Starting a Small business has never been easy especially if you live in a country that that doesn’t have business friendly policies, transparent tax regimes and is hostile towards entrepreneurs. You are likely to fail in sometime not because of your business model but because of your country’s unfriendly business environment. While there are both worst and best countries to start business, we will cover the best countries to start business easily.
Ideally, you should not plan to start a business if your country is hostile towards entrepreneurs and innovation. As a budding entrepreneur you need the flexibility to incorporate in countries that more openly embrace capitalism and new business development.
Each year World Bank releases a list of most business-friendly countries in the world. These countries were selected based on how easy it is for individuals to conduct business. The study also reflects how easy it is to start a small business in these nations.
Why you should consider starting a business in a foreign country?
The first thing about starting a business in a foreign country which is business friendly is that it is very simple to register a new business or a company in that country compared to few decades back. Due to globalization most of the countries have opened up their markets for foreign businesses and it has become quite easy to start a business in a foreign country.
But there are still foreign regulations, taxes, and policies that you need to deal with but business-friendly nations have setup institutions and information centers to help foreign businesses find all the relevant information in order to get started. The easiest way is to get in touch with an attorney or a CPA in the country where you want to start a business as they can guide you in the right direction from registering your firm to fulfilling all the legal requirements.
It doesn’t matter whether you are from South East Asia, Europe or North America, in this era or globalization, you can dream of becoming a global brand by setting your business in various other countries. Although there are certain challenges but the potential rewards far outweigh the long-term rewards.
Here are a few excellent reasons why you might consider starting a business in a foreign country:
- Starting a business in a foreign country gives you access to a diversified customer base and probably a high income market where people have the ability to spend more.
- Your existing products line that might be losing its market share in the domestic market due to saturation may become the next hot selling brand in a foreign market.
- Dependence on local market for revenues would reduce significantly and you will find new revenue streams in a foreign country.
- You will learn new methods of doing business, how to compete in more competitive markets and allow you to expand your business being more creative.
- Creates more space for you to experiment with your products and as people are more open to newer products because of higher purchasing power.
What you need to do before starting a Business in a foreign country?
Here are few useful tips to help you prepare before starting a business in a foreign country:
Do you Research on Business Practices
Regulations, compliances, business practices, banking and tax laws all vary from country to country. While you can set up a business in a developed country in one day, it could take weeks or even months in developing economies. Research is important before making a move to get started, study the laws and requirements for the country you’re interested in, and investigate how much it will cost to incorporate, acquire property, and start working.
Learn about Cultural Differences
Fitness industry or bakery business may be big businesses in the countries such as United States, UK, but it’s unlikely to have the same draw in the Middle Eastern Countries. You need to learn about cultural differences that could affect your business in the long run. Research the culture surrounding the product or service you’ll be selling to ensure that there’s a market and a need for it.
We suggest you to learn about the people, market and language barriers that could be a hindrance for your business, as an expat you may experience difficulty fitting into a foreign business culture. It is advisable that you take few short trips abroad to get understand the culture, people and their buying habits.
Learn about a country’s political outlook
It is crucial to understand the political climate of the country where you want to start a business, it’s tax laws and regulations. For instance, in 2013, as the European Union was bailing out banks in Cyprus, the Cyprus government went directly into bankers’ accounts, removing up to 10% of the funds deposited within and calling it a tax. You may not want this to happen to you as a business owner in a foreign country because of the political climate change. Find out about the political history of the country, its current political outlook and do your best to work within a country with a stable political and economic system.
Get Professional Legal Advice and Guidance
As we have mentioned about that it is always a good idea to seek advice from an attorney or a CPA when starting a business in a foreign country as he/she can take care of all the legal requirements to start a business. Locate an attorney or a firm that specializes in company registrations abroad, if local it would be better as it will have the knowledge and skills to help you navigate the foreign environment.
Similar to the institutions in the United States such as Chamber of Commerce and Small Business Association that helps small business owners start and grow their businesses, you should find out institutions in the country where you plan to open your business that help expat business owners with finances, training and other provide other assistance. You should start this process before moving to a foreign country so that you know whom to approach for business assistance in a new country.
Take your time and prepare well
We understand that you’re excited about moving abroad and getting your business started but remember that it takes time to settle things before you can reap the benefits of your hard work that you put in your business.
Don’t be in a hurry. Take your time for research, seek trusted counsel, and navigate the ins and outs of moving abroad. Getting visas, immigration procedures and other formalities of moving abroad also take time.
Benefits Of Starting a Business in a foreign country
Starting a business abroad can be challenging if you are new and know nothing about moving abroad but it can be rewarding in the long-term. Entering foreign markets comes with many advantages such as the ability to explore new opportunities, take advantage of government incentives, subsidies and enjoy business-friendly laws. Here are a few benefits of starting a business abroad:
Cheap Labor Costs
Cheap labor costs in many developing countries such as India, China and Philippines allow foreign companies to enjoy high margins on products as cheaper labor costs amounts to significant savings that reflects in the bottom line. Also, lower operating costs is also a factor of operating a business or moving your existing business to a foreign country. Although costs can vary from country to country, companies can undoubtedly save a significant amount of money by moving operations overseas to a lower income countries. For example, many global manufacturing companies produce items in China and sell across the world due to cheaper labor costs.
According to the World Bank rankings, New Zealand ranks on top on the list of “Ease of Doing Business” with Singapore on second. Factors that were kept in mind when compiling the list included ease of getting permits and obtaining lines of business credit, lower taxation and favorable contract law. Major economies like China and India are at the bottom.
However, U.S News has also published its own list of best countries to start a business in with Thailand, China, India topping the list. European countries on top of the list include the U.K, Switzerland and The Netherlands.
Companies in the USA are subject to stringent regulations by OSHA, the EPA and a host of other federal regulations enforced by agencies. However, these organizations have no jurisdiction outside of the U.S. Not having these regulations in place can make it easier for businesses to meet their goals. However, it is important to keep in mind that you will be subject to your host country’s laws including immigration laws.
Subsidies, Lower Taxes and Government Incentives
Business friendly nations provide have several government incentives, subsidies and lower tax rates which may not be offered in your country. Countries such as Malaysia has a government sponsored portal to help investors find business savings and Czech Republic provides tax incentives for up to a decade.
Lower tax rates are another major advantage when it comes to moving your business abroad. For example, the corporate tax rate is 20% in the U.K which is the lowest in the G20 and significantly lower than in the U.S which is currently at 35% on the upper side. This simply means millions of dollars in annual savings for a large company in the UK.
Many iconic American companies have moved their head quarters to a new country to enjoy tax benefits such as Burger King, Budweiser and Medtronic to name a few.
New Opportunities in a new Country
Moving your business or starting a business in a foreign country could potential open a new market for your products.
Your products may have become useless in your country but they could become hot seller in a new untapped market in a different country.
Best Countries for Starting Business in 2019 according to the World Bank:
As mentioned above New Zealand tops the list of best countries to start business followed by Singapore. Major economies such as India and China are not even in the top 10 due to their business laws, tax regulations and business practices.
Countries are ranked based on 10 key indicators such as ease of starting a business, ease of obtaining permits, access to electrical utilities, ease of registering property, availability of credit, protection for minority investors, tax rates and collection methods, capacity for trade to occur across borders, and ease of enforcing contracts and declaring insolvency. Labor market regulation is also a major factor taken into account while compiling the rankings.
So let’s find out the best countries for starting Small business in 2020:
1. New Zealand
New Zealand tops the list as starting a business is as easy as it takes only few hours time which is made possible by its simple online registration process. In the past few decades, New Zealand has transformed into a world-leader among industrialized, free-market economies.
It has a 2-3% annual growth rate and according to the the World Bank report New Zealand is the best country when it comes to protecting minority investors, as well as the best for starting a business. Its free trade agreements, pro-competition regulations, efficient tax codes, and an open political system are all contributors to its high ranking in ease of doing business.
Other contributing factors include:
- registering a property can be done in two days.
- the workforce is skilled and educated.
- in terms of taxes, there are no payroll, social security or capital gains taxes.
- it sets up LLCs that are their own legal entity, separate from shareholders.
After New Zealand, Singapore provides the most business-friendly and secure environment for entrepreneurs and small businesses.
Due to strong trade and investment opportunities, the city attracts global entrepreneurs and leaders, and has been named the most competitive Asian country to start a business.
Singapore has long been considered one of the best places to do business in the world due to the following reasons:
- One of the wealthiest nations in the world.
- Politically stable.
- Geographic advantage to do business.
- It has a strong labor force, and imposes no dividend or capital gains taxes.
According to the World Bank report, Denmark’s effective digitization process is one of the prime factors contributing to its third place rank.
Denmark has been one of the easy countries in Europe to incorporate a business and it has some really business-friendly policies such as:
- Denmark has the most flexible hiring and firing rules in the world, reducing the costs of scaling business operations up or down.
- You can register and finish incorporation work in days and not weeks.
- CEO or Directors don’t have to be a resident of Denmark, necessarily.
- No notarial deeds.
- It is tax efficient to establish a business in Denmark compared to other Nordic countries.
- Danish company law is modern, flexible and in conformity with the current EU legislation.
4. South Korea
Located in the South East Asia, South Korea is ranked as the fourth best country to start a business. It is hassle free process in South Korea when it comes to obtaining electricity, trading across borders and enforcing contracts. South Korea also has the world’s super high speed internet connection.
The South Korean government promotes its internet connection speed for attracting budding entrepreneurs to the country.
5. Hong Kong
Although, registration fee has gone up in Hong Kong when it comes to incorporating a business, it is still the fifth best country to start a business due to the simplicity of obtaining construction permits and conducting trade across the border.
6. United States
Compared to other countries, US has relatively higher corporate taxes but still it is the sixth best country on the list for starting a business, mainly due to the lower costs for supplies, offices, and logistics, just to name a few.
There are several other reasons that make United States a wonderful country to start a business:
- The workforce is educated and skilled.
- It takes 2 to 4 days to incorporate a business in USA.
- It is a recognized leader in research and development as well as innovation.
- Several government owned schemes are available for easy financing and other options such as investment firms, banks, venture capitalists and angel investors are highly active.
7. United Kingdom
The incorporation fee in the UK is approx. £81 which is pretty low compared to other developed countries on the list. UK ranks seventh of the list of countries to start a business due its low costs associated with setting up a business, combined with high earning population and a diverse workforce.
UK also has a very business-friendly environment for entrepreneurs due to its diverse population where people from different cultures and races live together.
Norway has a strong economy and an energetic workforce. It has managed to be the eighth best country on the list due to its strong technology sector combines with a strong safety net of social programs for its citizens. Resolving insolvency in Norway is also low-cost, with fees averaging 1% of the bankrupt entity’s value.
Georgia makes it to the ninth spot on the list of best countries to start a business. The country has an emerging economy. It only takes two days to register a new business in Georgia and it costs approx. US $50 to incorporate a business which is relatively low compared to other countries.
Sweden offers both a strong economy and a skilled workforce combined with a strong infrastructure and well-developed social programs which makes it the tenth best country to start a business. Besides these Sweden also offers high standards of living.
11. Isle of Man
The island is legally separate from the UK and from the European Union but it has a customs agreement with the UK, facilitating easy trade. Company formed in the Isle of Man has some distinct advantages when it comes to trading in other jurisdictions or holding investments such as:
- Zero corporation tax rate.
- Incorporation with a single shareholder possible.
- Only one director required.
- Director need not necessarily be a resident of Isle of Man.
If you are an internet entrepreneur then Belize is the best place to incorporate your business.
Following reasons make Belize an attractive destination for internet entrepreneurs:
- You can setup a bank account without being physically present.
- Great for merchant accounts.
- Can be used for a variety of different businesses.
- No taxes.
- Low setup costs.
We have tried to provide you a comprehensive list of the best countries to start business along with details about the business environment in each country.
While we encourage you to do your own research about the country where you want to start a business, the list of countries above are on the World Bank’s list of top 10 countries for ease of doing business.
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