Incorporating a foreign subsidiary company is a cost effective way to enter the country's economy. You may also be able to set up the incorporation process as a low cost service. There are some risks and benefits when setting up the incorporation of a foreign company.
Low cost. Inexpensive incorporation of a foreign company is one of the greatest advantages of the incorporation of a foreign company. A large number of the nation's businesses are formed through incorporation. It offers a low cost of entry into the nation's economy, to entrepreneurs who wish to form their own business, or to those who would like to expand their business.
For More Information click here
Source - Accounting,Finance and Compliance
Hiring a lawyer to help you form your company is an additional cost that you must include in your budget. This expense may be offset by the initial costs of incorporation. Besides, in the world of today, a lawyer can be a costly option.
Also, there is always the capital cost of setting up a branch office space. Many states have restrictions in place regarding office space that a foreign subsidiary company may require to operate and grow.
Setting up a subsidiary company is a lot easier than many may think. The disadvantages of the incorporation of a foreign company can be offset by the advantages of doing so. The disadvantages include:
Your foreign company can be taxed in your own country. As a foreign company, you are subject to the laws of the country where you are incorporated. If you are planning to transfer your corporation to your home country, you may wish to consult an attorney before you do so.
Your foreign company will not be subject to many of the regulations that apply to domestic corporations. For example, the foreign corporation is not required to be registered in the state where it is incorporated, but, in addition, it is not subject to the same reporting requirements as domestic corporations.
The foreign subsidiary company is subject to foreign reporting requirements. For example, its financial reports and earnings are subject to the rules that apply to all domestic corporations.
There may be restrictions on how your foreign company can spend its income. Depending on the laws of the country where you are incorporated, your foreign subsidiary company may not be allowed to deduct dividends paid to foreign shareholders. Additionally, foreign shareholders are not allowed to deduct their interest payments on their taxes, unlike domestic shareholders.
Unlike domestic corporations, non-domestic subsidiaries are subject to the tax laws of the countries where they are formed. Although the tax reporting is the same as a domestic corporation, a foreign subsidiary is subject to local taxation laws that do not necessarily match the rules of the Internal Revenue Service.
As mentioned earlier, a foreign subsidiary company is subject to local reporting requirements. Depending on where the foreign subsidiary company is incorporated, the local laws may limit the right of a foreign shareholder to deduct dividends and interest paid on their taxes.
Because of these risks and benefits, it is advisable to consult with an attorney before incorporating a foreign company. There are also several websites that provide information regarding incorporation.
Comments