Turning ideas into reality and starting your own business is difficult anywhere in the world. Therefore, before you start, you need to thoroughly prepare yourself for such an essential step in your life and the “basis” for establishing your business wherever you are, including in Portugal. Undoubtedly, anyone who aspires to become an entrepreneur in this European country has an endless number of questions about doing business in Portugal. As a result, we decided to make a detailed analysis of how to invest in this European country by establishing your own business. So, let's start!
How to start a business in Portugal?
We believe that most experienced entrepreneurs will agree with us that planning is one of the keys to successfully starting your own business in any part of the world, including in Portugal. In other words, one of the critical starting points for any entrepreneur when establishing a business is a well-thought-out strategy or, as people say, a business plan. Recently, another informative article on the topic of doing business in Portugal was published on our WithPortugal portal. We discussed the five most dangerous difficulties that any entrepreneur can face when starting a business in this country, one of which is considered to be the lack of a competent and detailed business plan, a detailed description of your project with calculations and perspectives for the next few years.
In addition to the business plan itself, each future entrepreneur must have their own investment reserves. However, if you have little financial capacity, don't despair. Even in this situation, it is quite possible to create your own business. For example, it is possible to set up a small local business or an online business because that doesn't require such a significant investment. There is also the option of borrowing money to start a business from Portuguese financial institutions, but getting approved for this kind of loan is quite difficult, so be prepared for complications. If you received a loan to establish your business in Portugal, this could be used as an advantage when applying for an entrepreneur visa or, in other words, a D2 visa. But for a loan in a Portuguese financial institution to be an advantage, you must have a well-structured and detailed business plan.
Another critical initial aspect when starting a business in Portugal is legalization. Yes, that's right. It is impossible to just come to the territory of this European country and start a business. The most profitable legalization option for entrepreneurs in Portugal is obtaining a D2 visa.
Entrepreneur visa or D2 visa
An entrepreneur visa or D2 visa is for people interested in investing in Portugal by setting up their own company in the country. In other words, this type of visa allows you to obtain a temporary residence permit in this European country to do business. Considering that the topic of a visa for entrepreneurs is of interest to many people, we wrote a separate article on this topic, where we talked about it in detail and gave some practical tips on how to get a Portuguese visa D2 in a simplified way. But be extremely careful. It is not enough to have the financial resources to invest in this European country. After all, as most experts on immigration to Portugal emphasize, initially, the Service for Foreigners and Borders (Serviço de Estrangeiros e Fronteiras, SEF). Subsequently, the visa department, Consulate, or Embassy of Portugal, when issuing a visa of this category, visas for entrepreneurs, will consider the economic and social significance of the investment made or proposed by you. Therefore, the mere fact of creating a company in Portugal is not a guarantee of obtaining it.
Thus, to obtain an entrepreneurial visa or a D2 visa, you must provide a reasonable business plan and determine the type of company you want to create. Two good reasons for the Service For Foreigners, the Visa Section, the Consulate, or the Embassy of Portugal to issue this type of visa accurately are as follows:
- Evidence that you have already carried out investment operations - a business plan, permanent certificate, or certidão permanente (the document that digitally collects all publicly available information about the company. Also includes all computerized records, all electronic documents related to the company, as well as the most recent statutes or updated statutes of the enterprise); declaration of commencement of activity or declaração de início de atividade; company registration or registo de constituição de sociedade; a bank statement showing the company's account balance in Portugal or extrato bancário com o saldo depositado na conta da empresa em Portugal;
- Proof that you have financial resources in Portugal, including from an established company in this country, and that you intend to continue investing in Portugal.
The process of obtaining a visa for entrepreneurs takes an average of 60 days and is analyzed by the Service For Foreigners, which, if a decision is positive, sends its response to the visa department, Consulate, or Embassy of Portugal in the country, where the person who requested this type of visa is located. We remind you that if you still have questions about the D2 visa, we recommend that you definitely read our article on the topic "D2 visa for entrepreneurs in Portugal. We are sure that with the help of this article, you can easily find answers to all your questions on this topic.
How to create a company in Portugal?
The company's official creation is the next important step towards starting a business in Portugal. You can officially establish your business in this country, regardless of whether before or after the issuance of a D2 visa. A business can be created at a company registration desk or Empresa na Hora (You can select a company registration desk in your area here) by simply presenting all the necessary documents for this action, such as a valid passport or residence permit and tax identification number (Número de Identificação Fiscal, NIF). In addition to these documents, at the time of creating a company, you will need to:
- choose a business name and type from a pre-approved list on the Internet, from a list available at the business registration desk itself, or provide evidence that you have patented your business name, which in turn has already been approved by the National Registry of Business Entities (Registo Nacional de Pessoas Colectivas );
- choose a model of a social contract from pre-designed ones. In other words, a social pact should be designated, which will provide for a set of mandatory proposals, references, or elements to regulate certain aspects related to the organization and functioning of the company, such as the rights and obligations of partners or shareholders in the enterprise, the company's relationship with third parties, etc;
- appoint an accountant by selecting it in the TOC portal (a management system that facilitates communication with an accountant and simplifies invoicing processes for companies and self-employed professionals) or submit a declaration of incorporation to any financial service that is engaged in running businesses (up to 15 days after the establishment companies);
- to contribute to partners, if any, the cost of equity capital to the company.
In addition, any entrepreneur should have an available company bank account in Portugal. Then, if everything is done correctly, establishing your company will take no more than a week.
Who can do business in Portugal?
In fact, any foreign citizen can become an investor in Portugal. Lately, the country has been very enthusiastic about encouraging entrepreneurship and offers many incentives for investors from other countries. To support our declarations, we present some statistical data. Thus, according to a study by the Immigration Observatory (Observatório das Imigrações) regarding the Portuguese census, in 2021, 30% of all existing entrepreneurs in the country are considered foreign investors. Thus, by this year, the total number of foreign entrepreneurs in Portugal has reached 69,697 thousand. As for the number of visas issued for entrepreneurs, the latest statistical 2021 report of the Office for Foreigners and the boundaries declares that such information doesn't appear. However, it highlights that 821 residence permits for investment activities were issued over the past year.
What is the best investment in Portugal?
In recent years, most entrepreneurs who invest in Portugal preferred to develop the technological field. But, such areas as catering are also popular, namely modern coffee houses, tourism, cosmetology, and the beauty sector (despite a large number of beauty salons in the country, there are very few quality establishments), marketing and advertising, etc. However, remember that before finally deciding which direction you will invest, it is worth studying the consumer market in Portugal to the smallest detail. Recall that the consumer market implies a set of individuals who purchase commercial products and/or services for their personal use. Pay attention to this because missing out on a detailed analysis of the consumer market in this European country is considered one of the five most dangerous difficulties when starting a business in Portugal and can cost you your finances and your dreams.
What areas are not worth investing in?
As in any other country, in Portugal, there are several areas where it is better not to run your investment because they are already oversaturated with supply, and there is a high level of competition in them, namely cafes and restaurants, women's and men's hairdressers, as well as real estate offices.
Franchise in Portugal
Franchising is a type of relationship between market entities when one party (the franchisor) transfers to the other party (the franchisee) the right to conduct business using an already developed business model under certain conditions. In other words, you are using a business model already created by someone, which is implemented and successfully operates in the consumer market. For some people, franchising is quite attractive and profitable for startup entrepreneurs because they get a ready-made and successfully operating business model with efficient production technologies and optimally tuned marketing. In addition, according to statistics, 85% of enterprises created by franchising pay off in five years of activity. Of course, working on a franchise in Portugal, like anywhere else, has its opposing sides. One of these disadvantages is the obligation to sell the franchise's product and/or service. If you are interested in this type of business, we advise you to view the currently available franchising in Portugal here.
The best Portuguese cities to invest
The annual Bloom Consulting Portugal City Brand Ranking, which has been exploring the development of entrepreneurship in different cities of Portugal since 2014, indicated in 2022 that Lisbon is considered the best city for investing and starting a business in this European country. The second place was given to the northern capital of the country - Porto, while the third - was to Cascais. Next, come to the following cities, namely the fourth place was given to the Portuguese city of Braga, the fifth - Coimbra, the sixth - Vila Nova de Gaia, the seventh - Sintra, the eighth - Funchal, the ninth - Setubal, and the final tenth place was awarded to Aveiro.
In addition, in 2022, two Portuguese cities managed to rise in this ranking: Funchal moved from 10th to 8th and Setúbal from 13th to 9th. However, Aveiro and Faro have fallen. The first Portuguese city in 2022 was in 10th position, while Faro has left the top 10 best Portuguese cities to invest and establish a business in the country.
Based on this rating, you can personally choose in which city you want to establish your own business.
Advantages and disadvantages of investing in Portugal
At the end of our article, we will discuss the positive and negative aspects of investing and establishing a business in Portugal. However, among the main advantages of creating a business in the territory of this country, it is possible to single out the following:
- It is one of the best countries for investment in Europe. According to Forbes, Portugal has adopted a strategy to encourage immigration and create tax breaks. This fact has made Portugal one of the best European countries for foreign investors;
- The attractive startup ecosystem in Portugal. Did you know that a study by the Startup Europe Partnership found that Portugal's startup ecosystem is growing twice as fast as the European average? Yes, Portugal's startup ecosystem is considered one of the most attractive in Europe. In addition, according to a survey conducted by the Global Entrepreneurship Monitor, Portugal has been ranked as a country driven by innovation. Thus, the survey showed that every 10 people out of 100 living in the territory of this country are entrepreneurs;
- Official language. The Portuguese language is not a barrier to investing in this European country, as it is spoken by about 250 million people worldwide;
- The affordable labor force in Portugal. According to a Forbes study, Portugal is recognized as one of the cheapest European countries in terms of the labor force, which is why many entrepreneurs choose Portugal for investment.
In turn, the following can be considered the main disadvantages of establishing your own business in Portugal:
- Significant initial investment. One of the main disadvantages of investing and starting a business in any part of the world, including in Portugal, is the need for a significant initial investment;
- Risk. Absolutely any entrepreneurial business is associated with risks; therefore, a potential businessman needs to be prepared for unforeseen events and/or obstacles that may arise along the way.
Finally, we wish all our readers who desire to become investors and create their businesses in Portugal good luck, and you will definitely succeed!