In entrepreneurship, there’s a rule of thumb: you need to invest resources before you can reap the rewards. This initial investment, which sustains the company in its early stages, is called share capital.
Opening a business goes beyond the name and CNPJ registration; a key decision in this process is establishing the amount of share capital.
This amount can be in cash, deposited into the company’s account, or in assets—such as equipment, vehicles, or real estate—that become part of the CNPJ’s assets.
The important thing is that the capital covers initial costs until sales begin to balance cash flow.
Besides meeting legal requirements, share capital demonstrates the partners’ commitment, impacts liability to creditors and partners, and is relevant to the company’s accounting and legal organization.
If you still have questions about what share capital is, how much to invest, or how to record this amount in your documents, in this article we explain the concept and show you how to calculate the appropriate amount for your business.
What is Share Capital?
Share capital is the initial investment, in cash or assets, that partners contribute to create and maintain the company until it begins to generate positive results.
Before the business can generate sufficient revenue to sustain itself, the owners must provide resources to support its operations. These resources can be monetary or consist of goods and services—for example, equipment, furniture, or funds allocated to contracting third parties—that support the company’s operations.
What is share capital for?
Share capital is intended to sustain a company in its early stages, covering expenses until it achieves financial stability and begins to generate profits.
In the initial months, expenses typically exceed revenues because the company is still acquiring customers. Therefore, this contribution is essential to sustain operations while sales do not cover costs.
For example, in an e-commerce business, it is necessary to invest in inventory, deposit payments, salaries, and fixed expenses before seeing a return on sales—all of which are financed by share capital.
Part of this amount also constitutes working capital, the cash reserve used to balance payments and receipts and avoid liquidity shortages while sales are slow.
How to define your company’s Share Capital?
The value of the share capital should be based on a realistic projection of the costs of opening and maintaining the business. Consider, among others, the following items:
- Initial installation costs: construction, renovations, and space adaptation.
- Acquisition of assets: machinery, furniture, equipment, and vehicles.
- Initial inventory (if applicable) and replenishment in the first few months.
- Expected fixed expenses: rent, water/electricity/internet bills, condominium fees.
- Payroll and charges for the launch period.
- Outsourced services and suppliers (logistics, cleaning, IT).
- Marketing and launch: campaigns, website, packaging, and branding.
- Taxes, fees, and license and registration costs.
- Working capital: reserve to cover negative cash flows for X months.
- Professional fees: accountant, lawyer, and consultants.
- Reserve for contingencies and market fluctuations.
- Investments in technology and systems (software, security).
Even with planning, it’s common to not define an exact amount. Therefore, it’s recommended to register at least R$1,000 for sole proprietors and limited liability companies.
It’s also crucial to determine how much each partner will contribute. In addition to capital, experience, existing technology, and client base should be considered, as these factors influence the distribution of shares—shares are determined by each partner’s contribution to the business.
Tips on how to determine the value of share capital
Determining share capital requires planning and attention to various factors. To make this process clearer, here are some tips:
1. Develop a detailed business plan
Before setting values, it’s important to develop a plan that describes how the company will operate. It should include information such as the target audience, products or services offered, competitor analysis, marketing strategies, and operational and financial aspects.
This document serves as a basis for identifying initial expenses and, from there, establishing a share capital commensurate with the business’s reality.
2. Organize your financial planning
Another key point is projecting revenue and expenses. This plan should include:
- opening costs;
- fixed and variable expenses for the first few months;
- sales and revenue estimates;
- amounts allocated for new investments.
- With these figures in hand, it becomes easier to determine how much investment will be needed initially.
3. Analyze the chosen legal nature
The type of company directly influences how the share capital will be structured. Therefore, it’s recommended to align this decision with the guidance of an accountant, ensuring that the legal model is appropriate to the partners’ objectives and financial resources.
4. Establish the participation of each partner
When there are multiple partners, it’s essential to record each partner’s contribution in the articles of association. This includes both cash and paid-in assets. This avoids future doubts or conflicts, especially when it comes to sharing profits.
5. Define how the payment will be made
The payment of capital must be provided for at the outset of the company’s incorporation. Payment terms and conditions must be specified in the articles of association, noting that, in the case of public limited companies, at least 10% must be paid upon opening.
6. Calculate the essential value to start activities
Share capital should, at a minimum, cover all operating expenses. Setting a value lower than necessary can lead to future complications, as formal reductions in this amount are often bureaucratic.
Continue reading and we’ll show you how to calculate the ideal value for your share capital.
How to calculate share capital
Once you have a clear understanding of the resources needed to get your business up and running and sustain it in the first few months, calculating share capital becomes much simpler.
Imagine, for example, that the goal is to open an e-commerce business and keep it active for three months. In this scenario, we would have:
Initial expenses (one-time payments):
R$2,000 for formalizing the business (CNPJ registration, registrations and fees with the Commercial Registry, tax registrations, etc.);
R$50,000 for purchasing initial inventory;
R$1,000 for trademark registration.
Recurring expenses (paid monthly):
R$5,000 for rent on storage space;
R$100 for the e-commerce platform;
R$3,000 for basic utilities (internet, electricity, water, etc.);
R$6,000 for employee salaries;
R$10,000 for inventory replenishment (monthly estimate).
Adding these amounts together, we would have R$53,000 in one-time contributions, plus R$72,300 corresponding to three months of recurring expenses (R$24,100 per month). The resulting share capital is R$125,300.
Therefore, the partners need to provide this amount so that the online store can operate in the first few months without immediately relying on sales revenue. This calculation highlights the importance of accurately estimating how much will be needed before starting operations.
What is the difference between initial capital and share capital?
Many people confuse equity capital with start-up capital, but although the two concepts are related, they are not exactly the same.
Start-up capital corresponds to the total resources needed to get the company off the ground, including expenses for accounting fees, commercial space rent, furniture and equipment purchases, and potential hiring.
Share capital, as we’ve seen, is the portion of this investment that will be officially registered as the company’s assets.
In other words, all the money invested to start the business makes up the start-up capital, but only the portion allocated for formal registration counts as share capital.
The former guarantees the opening structure, while the latter ensures the maintenance of operations until the business can sustain itself through its own profits.
How is social capital formed?
A company’s share capital can be constituted from contributions made by partners or shareholders. There are different ways to build this equity, each suited to different contexts and types of business.
However, regardless of the form of contribution, it is essential that the share capital is correctly recorded in the company’s accounting records.
Changes, such as increases or decreases in this amount, must comply with legal requirements and be formalized with official bodies, such as the Board of Trade and the Federal Revenue Service, in accordance with the company’s legal framework.
Cash contribution
The most commonly used method is direct cash injection, when partners make deposits into the company’s account to make up the initial capital.
Material goods
Another possibility is to include physical assets, such as automobiles, equipment, real estate or other assets of measurable value, which become part of the organization’s assets.
Rights and credits
In some cases, it is permitted to use existing credits or rights to intangible properties, such as trademark registrations, patents or signed contracts.
Provision of services
Although less common, there are situations in which the experience, work or performance of services by partners can be considered as support for share capital, provided it is formally evaluated.
Actions
In public limited companies, the share capital is divided into shares. Each shareholder acquires a proportional amount, which represents their stake in the business.
Examples of Social Capital
The value of a company’s share capital varies depending on the type of company chosen and the business structure. Below, we’ve provided some examples with common estimates for different business profiles.
It’s important to note that these figures are not mandatory unless required by law, but they serve as a reference for initial planning.
Share capital for MEI
For Individual Microentrepreneurs (MEI), many people have questions about how much to declare as share capital. Because it’s a simplified registration process, there’s no minimum required amount. You can enter any amount when registering.
A good practice is to record the approximate amount invested to start the business, ensuring financial control from the start. Remember that MEIs must adhere to the annual revenue limit of up to R$81,000, not have another company open, and work in one of the government-approved occupations.
Share capital for EI
Individual entrepreneurs (EIs) also do not need to declare a minimum share capital. As a microenterprise (ME), revenue can reach R$360,000 per year, and as a small business (EPP), up to R$4.8 million.
If it is not possible to calculate exactly how much to invest, it is recommended to adopt the symbolic value of R$1,000 as the initial share capital.
Share capital for EIRELI
The Individual Limited Liability Company (EIRELI) required a high minimum share capital: equivalent to 100 times the minimum wage.
The major benefit of this model is limited liability, meaning the entrepreneur’s personal assets are not mixed with those of the company. This means that debts or bankruptcy of the company do not affect the owner’s assets, except in cases of proven fraud.
However, because the required capital is high, the EIRELI has gradually been replaced by the Single-Member Limited Liability Company (SLU).
Share capital for a Single-Member Limited Liability Company (SLU)
The SLU was created by the 2019 Economic Freedom Law as an alternative to the EIRELI. It requires no minimum share capital, allowing entrepreneurs to establish businesses individually with low investment.
Like the EIRELI, the SLU protects the entrepreneur’s personal assets, guaranteeing limited liability, but without the financial constraints of high share capital.
Share capital for Limited Liability Company (LTDA)
The LTDA is the most common form of company with partners. In this case, each partner defines the amount of their contribution, as there is no minimum capital requirement.
It is worth remembering that the contribution of assets or money by each partner determines their shareholding in the company; that is, each partner will have a percentage of the share capital and will be responsible proportionally.
Share capital for a Public Limited Company (SA)
Without a mandatory minimum investment for each shareholder, in public limited companies, capital is divided into shares rather than quotas.
However, there is a requirement to pay in at least 10% of the value of the shares subscribed at the time of the company’s incorporation. This means that, initially, at least 10% of the total shares purchased must be paid in.
How to formalize Share Capital?
Now that you know more about the share capital of each type of company, it’s important to understand how to formalize this information.
In those companies where defining the share capital is mandatory, it must be recorded in the Articles of Association. This document describes in detail how the company operates, including:
Rights and responsibilities of each partner;
Shareholder interest and shares;
Contractual obligations;
Operating conditions;
Profit sharing;
Internal rules.
Registering the share capital is an essential step in establishing a company. First, the amount is defined based on the business needs and the contributions of partners or shareholders.
Next, the Articles of Association for limited liability companies or the Bylaws for corporations are drafted, including all information about the share capital.
These documents are then filed with the Commercial Registry of the state where the company operates, formalizing its creation. Following this, the company’s CNPJ (National Register of Legal Entities) is registered with the Federal Revenue Service, which is essential for the company’s tax operations.
To pay in the share capital, partners or shareholders must open a business bank account and make the corresponding deposits or transfers.
It is essential to issue proof of these transactions and maintain organized accounting records, in addition to complying with all tax and accounting obligations.
In this way, formalizing the share capital secures the company’s financial structure and guarantees legal compliance. Relying on the support of a specialized professional, such as an accountant or lawyer, is highly recommended to ensure all procedures are carried out correctly.
How to check your share capital?
A company’s share capital is always recorded in the Articles of Association, an essential document for opening a business. It specifies the total capital amount, the division among the partners, and, when applicable, the amounts subscribed and paid in.
Some basic company information can also be publicly consulted through the CNPJ (Brazilian Corporate Taxpayer Registry) on the Federal Revenue Service website. However, more complete details about the company’s share capital and structure are only available in the articles of association registered with the Board of Trade.
How to change the Share Capital value?
The amount registered as share capital does not need to be definitive: it can be adjusted upwards or downwards, depending on the company’s needs.
When there is an increase
If the partners decide to contribute new resources, the articles of association must be updated to reflect the new amount. In this process, the equity shares are redistributed proportionally, and the fees required by the Board of Trade must be paid to validate the change.
When there is a reduction
A decrease in share capital is less common and can only occur if the company is debt-free. In these cases, the reason for the reduction must be formally communicated, including by publication in a widely circulated media outlet.
After 90 days without objections, the company can formalize the change.
Have you discovered what Social Capital is?
We hope this article has helped you understand all about share capital and how to define the appropriate value for your company. Furthermore, providing quality customer service is essential to your company’s success.