What are MEs, or microenterprises?A microenterprise (ME, Microempresa) is a company size category, that is, a classification by size. Under Brazil's Complementary Law No. 123/2006, the criterion is annual gross revenue:SizeGross revenue per calendar yearMEI – Microempreendedor Individual (individual micro-entrepreneur)up to R$ 81,000ME – Microempresa (microenterprise)up to R$ 360,000EPP – Empresa de Pequeno Porte (small business)over R$ 360,000 up to R$ 4.8 millionThese are the limits in force in 2026. There are bills in Congress to raise the MEI ceiling; until a new law is published, the R$ 81,000 limit applies. In the first year of activity, the limits are proportional to the months of operation.There is also a classification by number of employees, used by Sebrae (Brazil's small business support agency) and IBGE (the national statistics institute) in surveys: a microenterprise has up to 19 employees in industry and up to 9 in commerce and services. It has no legal effect: for taxes and for the benefits of LC 123, what counts is gross revenue.A service company has 25 employees and earned R$ 300,000 in 2026. What is its size under LC 123?Answer: ME, because the legal criterion is gross revenue, up to R$ 360,000 — LC 123 uses only annual gross revenue. The employee count is a Sebrae and IBGE criterion for surveys, with no legal effect; and the MEI only goes up to R$ 81,000.Examples of microenterprisesWe can cite as examples:Small accounting officesSmall podcast studiosSnack bars or other small businessesAdvantages of microenterprisesSimpler opening and less bureaucracyThe process of opening and registering a microenterprise is usually simpler and less bureaucratic than for larger companies.The great advantage of microenterprises is that they are covered by the General Law for Micro and Small Enterprises (LC 123/2006). This law gives MEs and EPPs differentiated treatment: the option of Simples Nacional, simplified labor and reporting obligations, preference in public procurement and easier access to credit.Lower start-up costsThe initial costs of opening a microenterprise tend to be lower, which can be ideal for those starting out with a more limited budget.Tax benefits: Simples Nacional or taxation on profitAn ME can choose its tax regime: Simples Nacional, Lucro Presumido (presumed profit) or Lucro Real (actual profit). Simples Nacional, Brazil's simplified tax regime, was created to simplify tax payments for microenterprises (ME) and small businesses (EPP). Under this regime, rates vary according to the company’s revenue and the economic activities performed. The percentages range from 4% to 33%. These are the nominal rates in the tables; the effective rate, which the company actually pays, is lower, because each bracket has an amount to deduct.Simples usually pays off for most small businesses, but not always: companies with low profit margins, a small payroll, or customers who use tax credits may pay less under Lucro Presumido or Lucro Real. The comparison should be made with an accountant before choosing; the option is annual and made in January.Simples Nacional combines eight taxes (IRPJ, CSLL, PIS/Pasep, Cofins, IPI, ICMS, ISS and CPP, the employer's social security contribution) into a single monthly payment slip, the DAS (Documento de Arrecadação do Simples Nacional). For most activities the CPP is included in the DAS; the exception is Annex IV activities (such as construction, security and cleaning), which pay the employer contribution separately.Simples Nacional and the tax reformBrazil's tax reform (Constitutional Amendment 132/2023 and Complementary Law 214/2025) gradually replaces PIS, Cofins, IPI, ICMS and ISS with the CBS (federal), the IBS (state and municipal) and the Selective Tax. Simples Nacional remains in place. In 2026, the test year, Simples companies pay neither CBS nor IBS. From 2027, the CBS replaces PIS and Cofins inside the DAS, and between 2029 and 2033 the IBS gradually replaces ICMS and ISS.Also from 2027, a Simples company may choose to pay CBS and IBS outside the DAS, under the regular regime. This lets it use tax credits and pass more credit on to customers, which matters for businesses that sell to other companies. The choice is made every six months; for the first half of 2027, the deadline was September 2026.Access to financing and incentivesSome microenterprises may qualify for specific credit lines and government incentives that support small entrepreneurs.In public procurement, LC 123 (which also applies under the Procurement Law, Law 14,133/2021) gives MEs and EPPs two main benefits:Tax compliance at contract time: the company must submit its tax and labor compliance documents even if they show outstanding issues, and only has to regularize them if it wins, within 5 business days, extendable for the same period.Deemed tie: if the ME or EPP bid is up to 10% higher than the best bid (up to 5% in reverse auctions), it is considered a tie. The small company then has the right to submit a bid lower than the winning one and, if it does, gets the contract. It does not win automatically.In a reverse auction (pregão), the best bid is R$ 100,000, from a large company. An ME bid R$ 104,000. What happens?Answer: The ME can submit a bid below R$ 100,000 and, if it does, gets the contract — in a reverse auction, an ME bid up to 5% above the best one counts as a tie (4% here). The benefit is the right to beat the offer, not an automatic win.In 2026, does a Simples Nacional company pay CBS and IBS?Answer: No; from 2027 the CBS enters the DAS in place of PIS and Cofins — Simples companies were left out of the 2026 test charge. Simples continues; what changes in 2027 is the replacement of PIS and Cofins by the CBS and the option to pay CBS and IBS separately.Disadvantages of microenterprisesDifficulty achieving scaleWith fewer resources and less production capacity, it is harder for a microenterprise to achieve economies of scale.Limited marketing and advertising capacityMicroenterprises may have small marketing and advertising budgets, which can limit their ability to reach new customers and expand their market presence.Management and process problemsManagement in microenterprises often concentrates many roles in few people, which can lead to problems in administration and operational efficiency.Difficulty attracting and retaining talentOffering competitive salaries and benefits can be a challenge, making it harder to hire and retain qualified employees.Taxation on gross revenueUnder Simples Nacional, taxes are calculated on gross revenue, not on profit. This makes calculation easier, but it is a disadvantage when the company has low margins, makes no profit or records a loss in the period: the tax is due all the same.Simplification does not eliminate bookkeeping either. A Simples company must at least keep a cash book with all its financial and bank transactions, and full accounting records are required to distribute tax-free profits to partners above the legal presumption, and to meet the demands of banks, partners and public tenders.No use of tax creditsAn ME under Simples Nacional, as a rule, cannot use credits for taxes paid when purchasing goods, raw materials and inputs, and its customers receive smaller credits. From 2027, the option to pay CBS and IBS outside the DAS, mentioned above, is the way to reduce this disadvantage.An ME under Simples Nacional earned R$ 200,000 and had a loss of R$ 20,000 for the year. What about taxes?Answer: It pays Simples on the R$ 200,000 of revenue, even with the loss — under Simples, tax is levied on gross revenue. That is the regime’s disadvantage for low-margin or loss-making companies; under lucro real, IRPJ and CSLL would be zero.The law that defines the microenterpriseComplementary Law No. 123/2006, the National Statute of Micro and Small Enterprises, defines and regulates microenterprises.DefinitionArt. 3 For the purposes of this Complementary Law, microenterprises or small businesses are business companies, simple companies, individual limited liability companies and entrepreneurs, duly registered in the Commercial Registry or the Civil Registry of Legal Entities, as the case may be, provided that:I - in the case of a microenterprise, it earns, in each calendar year, gross revenue equal to or less than R$ 360,000.00 (three hundred and sixty thousand reais); andII - in the case of a small business, it earns, in each calendar year, gross revenue greater than R$ 360,000.00 (three hundred and sixty thousand reais) and equal to or less than R$ 4,800,000.00 (four million eight hundred thousand reais).The "individual limited liability company" (EIRELI) mentioned in the text of the law ceased to exist in 2021: EIRELIs were converted into single-member limited companies (SLU), which can also be MEs or EPPs.Labor obligationsThe law simplifies some labor obligations, but does not exempt companies from paying INSS (social security) or FGTS (the employee severance fund).Art. 51. Microenterprises and small businesses are exempt from:I - posting the Work Schedule on their premises;II - recording employees' vacations in the respective books or registration forms;III - employing and enrolling their apprentices in the courses of the National Apprenticeship Services;IV - keeping the book called "Labor Inspection"; andV - notifying the Ministry of Labor and Employment of collective vacations.Art. 52. The provisions of Art. 51 of this Complementary Law do not exempt microenterprises and small businesses from the following procedures:I - entries in the Work and Social Security Card (CTPS);II - filing documents proving compliance with labor and social security obligations, until these obligations expire;III - submission of the FGTS Payment and Social Security Information Form (GFIP);IV - submission of the Annual Employee Reports, the Annual Social Information Report (RAIS) and the General Register of Employed and Unemployed Persons (CAGED).In practice, the CTPS is now digital, and GFIP, RAIS and CAGED have been replaced by eSocial, DCTFWeb and FGTS Digital, which microenterprises must also file.Which of these obligations does LC 123 waive for a microenterprise?Answer: Posting the Work Schedule on its premises — Art. 51 waives the Work Schedule, among other items; Art. 52 makes it clear that the work card and the information sent to social security and FGTS remain mandatory.General dataAreas of concentrationCompany openings and closures over the yearsCompany openings and closures by regionCompany openings and closures by state
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