The Challenges Associated With Setting Up a Corporation in the Global Business Environment

by | Oct 21, 2021 | blog

There are multiple opportunities for your business to thrive in an offshore jurisdiction, from asset protection to tax benefits. That said, while the advantages of establishing a global corporation are great, there are a number of decisions involved, some of which can make your business vulnerable to challenges that could hinder your overall success in your chosen jurisdiction.

Make your journey as painless as possible by learning about the benefits and drawbacks of forming a corporation, together with some guiding principles to help steer you in the right path when it comes to choosing an offshore jurisdiction.

Choosing to Establish a Corporation

Establishing your business as a global corporation can be advantageous, but it’s important to understand what this legal structure will mean for your business.

The first point to note is that a corporation is a business recognised by the law as a legal entity separate from the owners or shareholders and as such, the owners are protected from personal liability. Now, when it comes to setting up in an international jurisdiction, you’ll need to follow the specific legal requirements of your chosen jurisdiction to become a global corporation in that country, such as creating corporate bylaws, developing local substance, ensuring tax efficiency, obtaining the correct licence, compliance and filing on time with the relevant authorities.

Here are my top guiding principles to establishing your global business:

  1. Choose the Right Jurisdiction: Research the location before incorporating your business there, because not all jurisdictions are the same and not all will suit your business’s specific needs.
  2. Choose the Right Service Provider: Does your interlocutor have sufficient knowledge of the subject matter to guide you on all your incorporation queries?
  3. Efficient and Expedient: Are your queries being satisfactorily answered and managed within a timely manner?
  4. Familiarity with Local Laws: You need to know the laws to follow and what the jurisdiction requires before you make your application. This requires due diligence and evaluations, preferably from an experienced service provider in the jurisdiction you’re interested in. Your service provider should have the time to explain the details to you.
  5. Confirm Tax Issues: Verify if your selected jurisdiction has an efficient and cost effective tax system with a reasonable number of double taxation treaties for the services that your company will be providing and in the locations you will operate.
  6. Product Legislation: Make sure the jurisdiction you are selecting regularly updates its rules to be ahead of the game with your company’s products and services, so that you are able to offer better and more sustainable solutions than your competitors.


Overcoming the Challenges

There are potential challenges to establishing your global business which must be addressed in order to explore whether incorporating your business is the right choice or how you can overcome these possible disadvantages. To my mind, not all challenges are disadvantages. They are merely opportunities to find a better path for your unique business.

The most common disadvantages of setting up your business in a foreign jurisdiction are the lengthy application processes, the rigid formalities and heavy protocols that must be followed and the related expenses.

To this I say, it’s wise to seek the appropriate guidance. I have assisted many clients over the years in their global corporation journey and know that with support and guidance, not all of these challenges present as true hindrances. In every instance, myself and my team apply a bespoke and strategic approach to the global corporation process, relying on a “get it right the first time” ethos that leaves no best practice ignored and every aspect of compliance achieved.

This is how we have secured a 100% success rate when it comes to helping our clients establish themselves in Mauritius as global corporations.

Taxation Concerns and Compliance

This particular challenge of taxes is one that I have deliberately singled out, because it is the most common concern facing entrepreneurs wishing to set up their global businesses. The reality is that in many jurisdictions, corporations experience double taxation, where the corporation first pays taxes on its income and then again on the dividends paid to shareholders, based on their individual rates. However, dividends are paid out tax-free in Mauritius because they have already been taxed at source.

Additional considerations that must be dealt with responsibly include corporation tax, withholding tax, taxes related to IP and to royalties, as well as knowing what are the applicable rates are and where the best jurisdiction is for your type of business operations and flow of funds. These are all valid and crucial to understand, but it is best that you discuss these details with your advisor.

With my background in the auditing space, during which time I oversaw a large portfolio of clients that comprised of both listed and private companies, combined with over a decade’s worth of experience with the Loita Group, means that I am well-placed to assist businesses in finding their footing. It is entirely possible for you to avoid business disruptions, reap the benefits associated with a global corporation, and have an overall positive experience.

In my experience, though, this is rarely achieved without the proper support. That’s why it’s important to choose the right service to partner with, one who will take a strategic approach to your business structure.

We are serious about our business and we will take every care when it comes to your business. To attain our services, get in touch with Loita Management Services at your convenience.

By Shanil Ramtohul

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