While forming a company is relatively simple and can be accomplished online, a few set-up mistakes could cost you time and money. Fortunately, these are easy to avoid if you choose the right professional to work with and take a little time to get everything right.
The most common mistakes we see when a business is forming an offshore company include:
It’s important to consider all of your options, including ongoing costs, what you might need in terms of accounting and audit obligations (if any).
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A common mistake is that clients are trying to replicate what they are used to. e.g. bricks and mortar bank offering traditional services. It may well be that an e-wallet makes sense in many cases and gives greater flexibility.
First, it is important to understand the difference between a bank and an e-Wallet (Digital Wallet or Neobank):
Banks have traditionally served local customers and are set up for face-to-face interaction and telephone service. They tend not to work well across borders except in specialist areas, e.g. private banking. Their existence is being undermined by increasing regulation and the move towards digital banking.
E-Wallets (also known as Neobanks or Digital Wallets) have rapidly increased their market share in the last twenty years or so, starting with PayPal in 1998. They specialise in fast transfers of funds, especially across borders, together with good exchange rates. Customer service is often limited unless you enjoy communicating with bots.
Tax law is constantly changing, and it’s essential to make sure you understand what applies in your chosen jurisdiction and how it will impact your personal tax position. e.g. is it better to take a salary or dividends? In several countries, including Singapore, salaries are generally taxed at the local rate, even for non-residents. This subject often requires professional advice to get it right.
However, there is a danger of ‘letting the tax tail wag the dog’ at the expense of, say, ease of doing business in a particular jurisdiction and the total cost (both start-up and annual) of maintaining the company.
Although it may sound obvious, not thoroughly researching your project can be a major reason for difficulties down the line.
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