Difference Between Registering and Incorporating a Company

By: | Updated: Aug-4, 2023
The contents of the Difference.guru website, such as text, graphics, images, and other material contained on this site (“Content”) are for informational purposes only. The Content is not intended to be a substitute for professional medical or legal advice. Always seek the advice of your doctor with any questions you may have regarding your medical condition. Never disregard professional advice or delay in seeking it because of something you have read on this website!

To save time and get answers “before” contacting the company, we have prepared the main questions and answers, including those that we think you need to know the answers of specialists.

These are some kind of “secrets”, having learned which, you will optimize your time and avoid many mistakes.

Difference Between Registering and Incorporating a Company

What is the best offshore jurisdiction to register a company?

No jurisdiction is the most honest response. The decision to register a company offshore has long been outdated and carries more risks than solving the tasks set. Nowadays, offshore schemes and tax evasion are being fought around the world. The biggest problem you will face after acquiring a “classic” offshore company (e.g. Panama, Belize, British Virgin Islands, etc.) is the difficulty and sometimes even the impossibility of opening a bank account. No bank account, no business.

It should be noted that the approach to choosing a jurisdiction for your business has changed in principle. When starting a business in Montenegro, do a mini-audit of your company strategy and choose a bank and country. After you decide on the bank, you can choose the country of registration of the company.

Are there any differences between offshore and low-tax jurisdictions?

The answer to this question lies in the name itself, the main difference between these types of jurisdictions is taxation. An offshore jurisdiction is usually called a territory in which the law provides for the absence of tax liabilities. A company registered in an offshore zone does not pay income tax, but only if the economic activity is not carried out in the territory of the jurisdiction. Instead of income tax in such offshore jurisdictions, companies pay a flat rate to the country’s budget.

If we are talking about a low-tax jurisdiction, then this is a territory where a favorable environment for doing business has been created. In such a jurisdiction, taxes will be lower than in most countries of the world. Cyprus company registration or Hungary, Ireland, Hong Kong, Gibraltar, Luxembourg, and Liechtenstein have low taxes.

And there is a third type of company that is registered in ordinary (from a tax point of view) jurisdictions in the form of partnerships. Such companies must pay tax not in the country of their registration, but in the country of residence of the partners. By properly structuring the company, you can achieve a zero partnership tax rate. But opening a partnership account with a bank is quite difficult; this form of company is not suitable for anyone.

Is there an alternative to offshore companies?

Yes, today jurisdictions that are not classic offshore are in great demand, but in these jurisdictions, there is the possibility of using an ordinary limited company type company with substance (reporting, taxation, real office, etc.). Such companies provide you the right to open a corporate account in the same country where the company itself is registered. This is one of the characteristic features of a real company in terms of tax “transparency”. The second sign of reality is the submission of reports and the payment of a certain amount of tax. The next key criterion confirming the reality of any business is the presence of a real office, employees, lease agreement, utility bills for rented premises, the uniqueness of your business address, etc. The “substance” of your company. This word and service are growing increasingly popular. Substance is indirect proof that your firm was not founded for tax avoidance, thus banks are increasingly inquiring about it.

Great Britain, Georgia, Ireland, Estonia, Cyprus, Hungary, Bulgaria, and Romania are popular jurisdictions. Such firms cost more to maintain than offshore companies.

(Visited 126 times, 1 visits today)
Did this article help you?
Thank you!
Thank you!
What was wrong?