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Company Formation – Choosing the Right Jurisdiction

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In today's global economy, an increasing number of companies are setting up offshore operations. Today, a sizable number of MNCs and small to medium sized companies are based offshore. Likewise, numerous self-employed consultants hold offshore companies and offer their services to clients across the world. There are several reasons behind why businesses are choosing to incorporate offshore companies such as low taxes, ease of company formation and ongoing compliance, transparent and efficient legal system, and access to world-class financial institutes.

A number of factors need to be considered and deliberated upon while setting up an offshore business. In order to choose the right business jurisdiction, critical elements such as the business environment, costs involved, ease of company formation, ease of ongoing compliance, bureaucracy levels, and tax regime need to be taken into account.

Ease of company formation, minimal statutory compliance, and low bureaucracy levels

Incorporating an offshore entity holds many benefits for a company; easier business administration being one of the key advantages. Businesses that are constrained by the convoluted legislation, red tape and compliance-related hurdles in their own countries often choose to incorporate an offshore company. Tax rates, regulatory requirements, and economic incentives differ greatly from country to country. Choosing the right jurisdiction for incorporating a business should therefore be done keeping these considerations in mind. Business incorporation takes very little time these days and the administrative tangles are minimal with most of them being handled by a company agent. All you need to do is make use of the company incorporation services offered by a consultancy that specializes in the field.

Conducive business environment

The general business climate should be pro-business and pro-talent and this is usually reflected in a country's immigration policies, regulatory environment, and the openness of its people. It is important to choose a jurisdiction that not only ensures the availability of excellent infrastructure but also enforces policies and laws that promote entrepreneurship and commerce.

Higher profitability

Offshore business incorporation can be highly profitable as a wide-variety of shares, bonds, commodities and other financial instruments can be held and managed through a single offshore company. Moreover, investments made through an offshore company are generally exempted from tax on the income from the investments.

Low taxes

Many leading jurisdictions that cater to global investors offer low tax rates and minimum reporting requirements. This means that the company benefits not only from low corporate tax, but also from lesser compliance and other regulatory costs. Moreover, many such countries offer no inheritance tax or capital gains tax.

Singapore as your destination for business incorporation

Singapore offers numerous advantages which makes it one of the best places to start a business.

According to the Doing Business 2010 Report Singapore retained its ranking as the world's easiest location to do business, due to its low import and export costs, well-framed laws for protecting investors, and labour regulations that favour employers. Due to its low and simple tax regime, Forbes rated Singapore as having the 11th lowest tax misery in the world. Singapore is also the most competitive country in Asia according to the World Economic Forum's Global Competitiveness Report. Unlike other jurisdictions, there is no requirement to rent or purchase a physical office in Singapore for company incorporation. Singapore's corporate tax rate is a flat 17%. Additionally, there are tax exemptions for startup companies. There is no capital gains tax in Singapore. Furthermore, incorporating a company in Singapore only takes one day. All these factors make the country an ideal jurisdiction for business incorporation.

Hong Kong as your destination for business incorporation

Like Singapore, Hong Kong is one of Asia's major economies and a preferred choice for business incorporation. Hong Kong is ranked as the world's freest economy and also ranked third in the World Bank's 'Ease of Doing Business Report', 2010. Hong Kong has the lowest tax rates in Asia and one of the lowest rates in the world. Taxes in Hong Kong are levied on the "territorial principle". In other words, taxes are only levied on income "derived from or arising in" Hong Kong and not on income sourced outside Hong Kong. No tax is levied on profits arising abroad, even if they are remitted to Hong Kong.

Roger Lee is a Singapore-based freelance writer who writes on a wide range of topics on doing business in various jurisdictions. For more information on topics discussed in this article, refer to Singapore company formation and Hong Kong company formation guides.

Author: Roger J Lee
Article Source: EzineArticles.com
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