Registering a foreign company from scratch takes time and effort. You have to draw up all the statutory documents and go through the bureaucratic procedures that are different in each country. These tasks require knowledge and professional assistance. Buying a ready-made company registered in a foreign country can be a faster way of taking your business operations to the international level.
Below we describe the process of buying a foreign company, discuss the parameters by which you have to choose the jurisdiction, and compare buying a ready-made company to registering a new one.
What does the phrase ‘buy a foreign company’ imply?
When you buy a company, you sign a purchase agreement with its present owner. As a rule, companies are purchased via legal firms that register the so-called shelf companies with the purpose of selling them later. Shelf companies do not conduct any business operations and have no assets.
At the same time, they are officially registered and they are functional from the legal point of view. Shelf companies do have their statutory documents in order, they have company By-laws and other papers that an active company would have. You can be offered a newly registered company or a company that has been in existence for a few years already – on paper.
How should you go about choosing the country for your prospective foreign company?
If you would like to buy a foreign company, the first thing that you have to do is choose a suitable jurisdiction. To make a wise choice, you need to take the following factors into account:
- The tax system in the country, availability of tax cuts, and other support measures on the part of the national Government.
- Requirements concerning bookkeeping, reporting, and economic substance.
- The cost of company maintenance.
- Opportunities for scaling the business, optimizing the logistics, and finding new partners and clients.
- Opportunities for acquiring a legal residence permit in the foreign country where your company is (probably) going to be registered.
We are not going to name the countries where you can buy a company because this opportunity is available in a vast number of jurisdictions. As a possible option, you can consider purchasing a ready-made LLC in Belize. Multiple other options are available, of course.
Why should you consider buying a foreign company?
There are several important reasons why you should opt for buying a company in a foreign country rather than registering a new one.
- You can save time. Buying a foreign company is much faster than setting up a new one.
- You can bid for tenders and sign government contracts. Please note, however, that you have to buy a company with a history of a few years behind it to be able to do that. In many jurisdictions, only companies with a history of operations are allowed to bid for tenders.
- If you buy an ‘old’ company, you can gain more trust on the part of investors and clients. Newly established companies may have problems with that sometimes. If a company has been in existence for several years, it makes it more reliable in the eyes of its (possible) partners.
The main risk associated with buying a ready-made company is related to the trustworthiness of the seller. You have to make sure that the company that you are buying does not have any outstanding debts and it is not involved in any litigation. You certainly don’t want to buy problems for yourself.
The procedure of purchasing a ready-made company
You have to go through the following steps when buying a foreign company:
- Choose a suitable ready-made company based on your main business objectives, target audience, and business strategies.
- Check the status of the company on sale. Before buying a ready-made company, you have to go through its papers and make sure that you are not buying any unpleasant surprises.
- Prepare the documents needed to re-register the company in your name.
- Introduce the required changes to the company’s statutory documents: change the company name, appoint new directors, and so on.
- Open a corporate bank account for your foreign company (or an account with a payment system).
Buy a ready-made company or register a new one? Comparing the options
Below we discuss the main parameters by which buying a ready-made company in a foreign country is different from establishing a new company.
Price. The price of the company depends on the term of its existence, the value of its name (if it’s a recognizable brand), and some other factors. Normally, buying a ready-made company costs twice as much as registering a new one.
The cost of company registration largely depends on what jurisdiction you have chosen. Some fees and state duties are always involved and legal assistance is often required too.
Speed of going into operation. Transfer of property rights can take only a few minutes if both parties are happy with the conditions. You can buy a company and put it into operation straight away.
The speed of company registration depends on the jurisdiction and the form of company ownership. On average, a foreign company can be registered within 10 business days.
Bank account opening. In some cases, you may be able to purchase a company that already has a bank account. When registering a new company, you always have to set up a new bank account.
Acquiring a VAT number. A ready-made company may have a VAT number while you have to apply for one after registering a new company.
Company name registration. You can change the company name when you buy a ready-made company. The name change has to be registered with the authorities. Obviously, you can choose the company name that you like when you register a company from scratch.
Term of company existence. You may be offered to buy a company that was registered several years ago. Your newly established company is just this: a newly established company.
Trust on the part of investors and clients. A long-standing company is better trusted. On the other hand, support programs and tax incentives are available to newly established business companies in some countries.
Risks for the company founder. You have to be very careful when buying a ready-made company. You might be offered a company with a bad history without you knowing about it. When registering a new foreign company, you run the risk of running into an unprofessional intermediary.
It’s up to you to decide if you want to buy a ready-made company in a foreign country or register a new one. If you want to go into business fast (or use your foreign company to make a single deal), purchase of a company should probably be your choice. If time is of no significance to you, registering a new foreign company entails much less risk.
