Internet business is one of the most rising business and the dream of every entrepreneur in this field is to build a company that would be something as huge as Google. What it takes to build such a company is the fact that it takes much of hard work, patience and a right direction to achieve such a big target. Perhaps getting incorporated is one such thing that allows a company to grow up and various big things such as getting venture capital or loans becomes easy enough. So where to incorporate and should you incorporate or not? Lets have a closer view on this.
For all those who may have no clue about what I am talking about should consider reading my previous posts that were started a website?consider incorporating and favorable business structures for internet entrepreneurs. Apart from this a lot of internet entrepreneurs also exist as sole proprietors because of the hectic process of getting a company incorporated and payment fees to keep it maintained.
Even successful bloggers including Amit Aggarwal remains a one man army even today when it comes to manage his business although really makes a great use of his skills. Just to mention if you have started a website for fun or you created a mobile application don’t just run and get incorporated. You should only go ahead and form a regular company once you have the plan to take your work seriously and turn it huge.
Now to the point. As operating a website or releasing a mobile application or a software involves in no way doing business physically anywhere you can go ahead to incorporate your business at any place in the world. Although if you are doing business by making your business visible and physically present such as having an office and hiring employees you need to incorporate/register in your home country or state.
Whereas on the other hand(if not physically present) the best would be to incorporate in such a country where the rules are flexible and there are lesser compliances.
Some important points that are included in the suggestions below include :
- No restriction or compulsion on the amount of capital
- No or very less taxes
- No annual filing requirements(or very less)
- Privacy protection of directors/members.
- No restriction in the working of the business.
Some of the countries or territories which I believe are the best to incorporate or register your business are :
One of the top places where more than 80% of the publicly listed companies of the United States have been incorporated Why? Because of the amazing business laws this state provides. Also apart from this if a business doesn’t do any real business in the state, they don’t require any business license or pay corporate taxes. In short a place where even after getting a corporation incorporated or an LLC formed you have to pay no taxes if your business is not located anywhere inside the state.
Only thing that one has to pay is an annual franchise fee of 200$(for corporations) or $250(for LLCs) till 1st June of every year. A registered agent having a local Delaware address is also required(if you have any friend you can appoint him/her as the registered agent). Nothing else is required! Citizens of any country can incorporate their companies in less than 60 minutes and the best you get an American company.
The British Virgin Islands
This is also another option for any person who wishes to form a company outside the boundaries of his or her domestic country. Although this is one suitable option for all those people who are a bit more established than just being a startup. Why? Because unlike Delaware above here you have to pay for a registered office, a registered agent(around $500 a year) as well as the annual fees of $300(minimum).
So this may seem a bit hectic although the best part you don’t have to maintain any record and file it up and apart from this there is nothing to be filed annually. Also the corporations incorporated in the United States have certain filing requirements although here you get a full corporation(with the name ending with Inc., S.A. AG, or Ltd.) with no filings.
Once again the US, the best thing just like Delaware here you enjoy pass thorough taxation(if you form an LLC). The annual compliance here include an annual report that has to be filed which is for $80 annually. Here unlike in Delaware you need to have a registered office address as well as a registered agent. Both of these may amount to around $200 annually for you.
Also the fact to be noted up here is that the first LLC that was formed in the US was formed in the state of Wyoming, rest other state laws are somehow similar to these laws.
Now don’t take this state as a gamblers place, because now the small businesses rely on this place a lot. Personally if asked I believe Delaware and Wyoming are fairly better places to form an LLC or incorporate but if someone is planning to form a business enterprise here then not a bad deal either. The annual fees are somehow not cheaper or expensive and the same verdict goes for the state laws.
The place where a lot of Americans form their offshore company, this is another place which will provide you with the same facilities as of The Virgin Islands(mentioned above) and also provide you with a full fledged corporation. The only thing that you should be noting here is that to incorporate you need at least 3 directors which may sound a bit weird.
This is probably the only problem and there is no thing as such that should stop you from going ahead with this option.
This option is for only those people who want to save money while incorporating a company. Its because there is a service that provides you incorporation for £5 only. Not only this you can even get a registered office address(which is a requirement) for less than £50 a year. Sounds pretty nice, but just get to know, your company won’t be tax free and would be taxed at 28% annually(flat rate) and you are required to file the annual returns and the books of accounts with the companies house.
This may become a hectic option later on specially if you don’t live in the UK because you have to somehow pay some other services to get this thing done. So think before well before you go ahead.
Other option for people living in India also are there although doing business in India is a really hectic matter and as much as I can say, if you are not going to earn a significant income and don’t operate physically in the country, don’t incorporate there(even if you are Indian). The annual compliances are too much as well as the taxation rates(30% + 3% flat rate). The online operations of the Ministry of Corporate Affairs are poorly managed, but still if you would like to know please have a look.
Some other offshore countries to incorporate may include Belize, Bermuda and the Ireland. What ever you decide please discuss with some other friend of yours(who have done this sort of work before) or any person who practices corporate law.
P.S. : The above article is my personal perception and is not a legal advice in any manner. You are requested to contact the necessary professional before making any decision.