When US companies expand, Europe is their first overseas destination, with 79 percent of companies choosing London, Dublin, or Amsterdam as their first point of expansion. Their choice is driven by ease of communication, as well as financial and cultural assets in their chosen destinations.
Most companies expand into European markets to boost their sales and revenue. This is particularly true for some industries. For instance, Europe is the largest overseas software market, offering a considerable opportunity for growth. American companies are also interested in the possibility of building solid research and development or product development teams.
The cost of expertise and engineering teams in the US has led many CFOs to look abroad for experienced, skilled workers who coast much less than Silicon Valley staff. If you are ready to take advantage of this and other features Europe has to offer, keep the following considerations in mind.
Choosing the Right Country
We mentioned the top choices for starting a business in Europe, but if you’re willing to look beyond the obvious, you should definitely conduct research into other possibilities. Some governments are firmly focused on creating prosperity, and they know that attracting foreign investment and business is one way to achieve this goal.
If you asked investors about innovative choices for starting up, don’t be surprised if they mention Montenegro, which has one of the most dynamic economies in the Balkans. Following its independence from Serbia in 2006, the Montenegrin government has been working to ease business set-ups and back the entrepreneurial motto—Montenegro, very business friendly.
For instance, the country offers offshore companies low company income tax rates, a low-cost and straightforward process for setting up a company, and a banking system that falls outside the scope of automatic information-sharing schemes.
The World Bank’s Ease of Doing Business Score
One handy guide to use when picking a destination for your European business is The World Bank’s Ease of Doing Business Score. This list indicates how easy a company is for starting a business, doing business, and paying taxes. For instance, Denmark is another destination that has excellent ratings.
It has an impressive 92.7 resting for starting a business, an 85.3 for doing business, and a 91.1 for paying taxes. The World Bank’s website allows you to select rankings by region, as well as by income. You can find a host of useful information on how easy it is to get electricity, register property, or deal with construction permits.
As such, your decision may vary greatly depending on whether you intend to lease or build your premises or installations from scratch. Regions are divided as following: East Asia & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, and OECD High Income. The points system allows you to view each country’s ranking within its group.
Knowing the Relevant Requirements
Enlist the help of an English-speaking lawyer in your shortlist of countries, to differentiate between the different rules and regulations you will be required to follow to set up business. Most countries will not require you to obtain a work permit or visa, but they will demand that you obtain a residency permit. To receive this permit, you will most likely be asked to present a business plan that shows that your enterprise is likely to benefit the economy. Some countries additionally require you to prove that you have a specific amount of funds to invest in your business.
This is the case for the UK, for instance, which requires business startups to have at least £50,000 for your business, plus £200,000 to support your family until your business becomes profitable. Additional requirements may include working full-time in your business, not seeking public assistance, and not working for another business. The UK also makes it obligatory for foreign-owned businesses to create at least two new jobs for UK residents. You will need to register your business locally, obtain a tax identification number, register with the social security, and perform other routine registrations.
How Long Will Registration Take?
In general, it takes one to two weeks to set up a business, depending on your destination and industry. The more licenses and permits your sector requires, the longer it will take. During the process of registration, you will need to select a unique name for your enterprise. You may also need to apply for permission if you wish to use specific names in your business name.
Make inquiries about the documents you will need so you can collect them and present them all at once. Usually, you will be asked to present a copy of your passport, your CV and photographs, bank reference letters, your business license, evidence of lease contracts, and your certificates of incorporation. It is a good idea to hire a business consultant to expedite the process and avoid frustration.
Choosing the Right Company Structure
In Europe, foreign entrepreneurs can choose from different legal entities to set up their business. One popular choice is a Limited Liability Company (LLC), which is ideal for small- or medium-sized businesses. Another choice for small and medium businesses is a European Company/Societas Europaea (SE), a type of LLC that allows you to transfer your company from one European country to another with ease.
A joint stock company is of interest to large businesses, though there is a large minimum capital requirement. Companies can also select to have a representative office (which does not allow you to undertake direct business activity), or branch offices (which allow you to conduct business in the usual manner). It is important to note, however, that branch offices do not enjoy legal status (as is the case with representative offices).
Many American companies are looking overseas as a means to expand their revenue and build a cost-effective team. There are many requirements involved, including tax and registration laws and regulations.
Hiring a business consultant who specializes in foreign businesses should be considered an excellent investment since it will expedite the process and ensure you don’t unwittingly break any laws, regulations, or norms
