The idea of expanding the business by investing in a new branch location appears to be the most suitable procedure. However some important points should be considered in order to make the right decision.
The greatest advantage for the partners is to have the total control of the activities and profits made by the branch. But on the other hand…
The branch is totally dependent on the Head-Office that will have to cover the costs to open the branch, such as facilities, equipment etc. And the taxation ends up to be the same of a new and independent company which becomes the best way to invest.
Here are some of the disadvantages:
1) The subsidiaries are subjected to approval of the executive power and supervision of the public prosecutor;
2) It is a requirement to publish annually, the balance sheet, the economic results and the administrative measures of the subsidiaries, with the penalty of having the authorization taken away;
3) Acts of branches can charge patrimonially the Head Office.
4) At last, a branch registration procedure ends up being more bureaucratic than a Brazilian company with foreign partners.
As you can see, the opening of branches in Brazil is not simple and requires a big, detailed and specific planning. Other initiatives can be as effective as that and a lot less complicated.