Businessmen can expand their companies on foreign markets through several options. For instance, they may register one of the legal entities that are available on those markets; however, they may also opt to incorporate a branch office or a subsidiary, which are two types of business structures that are specially designed for foreign companies expanding on foreign markets. There are various advantages for each of these structures and the selection should be based on the costs associated with the expansion of the company, the liability of the parent company, the types of services or products the company offers, and numerous others.
Incorporating a branch/subsidiary
The branch office and the subsidiary are business entities that can be found in all the member states of the European Union (EU), but they may also be set up in Asian countries and other regions. The incorporation procedure varies from country to country, but in Europe, the registration requirements are basically the same, considering that the EU has unitary legislation.
As a general rule, the registration of a branch in Europe is comprised of specific corporate documents. For example, in Malta and in other European countries, the investors will need to provide a copy of the certificate of incorporation of the foreign company, a copy of the parent company’s bylaws, and also a certificate of good standing of the parent company. A branch office in Malta must also have a representative, a legal requirement that can also be met in other European countries.
However, the most common way to start a business in most countries is by registering a limited liability company (its name may vary depending on the country where the investors will operate). This entity has a set of advantages and certain European countries (such as Ireland or Romania) offer various types of limited liability companies, designed for certain categories of investors or business activities.
The limited liability company is the preferred legal entity across the world as it is designed for small and medium-sized companies, which carry business activities in any given economic sector. For example, the limited liability company can be used for starting a dental clinic, a florist business, a real estate company, a retail company, and numerous other businesses.
In other regions, such as the Cayman Islands, the most common way to start a business as a foreigner is by opening a non-resident company. This type of company offers limited liability to its founders and it provides a set of tax exemptions. More importantly, it can be started by a single shareholder and it is not required to subscribe to a minimum share capital. The manner in which an investor expands his/ her business activity should always take into consideration the commercial legislation available in a given country and the advantages provided by each business form.