Establishing a company enables a business to operate within a separate legal entity, and thus provide protection and independence of action to shareholders and officers in the company. As is well known, establishing a company is not an easy job – it usually requires investment of resources, capital raising, acquisition of assets, locating an area to hold the company’s activities, and so on.
The difficulties increase even more when it comes to establishing a company overseas, where aside of many benefits, there are some obstacles, like the lack of familiarity with the foreign market, foreign language, establishment costs, administrative complications, etc.
There are cases in which establishing a company abroad is not worthwhile, therefore it is important to consider the alternatives.
Adecco Israel, a business solution management company – assists its clients around the world to operate in foreign countries while sparing the need to establish a legal entity in the target country.
When is it worthwhile to set up a company abroad? What is a tax haven and where can you create one? What are the disadvantages of establishing a company? What are the alternatives to establishing a company?
All of these questions and more will be answered in the following article. Keep reading!
Establishing a company overseas can be justified for several different reasons, that can be divided into two main categories:
Establishing a company in Israel is worthwhile when the main business is run within Israel, and targets internal customers, namely Israeli consumers, or other Israeli companies.
Nevertheless, there are businesses that legally cannot be established in Israel, even though they may be legal in other countries. The most prominent example is management of gambling business. In these cases, Israeli entrepreneurs would be required to operate their businesses in other countries.
Another problem that may arise for Israeli companies is direct trade with companies that operate in states who do not maintain diplomatic relationship with Israel.
Not many are aware of this, but the scope of economic activity between Israelis and these countries is not insignificant. These relationships are conducted indirectly, through companies that Israelis set up in foreign countries. Thus, formally, there is no direct economic communication between these states and Israel.
A ‘Tax haven’ is a strategic planning of a business’s tax payment. Countries who provide ideal conditions in terms of taxation are ‘Tax havens’.
The main reason for countries to create convenient conditions to create ‘tax havens’ is the desire to create ideal conditions for the flow of foreign capital into the country, and incidentally, the desire to incentivize the employment of local labor.
Creating a ‘tax haven’ is a great cost saving, since there is no need to pay taxes at all in those ‘tax havens’, or the tax rates are significantly lower than in other regions and countries.
In most cases, establishing a ‘tax haven’ is worthwhile when the potential savings have enormous economic dimensions.
It is important to check each case separately and be familiar with the different considerations that are relevant to the viability of creating a ‘tax haven’.
If the company you wish to establish, is going to operate mostly in the local market of a foreign country or operate with neighboring countries – it might be worthwhile to set up the company in the target country.
A registered company will allow easier access to the local market – from a strategic point of view. Furthermore, setting up a company in the target country will allow to get acquainted with the country in its entirety and thus market the product with more efficacy.
In addition, in the long term, savings in costs of transportation of goods and other services can be achieved. It is very possible that the savings will be high enough to justify the “headache” involved in establishing a company abroad.
First of all, a calculated choice regarding the target country must be made. In order to optimally choose a country, you must define two aspects of the process:
First, what are the motives to set up the company overseas, and second, what are the specific characteristics of the business which the company wants to manage.
After choosing a country, it is important to decide what the legal structure of the company will look like. Firstly, this aspect has significance in terms of the corporate structure of the company, which affects its routine conduct.
Secondly, there are tax considerations that guides the form of organization that will be chosen, and therefore it is important to carry out this step with extreme caution.
Moreover, you must check whether the target country has signed international conventions, in order to avoid situations of double taxation between Israel and the target country.
Following that, it is important to make sure that it is possible to open a bank account in the target country. At times, this possibility might be blocked – depending on the origins of the company’s founders and the type of business.
Finally, the plans should be executed, as well as the administrative activities that are involved in establishing a company.
Firstly, setting up a company involves high financial costs. Therefore, if the Israeli company does not have much capital or expectancy for significant current incomes – they should reconsider the decision to set up the company.
Additionally, it is less worthwhile to establish a business in cases where the company lacks certainty in terms of its business’s success abroad. It is very important to have business flexibility and agility, especially in the era of COVID-19.
It is not unlikely that following the flight restrictions or the possibility of entering an economic crisis – there might be a need to cease the business activity and sell or dismantle the company. In these cases, the company will be a bureaucratic and economic burden that wastes time and money and causes delay in the withdrawal from the target country.
Furthermore, there are cases in which there is a desire to set up a company in a foreign country, but there is no final decision regarding the identity of the country – for example, if a business is interested in operating in the USA but has not decided in which state to do so.
In these cases, it is not recommended to establish the company in each state, though it is advised to thoroughly examine the possibilities of running the business in several states, before deciding where to operate.
It is recommended to operate simultaneously using the management services of Adecco Israel, before making the final decision.
Establishing a company in a foreign country has advantages and disadvantages. It is highly recommended to consider and plan the decision regarding setting up a company before arriving at the foreign country.
Through Adecco Israel, a business project management company, your company can save resources and time that is required, in order to deal with complicated legal, operative and financial issues in the target country.
Adecco Israel provides services to its many clients in 66 countries worldwide. Adecco assists its clients with the decisions and the process of choosing the best destination country in order to establish the company, and moreover, to run the business remotely!
Due to its many years of experience and international connections, Adecco Israel helps its clients with various complicated issues and obstacles on their way to the company establishment; Such as knowledge of the local bureaucracy, opening a bank account, human resources management, financial consultant and management and all the regulatory, legal and administrative assistance that is included in opening a new company abroad.
With the help of the professional advice given by the business development experts of Adecco, your company can start expending your business without mistakes, while maintaining flexibility in the target country and all of that, in the most efficient and fast way possible.
Contact us today, so we can start expending your company tomorrow!