When business owners decide to incorporate their business and form a legal entity, they tend to think that the significant decision resides on which company structure they should go for. That’s where they are wrong.
Because just as important is to figure out which entity ensures, for example, the protection of its owner from being held responsible and helping him reach his goal, another matter of extreme importance revolves around choosing the location he should incorporate.
Nowadays, things have changed. Your market is no longer limited. With the proliferation of technology, e-commerce, and the limitation to the market where you live has extinguished, you are somehow connected to the world. Therefore, your market reach could be limitless.
The presence of the business owner in the state or country of incorporation is no longer required. Everything can be done remotely and through specialized agents.
With all that being said, the business owner should think and reflect on where he should form his legal entity.
Now, it may seem like a complicated issue to resolve since it sure isn’t easy to choose where to form your company when any place in the world could be an option.
For this reason, in this article, we will lay down several factors that any business owner should consider when choosing the location of his business incorporation.
One of the significant factors to consider is the capital requirement. Nowadays, business owners don’t necessarily have a significant amount of money. Many startups tend to start with as little as their savings.
For this reason, checking the countries and states which enable the incorporation of specific entities with no capital requirement is a must.
For instance, the Netherlands has reduced the capital requirement for private limited companies from 18,000 Euros to 1 Eurocent to attract business owners.
Every business owner should consider the legal system that is applicable in the country or state that he is to incorporate in. Taking into account the flexibility and the requirements of the law of that country is major.
For example, certain authorities demand a lot of paperwork filing, exhausting, or implementing complex rules. This stuff could be tiring and form a drawback for a business owner, and urge him to search for a more flexible environment to form his company.
This is another crucial factor, if not the most important. There are multiple types of taxes implemented on companies, such as corporate tax, income tax, franchise tax, etc. All these taxes can exhaust a business, certainly if that business is not doing so well.
Many authorities have been aware of that fact and changed their laws if not created new ones to minimize or reduce the implementation of such taxes.
For instance, Delaware, Nevada, Wyoming, British Virgin Islands are all known for their tax-friendly system, where they don’t charge corporate tax. For example, in Wyoming, the franchise tax cannot exceed $50 a year.
It is essential to mention that if the business owner intends to lead his business in Delaware, he will no longer enjoy the benefit of not paying corporate tax.
This is why tackling this factor can be of huge benefit and can majorly reduce the costs and expenses that the business owner has to bear.
When starting a business, every business owner should have a vision of where he intends to take his business and which level he wants it to reach. Does he want a local business with a humble capital? Or sky is the limit, and he intends to grow and attract investors?
Suppose the vision is going big and getting investments. In that case, the business owner should probably consider incorporating in countries that attract investors, such as Delaware, which is known as one of the most attractive states to investors.
Every business owner should consider these factors. Each business differs from the other, and consequently, its needs and goals will differ.
Therefore, there is no general rule, so if you are having trouble choosing the place to incorporate in, please visit Lexyom.com and book an online consultation with a lawyer.