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How to Select a Jurisdiction for Your Company

Starting Business
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Do you want to know which is the best offshore company jurisdiction for your business? Read the article to find out!

1. Price of Company Formation and Annual Maintenance

Company formation is essentially the incorporation of a company, or rather what we call company registration. The price of company formation is largely dependent on two factors. That is, the agent you choose to register your company with and the type of company you choose to register. For instance, in the UK, sole proprietorships are usually charged an average of £60 while charitable organizations go for an average of £140. There is also an annual fee charged to protect your company’s identity and ensure that no other company registers under a similar name. Moreover, agents usually give regular advice to companies to avoid any costly changes in jurisdiction that might come with some serious legal implications.

2. Local Laws, Regulations and Investor Confidentiality

The attractiveness of local laws and regulations largely determines which countries become influential business hubs. For instance, multi-national corporations are well known for carefully considering which offshore jurisdictions best suits them. That’s why you’ll hear of big offshore hubs like Bermuda, Cyprus, Switzerland and even the Grand Cayman Islands. These preferred offshore destinations are best known for their confidentiality clause and asset protection laws. The favourable business climates of various European Union states are also determined by local laws and regulations. For instance, according to Forbes, Ireland is currently the best business destination in Europe due to its favourable tax burden and investor protection laws.

Formation of Limited Liability Company in Cyprus

Easy and quick formation of Limited Liability Company within European Union with low corporate tax rate of 12,5%, zero taxation on dividends for holding companies and benefits of double taxation agreements with 44 countries worldwide. Cyprus LLC is an ideal solution as EU intermediary or holding company, as well as regional headquarter.

3. Political and Economic Stability, Reputation

The essence of political and economic stability in choosing a jurisdiction for your company can’t be overemphasized. Case in point is the recent attempt by Scotland to partition itself from the Northern Ireland. According to the BBC, investors were quite skeptical about the negative economic implications for businesses considering the fact that they would now have to grapple with the inconvenience of two different jurisdictions. There have also been reports of demonstrations in some European countries which ultimately hurt their reputation as favourable business hubs.

Formation of Swiss Holding Company (GmbH) in Zug municipality

Switzerland is one of the most attractive jurisdictions for holding companies, granting special tax status in stable and reliable political and legal environment. Swiss GmbH can be formed by only one founding person or company, allowing 100% foreign ownership, with liability limited to the share capital.

4. Taxation and Information Exchange Control

As governments implement austerity measures through internal borrowing, the European Union has been trying it’s very best to harmonize tax systems across Europe while at the same time allowing member states to institute their own tax reforms. This is due to the fact that the EU has realized the ramifications of individual tax obstacles in relation to cross-border trade. These efforts are aimed at encouraging the nurturing of small and mid-sized companies as business operations are eased by involved jurisdictions. This in effect will lead to job creation and necessitate economic growth across Europe. However, the EU aims to exempt corporate and income taxes from harmonization in order to avoid any instability in revenue collection.

5. Compliance Requirements

Different jurisdictions have different compliance requirements when it comes to company formation. For instance, in Italy, the minimum starting capital is 10,000 Euro while in the Netherlands, it’s 18,000 Euro. It should also be noted that if your company will be operating in various jurisdictions within the European Union, then you’re likely to get involved in transfer pricing; in which case you should familiarize yourself with the “Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration.” Besides addressing cross-border disputes, it gives various interpretations regarding the smooth operation of market jurisdictions within the EU.

Formation of Germany Limited Liability Entrepreneurial Company - Mini-GmbH (Unternehmergesellschaft UG)

Formation of Limited Liability Entrepreneurial Company (UG) - mini-GmbH. The most common form of business enterprise in Germany with simple structure designed for private companies, with minimum share capital requirements of only EUR 1.

6. Banking Facilities

Various factors should be considered when assessing the banking facilities within a jurisdiction. The major challenge for most companies is finding a bank that doesn’t charge hidden monthly fees. Security of funds also poses a major challenge considering the technological advancement of money scams and frauds. The responsiveness of customer service also matters a great deal especially when urgent matters have to be addressed. And last but certainly not least is the ease with which one can withdraw or deposit funds. Otherwise, if one is not careful, funds can be withheld abruptly as a form of ‘austerity measure’ like the Greek recession back in 2008.

7. Requirements with Regards to Minimum Number of Directors & Shareholders

In the UK for instance, directors and shareholders don’t necessarily have to be local citizens and they can be as young as 16 year old. Plus, the minimum number of shareholders is 2. And when we head over to Hungary, it is advised that a company has at least 2 directors that should be elected after every 5 years. The tenure can of course be extended at the discretion of the company. All in all, some jurisdictions share the rules regarding minimum number of directors and shareholders.

8. Language for Communication and Time Zone

Language tends to go hand in hand with time zones. Moreover, the scope of your market largely determines the number of time zones, and consequently the number of languages your company will have to familiarize with. For instance, if you choose Germany as your primary jurisdiction, then it’s likely that your market will expand to surrounding jurisdictions like Poland, France, Netherlands, Italy and so on. You should therefore expect clients to speak different languages within this time zone and you’ll thus require efficient customer service to address this challenge.

What we’ve presented to you is essentially a nutshell of the hurdles and paperwork you’ve got to deal with before ultimately deciding on the best jurisdiction for your company. It’s therefore up to you to gauge the suitability of various jurisdictions and come up with a final decision regarding your company HQ.

Starting Business Expert advice and insight on starting, operating, and growing your business
As industry leaders for corporate solutions, StartingBusiness provides a broad range of high-end administrative and financial services to a global network of corporations and entrepreneurs from all around the world.
As industry leaders for corporate solutions, StartingBusiness provides a broad range of high-end administrative and financial services to a global network of corporations and entrepreneurs from all around the world.

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