Pocket guide on starting a business in Europe – Know the best location, type of company, registration procedure and formation tips
Why should you start your business in Europe?
Europe is one of the most central business hubs in the world.
In 2014, the European Union contributed to 23.8% of the world’s GDP and is a major trading power.
From an economic standpoint, it makes a lot of sense to start a business in Europe or expand an existing business into the region, to get a share of this profitable European market.
Businesses in Europe benefit from established legal frameworks, advanced financial systems and developed infrastructure. Moreover, many countries, especially in Northern Europe, have relatively higher income compared to other regions. Consequently, people generally have more disposable income and thus are more willing to spend for your products and services.
In addition, as 28 countries have entered the European Union, business in one European country also enjoys various benefits from other EU member states. In the Doing Business Report 2016 by World Bank, there are 13 European countries amongst the top 20 easiest countries to do business.
Choosing the best location in Europe for your business
The most decisive factor in determining the location for your business is understand where your potential customers and suppliers are. If a majority of your customers and suppliers are located in Spain, it would be most logical to incorporate a company in Spain.
Finding the right corporate structure
Similar to any other countries in the world, the most common way to start a business in any country in Europe is to form a private limited company (Limited Liability Company a.k.a LLC), also known as a SARL in French speaking countries or GmbH in German speaking countries.
Although shares are not freely transferred in an LLC, shareholders are sheltered and only liable for the amount of capital they contributed in the company. Compared to a public company, an LLC is faster and cheaper to set up, and also has less compliance requirements.
If you already have an existing business and wish to expand into other European countries, you can set up a subsidiary company (branch of a foreign company). Provided that you are a EU citizen and the parent company is in a EU country, you are free to set up a branch in any EU-member state.
Registering your company in Europe
The company registration processes in European countries are largely similar and fairly straightforward. Company incorporation typically takes 1 – 2 weeks. Incorporation of your company in Italy, Denmark, Netherlands, Poland and Portugal only takes 1-2 days, depending on business sectors.
Most countries also have a centralized one-stop shop authority that handles all administrative procedures. For example, Denmark has the Danish Business Authority, and France has the Centres de formalités des entreprises (CFE).
However, if you are not familiar with the process, company registration is still a very time consuming task. Every Government expects businesses to submit application in a specific format.
If the application form is not submitted properly, the relevant authority will contact and request you additional documents, which will delay the process. This delay will spoil your plans especially if you are located overseas.
Therefore, it is more desirable to contact local law firms or international business consultants to register the company on your behalf, so you can allocate more time on business development. An experienced consultancy firm should be able to incorporate a company via a Power of Attorney without its clients need to travel, saving much time, energy and money.
Opening a corporate bank account for your business
There are various bank account options in Europe. European banks in Switzerland, Germany and Austria are amongst the most secured and advanced, with long history in the financial industry.
If you have special relationship with banks, corporate bank accounts can be opened without incorporating a local company. This is a great way to diversify political and economic risks.
Moreover, in this modern age of business, it is not unusual to have an international business with clients and suppliers located in multiple continents. For example, you can have a consultancy business in Hong Kong that deal with Norway clients. Therefore, setting up an offshore account could facilitate payments, minimize exchange rate risk and reduce transaction costs.
The Single Euro Payment Area (SEPA) is a directive to simplify bank transfer within European countries. Transactions within SEPA incur very minimal charges or even at no cost at all.
Taxation and legalisation in Europe
A factor to be taken into consideration is tax implications.
Many countries in Europe such as Bulgaria, Hungary, Cyprus and Ireland offer low corporate tax rates in the region of 10% to 15%. Low tax rate is extremely crucial for new companies as cash flows at initial stage of incorporation are generally not stable and consistent.
Many countries in Europe including UK, Germany, Belgium and Denmark do not require an LLC to have a resident director, so you are able to manage your company from abroad.
Nevertheless, opening a company in Europe will be the best choice if you are a foreigner and your business in targeted towards the spending consumer power of Europe and the Middle East. Ireland, Bulgaria, Switzerland, Lithuania, Luxembourg, Romania are some of our recommended countries to start your business in Europe.
If you are interested in setting up your company in a European country, or if you are still wondering which countries would best suit your business needs, do not hesitate to email us at email@healyconsultants[at]com or call us at +65 6735 0120 to talk to our experts.