Starting a business: 10 frequently asked questions
Company incorporation is a straight forward affair once you know how to do it. With over 13 years of experience Healy Consultants have acquired knowledge of what are the challenges and “good-to-know” when registering a business anywhere in the world.
In order to share a bit of our knowledge and help Clients that are considering registering their companies, we have created the top 10 questions we receive from our Clients. As you will be able to see below, the answers depended on the Client’s specific case, however, hopefully by the end of this post you will have a clearer view of what you should consider when starting a company.
1. What is the best place to start a business?
The best way to start thinking of a location is pondering on i) what are your business plans ii) where are your customers and suppliers located and iii) where are you located. These three main points you will enable you frame your choices to a geographical location.
The next step is doing research. Some of the items that are worth investigating are: i) the type of business entities available ii) tax system in place iii) incentives that may apply for your industry iv) development level of the industry v) quality and price of the labor market vi) quality of the infrastructure. This information will be able to reduce the list to just a few countries, if not for one.
Our website is a good source of information on the advantages that each country can bring to businesses, as well as the best type of industry for that location. Other useful websites include the Doing Business by the World Bank, the Deloitte Country Guide, as well as Government’s websites.
Research is a must when starting a business. A location must be chosen taking into account all variables in order not to have surprises in the future.
2. What about tax havens?
Traditional tax havens are very popular jurisdictions for Clients that wish to minimize taxes. However, with a bit more research it is possible to see that they are not good long-term solutions.
What attracts Clients to tax havens is that i) companies with overseas business are not subject to local corporate income tax ii) the details of the owners and directors are not available to the public and iii) in their majority, they have avoided signing tax information exchange agreements with other countries.
However, due to these advantages, tax havens do not have a good reputation worldwide, being often linked with money laundering and tax evasion. Companies registered in tax havens usually i) have a hard time opening corporate bank accounts with reputable banks and ii) are not well seen by clients and suppliers worldwide.
Instead of tax heavens, for Clients that wish to minimize tax obligations, we suggest registering an offshore company in a reputable zero tax country such as Singapore, Hong Kong and Dubai. You can find a map with all of our recommendations on our website.
3. What are the requirements for company formation?
Each country has a different requirement for company incorporation, however here are the items that you should keep an eye on:
- Shareholders: the most important thing to know is if the country specify the nationality and the residency of the shareholder. Most Middle Eastern countries for example require at least one local shareholder, a company owned only by foreigners is not allowed. Philippines on the other hand, allows foreign owned companies as long as the foreigner resides in the country;
- Directors: same as with the above, it is important to notice if the country requires a local or a resident director and the minimum number of directors allowed. While Singapore only required one, Thailand requires 7;
- Company secretary requirements;
- Registered address: all countries require local companies to have a local registered address. In some cases, a Virtual Office is sufficient to comply with regulations, in others, the Government will want to see a lease agreement before completing company registration;
- Capital requirements: the minimum capital required to open a company can vary greatly from country to country. In Singapore for example the capital requirement is just US$1, while in Saudi Arabia, companies with foreign shareholders are required a capital of US$27,000. Furthermore, some countries require the capital to be deposited into a capital account before the company is incorporated, while other allow it to be deposited once the process is finished.
4. What if I don’t have a resident or local director/shareholder?
That’s not a problem. We at Healy Consultants can supply you with nominee shareholders and directors if necessary. A nominee ensures that Clients meet the necessary requirements for company registration without having any role in the administration of the company or without being a bank account signatory. Before the director is appointed a Nominee Agreement is signed to protect both parties.
5. How long will the incorporation take?
Incorporation time really depends on the country, as it can vary from 1 week to 6 months.
South American, African and Middle Eastern countries usually require 5/6 months for a company to be registered due to local bureaucracy and regulations.
If you wish to have a company in a week you should consider Hong Kong, Singapore, New Zealand, UK for example. These countries have a good online system in place that makes registration simple and fast.
It is crucial to have a realistic expectation of timelines to avoid surprises. The Doing Business website has a brief description of the time and steps required to register a company with no foreign shareholders or directors, however if your company does not fit into that criteria, the timeframe can be much longer.
Visit our website for a better understanding of the steps and timeline to register a company in any country in the world.
6. Where should I open a bank account?
Bank account opening will not just depend on your business plans, it also highly depends on the banks themselves. Unfortunately, in recent years banks have been more cautious about opening corporate bank accounts. Depending on i) the type of business activities, ii) the place of company incorporation and iii) the nationalities of the shareholders and directors, it can be quite hard to open a bank account.
In our experience for example, companies incorporated in traditional tax havens can have a hard time opening bank accounts in reputable jurisdictions, having to open accounts in other tax havens where banks have less strict requirements.
Nevertheless, the first thing to consider is the purpose of the company and the bank account. If you are setting up a local company to serve local Clients, then a local bank account is the best option. If you wish to set up an offshore company, places like Singapore, Hong Kong, Switzerland are usually the preferred choice.
To have an overview of opening a bank account in the world, take a look at our website.
7. Will I have to travel to open a bank account?
As mentioned before, banks are increasing their requirements for bank account openings. Our Clients should expect to have to provide more documents including i) sales contracts ii) lease agreement and iii) reference letters from lawyers and licensing authorities. Furthermore, they should also expect to have to attend an interview with the bank officer.
Hong Kong, Pakistan, Taiwan and Brazil are some of the jurisdiction known for this requirement. No matter which bank, all shareholders, directors and bank signatories are obliged to travel to complete bank account opening.
A we understand that this can be a nuisance for Clients, therefore we have prepared a list of non-travelling banking options for their reference.
8. How long it takes to open a bank account?
Bank accounts usually take at least 4 weeks. For high risk Clients, the bank may require additional due diligence or may require Clients to travel, delaying the opening process. However, our Clients should plan at least one month before they have the account numbers.
9. I want to apply for a visa to move and manage my country.
Visa applications have become increasingly tricky, but it is not an impossible ordeal. For Clients that wish to setup business to apply for employments visas we recommend the following:
- Have contracts with local customers. The Government will want to see that you intend to do business in the country, or if the company is a tool for visa application. Contracts and invoices with local companies are essential for visa application;
- Invest at least US$50,000 in your company. Although most countries allow you to open a company with a capital of just US$1, showing that you are willing to make a significant investment in the country is also a good way to prove that the business is real and not just for visa;
- If possible, have a plan to hire local staff. Although not all countries require you to hire local staff before applying for a visa, it is good to show that you indent to hire locally and will not just depend on foreign workers;
- Do your research. All countries have many requirements for visa application, such as i) education level ii) work experience iii) salary thresholds. Be aware of them before you incorporate your company. Furthermore, most countries also have special programs for investors, it is worth taking a look to see how your company can be eligible.
Now more than ever countries are making it harder for companies to hire foreigners and strongly prefer that they hire locally. Just registering a company is not enough to justify a visa, companies and employees must comply with additional requirements.
10. What about taxes?
Taxes are one of the main drivers for company incorporation, and rightfully so. Taxation is a crucial item that every company has to be aware of, especially after company incorporation.
Usually companies are required to submit a monthly report and pay monthly VAT and other payroll and social security taxes; on an annual basis there are obliged to
submit financial statements and pay corporate income tax. This applies for all companies and all countries. Clients that do not oblige with the above may face penalties.
The good thing is that taxation information is available on most Government websites and across the internet. Additionally, we at Healy Consultants can assist our Clients with their monthly and annual report obligations.
Contact us for help
Hopefully now you have a better understanding of what you should consider when registering a company. If you have any more questions, of want an expert opinion, we at Healy Consultants will be happy to assist you. With over 13 years of experience, we will be able to assist you from A to Z. Give us a call at +65 6735 0120 or drop us an email at firstname.lastname@example.org.