Search
  • Emily A. Georgiades, Esq.

Top 3 Considerations in Structuring a Global Business

Whether you want to buy and sell real estate or structure an investment fund, the world has become a very small place to set-up a business. The goal of going into business is to realize profits- maximum profits! To do this effectively, one must carefully consider 3 key components of structuring or re-structuring their company and they are the:


1. Corporate Structure;

2. Legal Regime; and

3. Tax Regime.


Although these key components are written above in a list, they actually work in tandem simultaneously. That is to say that they are considered together as working parts of the whole picture and one necessarily affects the other in all business plans. Let’s have a look at each in order.


Corporate Structure:


The structure of the corporation- whether it is a single company entity or a simple holding company or a holding company with subsidiaries- will depend on the type of business the company is conducting (or plans to conduct) and also will depend on under which legal and tax regimes the company falls. The aim is to utilize the law and the tax legislation in a way which will be most advantageous to your business.


Therefore, once you have an idea of what business the company will be conducting and a starting point of which country it will begin operating, then you can work with your lawyer to decide how the company should be structured and how the law affects this structure. Simultaneously, the tax implications of the jurisdiction from which you are operating should be considered as well as a check-on-balances to determine whether your business is operating tax efficiently.


Legal Regime:


The jurisdiction in which your company is established will have an impact on how you do business. For example, some jurisdictions are more “business friendly” and some have heavy investor protection laws which actually entice investors to invest in a business because they are comforted in the fact that they have legal recourse. Cyprus, is a business friendly regime with laws that allow for easy incorporations and recourse to the courts which employ domestic legislation (based on the British common law system) and EU directives.


Tax Regime:


Whether a country is an offshore jurisdiction (which allows for 0% corporate tax) or a tax-incentive country like Cyprus (with 12.5% flat corporate tax rate), there are various tax regimes to choose from to help your business maximize its profits. Another consideration in electing your tax regime is to determine which country has double-tax treaties with countries you either want to do business in or reside in (for personal income tax purposes).


Example of how the 3 Key elements work together:


Here is an example of how the 3 key elements above work together in deciding to structure your global business. We have a company founded by investors in the United States that is investing in real estate in Europe, can elect to set-up a simple holding company in the BVI or Cayman which has 0% corporate tax and has a subsidiary a company set-up in Cyprus which will be actively purchasing and selling the real estate in Europe. The Cyprus subsidiary company can enjoy 12.5% corporate tax rate and foreign owners of the company are exempt from paying taxes on dividends. The Cyprus sub-company also enjoys the European Union legislation that Cyprus adopted. Another bonus is that the subsidiary company is exempt from the new economic substance rules in BVI and Cayman. Finally, as each U.S. state has its own tax legislation regarding how personal income tax is calculated, the ultimate beneficial owners (in this case the American investors) can further reduce their personal tax liability through careful tax planning in the U.S.


Conclusion:


Today’s global business culture gives you the freedom to choose the laws that govern your business, the tax legislation that will apply and the structure of your company. All of these components can be accomplished seamlessly and efficiently in different countries by knowing how to choose regimes wisely.


© 2023 by E.A. Georgiades & Co  LLC. Attorney advertising. Previous outcomes do not guarantee same results.

  • LinkedIn Social Icon
  • Twitter Social Icon