If you are an Internet entrepreneur, you have probably asked yourself the question: in what countries is it better to start a business than to limit it to one country? Of course, you may be tempted to go the "easy way" and simply start a business in your own country with the goal of further expanding to other regions. But there is no law that says this is the best option.
Ultimately, this can be a rather complicated choice. For example, if you live in a place with quite high taxes, low legal protection of property and high corruption, this can quickly put your business project at a disadvantage in relation to its foreign competitors.
The registration of a foreign company (offshore) can offer some important advantages. Especially if your company is independent of its location, it has the ability to work remotely for employees, as well as a strong demand for its products and services in other countries. In this case, you can choose a country strategically more profitable for the development of your business project.
It would seem that everything is clear, although there is a question: exactly where to start? which countries are strategically advantageous? how to narrow the limits of the search for a country with the most favorable conditions for the development of your business?
Here you will find the TOP-10 countries with the best conditions to start a business and try to answer the questions why that is so. Come on!
What does it mean to "register" your business?
Business registration is a process in which an economic entity is treated as a separate legal entity in the eyes of the law. It creates a Limited Liability Company (LLC) or a corporation. This means that this company is given the same rights and can operate within these rights in the same way as an individual citizen. The official registration of your company has many benefits. For example, a corporation could:
- initiate legal claims (as individuals),
- protect your shareholder's personal property against arrest, in case of a legal claim,
- to acquire personal goods,
- exist regardless of the location of its shareholders.
In short: registering your company as an LLC or a corporation means that you will not be solely responsible in the event that the company incurs losses. You will only be responsible for the money invested in this business and not for all the investments or loans that your project attracts.
Factors to consider when choosing the country where your business will be located
Let's take a look at some of the key factors to consider that could influence your future decisions.
Tax implications and treaties
One of the key things that can really affect the profits of your company and its investors is the tax effect it will have personally on you, its founders and employees. Basically, this means the amount of taxes you will have to pay on your business results.
Consider things like:
- tax incentives for the return of investments, as a founder, as well as when your company enters markets in other countries in the future;
- income tax liabilities;
- capital gains liabilities;
Think about whether your tax legislation has a negative impact on the prospects of attracting potential investors to your project.
One of the key reasons for choosing a foreign country to start and develop your business project is that investors seek to optimize its tax consequences. There are other issues in the final legal documents that they prefer to address in their home jurisdictions rather than new ones with which they are less familiar.
They may prefer to register a new company in a third country, where they have understandable tax incentives that they can receive in addition, as part of the investment in your business. In addition to this, the management of the company may depend on the country in which you reside directly, as the founder of a new project.
Certain corporate governance structures should be applied depending on where you are registering a new company and what opinion investors may have about it.
Paperwork is one of the main problems when deciding to register a foreign company. This includes the need and intervals for tax and administrative reports, as well as other requirements that accompany any business process. For example, the requirements for filing documents when registering a new company in the country you have chosen to do more business.
In some regions there may be citizenship requirements for company founders, while in other countries there are no such restrictions. Keep this in mind, especially if you do not have the proper immigration status or it is difficult to obtain.
When urgently needed, some of your employees may have difficulty moving quickly and indefinitely to some countries. Hiring local staff can also be a problem, due to the lack of human capital or the cost of hiring and retaining specialists for your project.
There may also be legal restrictions on how you can hire and fire employees, which can affect how employees are promoted or demoted in your company.
Corporate governance requirements tend to vary from country to country. Since you will have to meet some of these requirements, you should also familiarize yourself with these variables before making the final decision on which country to choose to register your business.
Mergers & Acquisitions
With the successful development of your business, surely there will come a time, and perhaps more than once, when your company must be sold, reorganized, merged in whole or in part, or its shares listed on the stock exchange. In these cases, you will have to go through the processes of mergers and acquisitions.
In some countries, these processes are transparent and simple, and potential buyers or sellers can easily understand them, start and finish quickly. In countries with less developed corporate legislation, such processes may be less known and therefore may cause delays, complications and ambiguous scenarios for future developments.
Where is the best place to register an international company in 2020?
1. British Virgin Islands: easy banking
The British Virgin Islands (BVI) is the best place to register if you are an Internet entrepreneur with worldwide generated income that you would like to keep abroad for later use in new commercial projects.
The BVI is home to some of the most reputable and experienced filing companies of any offshore country.
One of the most beneficial aspects of operating an IBC in the BVI is that you can link this structure to a foreign bank account opened in a respected jurisdiction. For example, in Hong Kong or Singapore. Asian banks are especially willing to work with companies registered in the British Virgin Islands.
In general, banks want to work with BVI registered companies and there are reasons for this. This country takes the company registration procedure seriously.
The legislation of the British Virgin Islands has been specially created to successfully provide the services of an international offshore center. Despite all the requirements of international organizations to combat tax evasion, the BVI has no particular problem with these innovations. All its requirements are generally met.
That is why foreign banks do not have problems with the transparency of the companies registered in the BVI.
It introduces additional forms required to establish an IBC in the BVI, e.g. a declaration of beneficial owners. Therefore, foreign banks are comfortable with BVI registered companies.
Cons of registering a company in the BVI
- registration here is not as cheap as in other offshore countries (e.g. Belize);
- the registered office and government fees are also slightly higher;
- there is a requirement of economic presence, which is now present in the laws of almost all offshore countries with which large Western countries work;
- the exchange of financial data takes place automatically, which may be of little importance in the case of a competent structuring of the company, as well as the management organization of this company.
2. Denmark: flexible and tax-efficient hiring and firing
Denmark is considered one of the easiest countries in Europe to start a business, and has some good advantages:
- With flexicurity, you get the most flexible hiring and firing rules in the world, which reduces the cost of scaling up business operations;
- you can register and complete the registration of your company in Denmark in just a few working days, not weeks;
- there are no requirements for management citizenship, even for the CEO and board of directors;
- no notarial shares;
- effective tax to establish your business in Denmark compared to other Nordic countries;
- Danish company law is up-to-date and in line with current EU legislation.
3. Norway: digital communications
Norway has a strong economy and most of the communication with the government can be done digitally. Business registration in Norway is fast and tax compliance is relatively simple.
Below are the benefits of Norway to start your business:
- ideal for online business, as all communication with government agencies is done in digital format;
- the focus of government support is on the business of technology;
- the job market is full of highly qualified employees in the field of information technology, finance, design and music;
- entrepreneurs have access to manufacturing expertise, investors and creative talent;
- there is high economic and state stability;
- Norway has longstanding trade links with the European Union;
- Communications and transport infrastructures are well developed here.
- There are also some disadvantages:
- obtaining a building permit can be lengthy;
- Labor legislation is quite strict, which compensates for the presence of highly qualified personnel.
4. New Zealand: quick setup
New Zealand is considered one of the easiest countries to do business with because:
- registration of the company takes only one or two days,
- you can register a property in two days,
- the workforce is qualified and educated,
- labor costs are relatively low,
- in terms of taxes: no payroll, social security or capital gains taxes,
- a separate LLC is created, which is a separate legal entity that is independent of the shareholders.
5. Singapore: no capital gains tax
Singapore is known for many large international companies that have their headquarters here. With solid business and investment opportunities, the city is attracting global entrepreneurs and business leaders. The country has repeatedly been named as the most competitive Asian country in which to start a business.
Singapore has long been considered one of the best places to do business in the world because:
- it is one of the richest countries in the world,
- is politically stable,
- is a convenient geographic location to do business in Asia,
- has a competitive market of highly qualified specialists,
- Dividends and capital gains are not taxed here.
6. Isle of Man: zero tax
The Isle of Man has a customs agreement with the United Kingdom to facilitate trade, but is legally separate from both the United Kingdom and the European Union.
This provides certain advantages for companies incorporated in the Isle of Man when doing business in other countries and legally investing in new sectors of the economy.
Advantages of registering a company in the Isle of Man
- zero income tax rate,
- developed banking system with complex services,
- A corporate structure with an owner (shareholder) is possible,
- Only one director is required who does not need to be a resident of the Isle of Man,
- Registration of the company in the Isle of Man is beneficial for maintaining investment portfolios, including commercial real estate,
- The Isle of Man is ideal for owning intellectual property.
7. Canada: innovative engineering
Canada is a very good place to develop innovative businesses. It has solid engineering experience based on one of the best higher education systems in the world and government support for the innovative sector of the economy.
In addition, companies registered in Canada have the following advantages:
- a powerful Canadian brand as the center of a high quality, high technology product;
- it is possible to use tax credits for scientific and design developments of new products;
- the proximity of the United States, the government and the support to the developed infrastructure create unique investment opportunities for companies registered in Canada;
- a huge market of highly professional labor resources, which, with the help of developed immigration legislation, allows to attract specialists from any country in the world to projects in favorable conditions for relocation;
- the convenient geostrategic location allows you to work with physical goods in the markets of Asia, the European Union and North America;
- relatively low level of living costs in the country.
8. Nevis - asset protection
Nevis is one of the best places to register a company in terms of asset protection. If you are running a business that is fraught with liabilities, then it makes sense to go where the plaintiff must post a bond to sue you. To sue your company, a person will have to file a claim in a Nevis court and pay for the entire litigation.
Advantages of registering a company in Nevis
- confidentiality, since there is no company registration at the national level,
- excellent prospects for the protection of assets owned by local companies,
- defense of legal claims,
- the government and the prime minister are willing to discuss dual citizenship with international businessmen.
Despite these advantages that Nevis has, there is one caveat: companies registered here still do not have international recognition, which can be a problem when working with large Western countries. However, it all depends on your business and the degree of openness of your shareholders.
9. United States: tax exemptions and a huge solvent market
There are several factors that make creating a company in the United States (in spanish: crear una empresa en Estados Unidos) a good idea, especially if it is related to IT technology, since there is California with its Silicon Valley and some other very innovative states. Some of the advantages of creating an LLC in the United States (crear una LLC en Estados Unidos) are
- the workforce is diverse and skilled;
- The United States is a recognized leader in research and development and innovation;
- You can also find a wide range of financing sources: investment funds, banks, risk accelerators and a large number of business angels with checks starting at 5'000 USD.
- The United States is a confederation of individual states with quite diverse local legislation. The key factors mentioned above may vary from state to state. Therefore, the question arises, does it matter in what capacity a business is opened in the United States: as a permanent resident or as a foreigner?
There is one general rule you can follow, which is this: if you are a U.S. resident, you must register your business in the state where you live. In case you are not a US resident, it will be more profitable from a tax point of view to register your company in Delaware.
Why Delaware? More than half a million entrepreneurs have registered companies in Delaware, including more than 50% of all public companies in the US in 2019 and 60% of the Fortune 500. Delaware is considered the most business-friendly state in the US to register a company for the following reasons:
- the initial registration fee is minimal compared to other states,
- offers several tax incentives for LLCs, for example, corporate tax is paid only on profits earned in the United States, i.e. all foreign profits will be tax exempt,
- commercial license - not required,
- non-residents do not pay income tax,
- non-residents may assume the role of shareholders, members, directors or business managers,
Here, the rate for preparing and filing documents with the tax office is below the average market rate for similar services in other states,
There are limited rules for doing business in this state;
there is a separate "Chancery Court" here, created specifically to deal with claims against businesses.
There are several disadvantages to registering a business in the U.S:
Not all states have low taxes. For example, Silicon Valley has a combined corporate tax rate of 29.85%, of which 21% is federal corporate tax. The good news is that you need to grow to make a profit. But, if the profit is already visible, then this is a good time to attract investors and reorganize the company by relocating to a state or country with a lower tax burden. Therefore, you should be given the tax forecast as soon as you start your trial sales. Sometimes it is difficult to understand if foreign income is taxed.
10.UK - quick setup
Company registration in the UK is fast and affordable, making it one of the easiest in Europe.
Benefits of registering a company in the UK
Company registration in the UK can be completed within one hour and a fee of £14 (GBP);
the tax authorities understand that in the early years new companies do not generally make a profit, so there is no prosecution for unprofitable activity;
The British government offers various tax incentives for investors, founders and employees;
Some of the best places to start a business in the UK are Belfast, Durham, Derby, Stoke and Sterling.
Do your own research. Weigh the pros and cons and start your business. Remember that the world is very big and you don't have to settle for just what you have next to you.