ENTREPRENEURSHIP / SEP. 05, 2014
version 3, draft 3

How to Decide Where to Register Your Company

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We live in a world with fewer and fewer boundaries. A company can now quickly and easily conduct business with someone on the other side of the world. Your physical location is no longer a limitation on your potential success. Online retail stores, overnight shipping and digital downloads mean you can sell to everyone, everywhere any time.

The only real decision you need to make is where to register your company. You can sell and conduct business online in the virtual vastness of cyberspace, but a company still needs a place to call home. It might be the country, state, or province you call home, but it doesn’t have to be. There are a few things to consider:

Tax Rates

Every country sets their own tax rate, and states or provinces within that country may have a second set of taxes on top of that. Looking at the various tax rates for the places you’re considering is a quick and easy way to see where you could save some money. The United States, for example, has a basic corporate tax rate of 40%, while Canada sets it at 26.5% That much of a difference can really add up over time. Taxes are never so simple, though, and it is possible to pay less via various deductions and tax breaks available in each country, and most places use a sliding scale depending on income. As a basic guide, the corporate tax rate is as follows:

  • United States - 40%
  • United Kingdom - 21%
  • Canada - 26.5%
  • Ireland - 12%
  • United Arab Emirates (Dubai and Abu Dhabi) - 55%
  • Isle of Man - 0%
  • New Zealand - 28%
  • Australia - 30%

Beyond the basic rate, though, it is worthwhile to read up on the tax collection agency for a specific location to get a better idea about tax deferment, tax breaks, tax abatement, tax incentives, and so forth. Many countries are actively trying to attract foreign investment and business, so they offer many incentives - sometimes for a set period of time, sometimes indefinitely - to attract businesses. The recent billion-dollar merger between Burger King and Tim Hortons means that Burger King can register as a Canadian company and get access to that lower corporate tax rate...something that no doubt made the deal even sweeter. 

Can You?

One of the simplest questions to ask yourself is whether you’d be allowed to register a company in a country. As a non-citizen or resident, you may not legally be allowed to register, making the decision for you.

You can register a company as a non-citizen in the US, for example, although it does entail additional steps and cost. The United Arab Emirates, on the other hand, requires you to take a local partner, and they must have at least 51% ownership of the company (unless you set up in the so-called “Free Zones” in Dubai, where companies can be 100% foreign-owned). Other countries may restrict or ban foreign companies completely. You’ll just have to check.

Where’s Your Target Market?

Depending on your service or product, you may have a very specific market in mind. If it appeals most to Americans, it would make sense to register and set up shop in the United States. Think about your ideal customer. Who are they? Where do they live? There may be more than one answer, of course, but answering these questions should give you some indication as to where you should ideally register.

Beyond that, some markets and people might be put off buying from a company located very far away, and still others have very strong feelings about buying “local” (or at least domestic). That goes for everything from contact addresses to website suffixes (.com vs .co.uk for example). Once you’ve identified your largest target market, it makes good business sense to register and place yourself within that group.

The Red Tape

You should also examine the red tape and bureaucracy that you’ll have to go through in order to register. While not the most important item on this checklist, it is worth exploring, especially if you’ve narrowed it down to 1-2 choices. The one that is easier to deal with makes your decision for you.

Other Useful Links

Corporate Tax Rate Table

Corporate Tax in the United States

There’s a lot to look at and consider, but again, your actual location matters a lot less than it did in the past. You can work out of your garage and sell to the other side of the planet. Aside from tax rates, there is probably not much difference between the usual suspects, so you can’t really make a bad choice. All things considered, it should likely be your target market that influences your decision the most. Identify them, and then register accordingly...you can do it completely (or nearly so) for most countries. And then get down to the real business of growing and selling.

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