Things to consider when choosing a jurisdiction for setting up a company

When forming a company, choosing the right jurisdiction is an extremely important strategic decision which will have a significant influence from the moment of registration until the business ceases to exist. The jurisdiction you select will define which laws and international agreements your company must comply with. There are various criteria which need to be considered before the registration of the company. Furthermore, each entrepreneur and his or her business is different, and while some criteria might be crucial for some businesses, others might not find them so important.

Consider such a broad concern as the political stability and independence of the chosen country. It would not make much sense to register a business in a country where tax exemptions can be cancelled as soon as a new government comes to power. Below, we discuss some of the most commonly raised criteria which should be considered before deciding on the right jurisdiction for your business.

Forming an offshore company is not about evading taxes, but it can be strategically advantageous to minimise your tax burden in a legal way, thus helping you save money and grow the business. Be sure to check the tax policy and tax rates imposed by the jurisdiction; it would also be helpful to consider tax treaties, in order to avoid double taxation. Usually, most non-resident companies are registered with the status of zero taxation.

It is important to note that the tax exemption granted to foreign companies and the effects of any double tax treaty between the country where the company is intended to operate and the jurisdiction of incorporation may be mutually exclusive. This means that only those companies that actually pay taxes in the country of registration may enjoy the benefits of a double taxation treaty with another country.

A nominee shareholder is a third party who is registered as a shareholder in the company. The main purpose of a nominee shareholder is to maintain the client’s privacy by not publicly disclosing the actual owner of the company.

Most offshore jurisdictions have made efforts to secure client privacy and confidentiality through the local legislative system. Before deciding on the right jurisdiction for your company, it would be recommendable to check that there are no requirements to disclose beneficiary information, or else that disclosure requirements are limited to such bodies as the central bank and other authorities.

When registering a company, the owners decide how much money they want to or can invest in exchange for a certain number of shares in the company. Often, the authorities regulate the minimum share capital through corporate law; therefore, it would be useful to find out whether your preferred jurisdiction has such a minimum share capital requirement. For example, in Cyprus there is no minimum share capital for private companies, whereas the minimum share capital for public companies is set at 25,630 EUR.

Generally, all registered companies are legally required to have a registered office address. The registered address is the place where all official state authorities, such as the tax institution, will send letters, reminders and other communications. However, there are certain countries, such as Luxembourg, where there is no requirement to have an actual office, and your company can simply rent a post office box.

As with all the criteria discussed so far, bookkeeping requirements also tend to differ among jurisdictions. For example, it would be useful to look for a jurisdiction with minimal or optional statutory filing requirements and no obligatory auditing of accounting records.