office as a service during your incorporation, they'll be more than happy to help you out with this.

Profit distribution is the most efficient way for founders to compensate themselves, but it's only possible once the company starts to have revenue. Under this regime, distributed profits are exempt from taxes. You can learn more about it here.

This compensation category will always need to be paired up with pró-labore for the company's administrators.

409A valuations are a third-party appraisal of how much your company is worth. In case you have US citizens or tax residents in your cap table (founders, employees and investors), you're required to get one once every 12 months, or whenever there's a material event that could impact the valuation – like raising a round, doing an M&A or having a change in control.

Please note that this is not required for SAFE holders, as they are not yet on your cap table.

There's a multitude of service providers you could turn to for this. Our partners at Carta offer 409A valuations once a year as part of their package under their Starter plan, or as a stand-alone service.

83(b) elections are an IRS form that US residents need to file in the 30 days after exercising an ISO stock option grant, or when receiving restricted shares.

Startup founders with shares under a vesting agreement need to file an 83(b) election  – even if you're paying nothing for your shares. By filing an 83(b) election in the 30-day window after receiving your restricted shares, you'll be taxed on the value of your shares when granted. If you don't file one, you'll be taxed over the price of shares at the time of vesting, which can be significantly higher as your company grows.

Here's a step-by-step on how to file your 83(b) elections with the IRS.

Your Stock Option Plan will be set up at the Cayman Islands level, not at the Brazil level, but you can still offer stock options to your Brazilian team members. One thing to be mindful of is that to avoid exposing your employees, contractors and your own company to taxation liabilities with Receita Federal, you'll need assistance from experts to define your company's shares’ fair market value.

Discounts on strike prices are not uncommon as they enable you to provide a more advantageous compensation package. But do be mindful that they can also expose you to liability.

Certain lawyers understand that there are some safe thresholds for discounts that minimize exposure, so to get the best deal for your employees, we highly recommend seeking legal advice for this – our friends at Pinheiro Neto can help.

In Brazil, you can hire individuals as employees under the CLT regime, or you can hire Pessoas Jurídicas (PJ) as service providers. There are significant differences between the two, and we highly suggest getting educated on the topic before hiring.

The TL;DR is that hiring employees under CLT is more costly, while hiring a PJs as a service provider could require additional attention to make sure there’s not a breach of the local labor laws.

Early stage startups typically lean towards making their first hires as PJs service providers, and shifting towards the CLT model once they've matured and grown their payroll. We highly suggest checking with your lawyers to understand what works best for your specific situation.

To save you some trouble, we provide you with document templates for hiring service providers as PJ and to protect your intellectual property.

By providing meal benefits to your CLT employees, you can qualify for a tax incentive program called PAT – learn more about it here. You may look at traditional benefits providers like Sodexo or Ticket Alimentação, or newer flexible benefits providers like Caju.

On top of meal benefits, you can also consider offering:

Note that health insurance can be hard to offer if you under 30 employees – service providers like Pipo Saúde and Benify can be options.

If you're a Brazilian tax resident, you'll have to report the company shares you own as part of you yearly tax filings (Imposto de Renda). You can do so under the  “Bens e Direitos” tab (Grupo 03 – ‘participações societárias’), indicating the amount you own every year until you have an exit. Read more about the step-by-step here.

Reach out to our team at formation@latitud.com and we'll be happy to answer them!