Set up a company in Portugal – my experience

If you are a real estate investor, creating LLCs is really a must if you want to protect your assets and optimize taxes. I have created some companies up until this point (you can find out why in my book), and I can tell you that there are some differences to the US. I’d like to comment on those differences, as I have been working with RE investors from the US who want to create an LLC for every property. Well, in Portugal, that won’t do.

To set up a company in Portugal, you will incur the following costs:

  • €360 to register the company (LLC – which is called Lda);
  • €123-€300 to register a trademark (this depends on the sector, how protected you want it to be, etc)
  • €100-€200/mo to pay for an accountant (which is mandatory);

These are the mandatory costs (except for the trademark). However, note that you will also likely incur costs such as:

  • A salary. You don’t really have to have a salary – I don’t take any salary out of my companies. Note though that, if you do, you will have to pay for social security, medical insurance and what not. Your cost will be much higher than the salary per se.
  • Rent and utilities. Depending on the type of business you run, you may have to have a brick and mortar location. Even if you don’t have to have one, in most businesses they come in handy.
  • Advertising. This may be close to nothing or a lot. In my case, 95% of the costs of a company I run is advertising (it is a digital service, of course).
  • Bringing assets to the company. You need to pay about €50 per asset you bring to the company. This doesn’t include e-assets, fortunately. 😉
  • Insurances. Depending on the type of business you run, you may have to have insurances. I always have insurances in my companies, even if I don’t have to have them.
  • Legal advice. Unless you have a very basic type of business, today you’ll need legal counseling. This can be quite expensive as well.
  • Vehicles. Depending on the type of business you run, you may have to have vehicles to operate. I keep my companies super lean and I never bought any vehicle to any of my companies.
  • Taxes. There are two things you can’t escape in life: taxes and death.

As you see, the fact that you need to spend €100-€200 per month with an accountant, opening a company for every property usually doesn’t make sense, because your profit is wiped away by this fixed cost. At the same time, it typically only makes sense to set up an LLC when you reach 3 properties.

BTW, at the company level, in Portugal, prices are usually defined as the price + VAT. VAT is the value-added tax, which you may know as the goods and services tax (GST).

If you’re thinking about setting up a start-up in the US, check out this guide on the costs of opening a company.

Duties

Opening a company in Portugal comes at a cost (although I list multiple advantages below). Some of them include:

  • Print and send the physical copy of the invoices to the accountant, every single month.
  • Issue the digital compilation of the invoices and upload it to the tax office every three months.
  • Keep the books in order (even if you’re hiring an accountant).
  • You may be held accountable as a CEO, manager or partner, for multiple things within the company, including maximizing profit for shareholders in multiple states in the US. This became quite polemic after Martin Shkreli brought it up.
  • etc…

My companies

I have set up multiple companies in Portugal, and I have a main accountant which actually charges me €75 + VAT per extra company. I currently own or co-own the following companies:

I also think that there are multiple advantages to having companies (and multiple companies) including:

Protection

As I said, this blog belongs to a company that I use to collect royalties, online businesses, etc. This also protects me, as this asset belongs to a separate entity that doesn’t hold any of my assets.

Flexibility

If I want to charge money, I can. This wasn’t the case back in the day (as I couldn’t do business because I lacked a license or was employed on an exclusive contract with an employer).

Also, having multiple companies allows you to write off way more costs than when you don’t have these companies. For instance, as an individual, you can’t write off fees and interest with mortgages even if you do get mortgages for real estate investing. For me, that is a killer.

What about yourself? Do you own a company?

Let me know if the comments down below.

Thanks

Ben