Legal Framework for Startups: What does this bill propose?
In 2020 the Legal Framework of Startups appeared, which promises to facilitate investments for these companies, helping to move the economy
The number of startups has grown considerably in Brazil in recent years. In 2011, the Brazilian Association of Startups (Abstartups) reported that there were 600 companies following this model in the country. In 2020, the record is no less than 12,700 startups.
With this considerable advance, it became necessary to better organize and structure this market. Also for this reason, in 2020 the Law Project called Marco Legal das Startups appeared, which had its basic text approved on 12/14/2020. Basically, it promises to make investments easier for these companies, helping to move the economy.
In this post, we’ll explain what the Startups Legal Framework is and what changes it can bring!
First of all, it doesn’t hurt to remember the concept of a Startup. When we talk about startups, it is very common to think that it is a digital company, like a platform, a website or an application. It’s not wrong, but we can say that this idea is incomplete. A startup is actually a company with a replicable and scalable business model. In other words, it delivers your product or service unlimitedly and without changing your business model.
In addition, for it not to be classified as a traditional company, the startup needs to present innovation to the sector it wants to be part of, solving the customer’s problem in the best way. Precisely for this reason, as a rule, it brings some technological solution.
Starting a startup is not much different from starting a regular business. You must choose the business format, which can be an Individual Micro- entrepreneur (MEI), an Individual Entrepreneur (EI), an Individual Limited Liability Company (EIRELI) before it was dissolved, a Sole Limited Partnership (SLU) or a Limited Liability Company (LTDA). Finally, it is also necessary to choose the startup’s tax regime, which can be Simples Nacional, Presumed Profit or Real Profit.
What is the Legal Framework for Startups?
The Legal Framework for Startups aims to clarify some operations that are carried out by these companies. For example, in the base text that was recently approved, it is determined what actually classifies a business as a startup. It established that companies that have at least one partner, have innovation in their product and/or service, earn up to R$ 16 million per year and have less than ten years of enrollment in the CNPJ can be considered startups.
These companies also need to declare innovative models when they are incorporated or fall under the Inova Simples tax regime, recently created to support the opening of new companies, stimulating the development of these new startups, collaborating with the principle of stimulating the economy.
Startups currently face some problems that Marco Legal can solve. For example, the startup process. Opening a company in Brazil is time-consuming and, to open a startup it is necessary to go through the same steps as a traditional company, the process ends up being slow as well. With the Law, it is expected that this process will be faster since it will be exclusive to startups.
Summary of some important points:
Legal security for angel investors not to incur debts with employees and companies if the startup goes bankrupt.
Income Tax Reduction if startups go bankrupt, as it is a high-risk investment.
Exemption from taxation of employees in the acquisition of stock option plans.
Financial and tax benefits for investors
As the Legal Framework for startups, angel investors will be more secure in contributing venture capital to new technology companies. In addition, now investors will no longer have responsibility for the startup’s expenses and expenses, such as payroll and supplier accounts. This initiative aims to increase investments in Brazilian startups.
Another facility presented by Marco Legal of startups is for taxation. The proposal is to favor the relationship of investors with their taxes. These days, people who invest in startups need to pay taxes on the earnings received from their investments. What Marco Legal will provide is the removal of monetary losses from the calculation of taxes. As investments in startups are considered high risk, this is another novelty that should increase investments in this type of company.
Another stimulus for the startup sector is the new investment possibility. The basic text of the Legal Framework has a proposal to authorize government agencies to apply the resources obligatorily destined for research and development in specialized venture capital funds that invest in startups.
For Corporations
The facility proposed for Corporations is not restricted to startups only, it can be used for all SA companies. For this, they need to earn less than R$ 78 million per year. The basic text of the Legal Framework for Startups indicates that these companies will no longer need to place their advertisements in a large-circulation printed newspaper. If approved, these documents may be released electronically.
The basic text of the Legal Framework for Startups has a proposal to authorize the hiring of startups by the public administration, with the aim of testing innovative solutions. For this, the companies will go through a special bidding process. This process was created to solve public demands that need technology and innovation, making the sector’s productivity increase.
After the result of the bidding process is disclosed, the Public Contract for Innovative Solution (CPSI) will be signed. It will have a term of 1 year and maybe extended for another 12 months. This type of contract has a maximum value of R$1.6 million and has some payment rules.
The Legal Framework and Labour Relations
In the basic text of the Legal Framework, the employment contract with a fixed term for this type of company may be for up to 4 years, and may not be extended any longer. And, if during the contract period the company is no longer classified as a startup, the contract becomes 2 years. With this work contract proposal, it is expected that the generation of jobs in Brazil will increase.
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