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There exist certain criteria that the entrepreneur should take into account when choosing the most appropriate jurisdiction to incorporate his or her company. There are practically no two identical business situations in the world, and in every case one or several particular criteria will be decisive. Here are the most important criteria for choosing the most appropriate jurisdiction:
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| – | Political stability and independence of the country. This is by no means an insignificant condition - any entrepreneur will agree that there is no sense in incorporating a company in a country, where tax exemptions can be annulled by an incoming government, or as the result of political pressure from other countries. |
| – | Requirements as regards financial reporting. The majority of tax-exempt jurisdictions do not require that financial data on the activities of companies incorporated there be submitted. However, if the entrepreneur has chosen a country where financial reporting is obligatory, I.O.S. will provide the company with the necessary accounting and auditing services. |
| – | Confidentiality of the owner. The legislation of some countries stipulates that the locally registered agent in that country must retain information about the beneficial owner of the company. Other countries, do not have such requirements. It should be noted that all information stored in a particular country's Register of Enterprises, is effectively in the public domain. Therefore, in order to ensure confidentiality in such cases, the nominee service is used as a rule. |
| – | The best conditions for the incorporation process. In order to define this criterion, you have to consider the following questions: |
| | 1) | Does this jurisdiction require the authorized and declared share capital of the company to be fully or partly paid or frozen on account? |
| | 2) | Can physical as well as legal persons act as the directors of the company in this jurisdiction? |
| | 3) | How efficiently is the procedure of company incorporation carried out? |
| | 4) | Is there a practice of incorporating "ready-made" companies in this country? |
| | 5) | What are the costs of incorporation and ongoing maintenance of the company? |
| – | The existence of double tax treaties between the jurisdiction of incorporation and the country where the company has to carry on its business. When considering this issue, it should be noted that the existence of such a treaty and the tax-exempt status of the foreign company are mutually exclusive - only companies that are taxpayers in the country of incorporation will enjoy the benefits of the treaty. The issue of international treaties will be very important when holding companies are being incorporated, when there are operations with securities and in other instances. |
| – | Taxation regime. In practice, most non-resident companies are incorporated in countries with zero taxation; however, this does not necessarily imply that zero taxation is the main criterion and the objective of the entrepreneur in most cases. Very often entrepreneurs use taxpaying companies operating in low-tax regimes. |
| – | Presence/Absence of a jurisdiction in the "black list" of the country where the company is going to carry out its business activities. If one or other jurisdiction is included in the "black list" of a specific country, the owner of the company will encounter certain restrictions, imposed on business transactions between the residents of that country and companies from the specific blacklisted jurisdiction. |
| – | General rating of the country in the business world. You do not have to be Nostradamus to forecast that where the owner of a company incorporated in a small, exotic and totally tax-exempt island, presents the articles of incorporation to some public or other institution, he or she will be asked many more additional questions than when presenting the same documents from some respected and industrially developed country. |
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Let us consider some examples of selecting jurisdictions appropriate to certain business situations.
Example 1. The entrepreneur plans to carry on normal external trading operations, let us say - importing goods from European countries to Asia, involving a non-resident company. In this case, a US LLC will be an ideal operating vehicle. Such a company records positive indicators in practically all respects - the high rating of the country, minimal reporting requirements, high confidentiality, the best conditions for incorporation. It is particularly significant that most US States are not blacklisted by the any countries and, therefore, commercial transactions between residents of these countries and American companies are not subject to any restrictions.
Example 2. The entrepreneur plans to open an account at a Swiss bank to hold funds. In this case, the ideal vehicle may be a company from a classical offshore jurisdiction - the BVI, Panama etc. Swiss bankers have a good command of issues relating to classical tax-exempt jurisdictions and positively assess the status of those companies. A company from the USA, on the other hand, may leave an entirely different impression - the "gnomes of Zurich" may consider that they are dealing with a US-resident company that is simply planning to avoid declaration of its bank account and thus evade US tax.
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