How to choose the location for starting a company

Posted by Dr. Karl Ruegg on 2018-07-12

Starting a business in a foreign country has become more and more accessible to enterprisers around the world thanks to the development of the Internet which is enabled even in the most remote corners of most countries. Moreover, investors no longer choose only developed economies to open companies in, as the countries on the path to economic growth are more appealing than ever as the governments have started offering various incentives to attract foreign investments.

With so many choices, comes the difficult decision of where to open a company. So, let’s explore the aspects to be considered when choosing a country for setting up a business.

The costs related to opening a company

One cannot start a business without having some money, therefore the cost related to opening the business is the most important aspect to take into account when choosing the location. By this, we mean the real costs, which imply the registration fee, the licensing, the office rental and hiring personnel.

From this point of view, there are countries in Asia and Europe where the business setup costs are not that high. Spain, for example, is not an expensive country when choosing it as a location for starting a business. Also, those planning to open a company in Spain can choose between several sectors which allow for the establishment of small enterprises.

For example, the costs related to registering and licensing of a Spanish company are reduced compared to countries like France or the UK.

The taxation system

One of the most important aspects related to open a company is taxation. Each country has its own tax system which comprises corporate taxes and other levies, such as solidarity taxes and surcharges, which can make a huge difference and add up to the whole costs spent on the maintenance of the business.

Also, the possibility of repatriating profits should be considered when choosing a country for opening a company.

The latest trends indicate a greater number of European investors choosing Asia like their investment destination, with China as a preferred country. The Chinese taxation system is quite friendly to foreign investors because of the double taxation agreements with most of the countries in the world.

Even if it has a progressive taxation system when it comes to companies, the lowest tax rate applicable to companies in China is 10%.

Company incorporation and restrictions for foreigners

The costs related to opening the company have been calculated, but there are other variables which must be taken into consideration. The most important ones are related to the restrictions investors face and the procedure for setting up the company, according to various questionnaires which stand at the base of the most important global reports on doing business.

Even if there are countries which still impose certain restrictions to foreigners, more and more governments offer various flexible structures for them to open companies in most industries. Once again, Asia is home to the countries which impose most of these restrictions; however if we take a look at Malaysia, it is one of the countries which have made significant progress with respect to these restrictions.

Opening a company in Malaysia has become simpler for foreign investors and so has the access to types of companies like the limited liability company.

The business start-up costs are also some of the lowest in Malaysia compared to other Asian countries.

If you plan on opening a company and have not decided to a country, you can also consider aspects like innovation, the industry you plan on working in and the workforce. Doing your homework implies analyzing all these aspects and even considering a few similar destinations for comparison before making a decision.

photo credit: marcoverch Rechnungen die bezahlt werden müssen via (license)

Source

https://www.themoneyprinciple.co.uk/how-to-choose-the-location-for-starting-a-company/


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