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27 February 2024
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4 minutes

A practical guide to entity incorporation

A practical guide to entity incorporation

Expanding your business globally can help you access new markets, increase profitability and drive competitive advantage. The key to success is understanding the complex rules and regulations that govern entity incorporation in each jurisdiction.

What is incorporation?

Incorporation is the legal process that must be followed to set up a new entity in a foreign jurisdiction. The journey to incorporation can be challenging – organisations are often required to navigate complex regulatory requirements, unpredictable timelines and language barriers which can delay operational readiness and impact business expansion plans.

Incorporation involves multiple steps, ranging from choosing and registering the type of business entity to appointing personnel and opening a business bank account. Each step requires some administrative effort, but careful planning and research can make the journey easier.

The global outlook

Our latest Global Business Complexity Index (GBCI) report indicates that the incorporation process has remained stable across most jurisdictions. This includes the time it takes to incorporate a business, the number of bodies involved in the registration process and the types of professional parties required.

There has been a slight increase in the number of jurisdictions that require contact with the national government during incorporation, increasing from 68% in 2020 to 73% in 2023. This has remained stable year-on-year in North America, while both South America and EMEA have seen increases. Interestingly, in APAC, the number of jurisdictions that require businesses to contact the government during incorporation has decreased from 86% in 2020 to 57% in 2023.

The impact of digitalisation

Many jurisdictions are embracing digitalisation by moving incorporation processes online, making things easier for foreign businesses. In fact, electronic submissions to authorities increased from 71% in 2020 to 78% in 2023.

In Colombia, for example, online registration for new entities can be achieved in three days. Likewise, in Vietnam, most authorities have established official online systems for uploading new regulations and conducting licensing procedures, making the process more convenient for foreign businesses.

Promoting foreign investment

Our research shows that governments across many jurisdictions are focusing their efforts on securing foreign investment. Even in traditionally complex jurisdictions, such as France, governments have undertaken initiatives to attract foreign entities.

In Malaysia, for example, the new government announced that restoring investors’ confidence and increasing foreign direct investment are among its top priorities. These include establishing a special investment scheme to attract more high-value-added investment that will generate higher paid employment opportunities.

Navigating complex regulatory requirements

Although we see some jurisdictions moving towards a simpler incorporation process for foreign businesses, 49% of TMF Group experts predict that entity management will become more complex in the next five years.

The largest regional year-on-year increases are seen in APAC, where this has increased from 14% in 2022 to 43% in 2023. In Australia, for example, the government’s commitment to introducing a public UBO register is likely to increase the level of data required from foreign businesses operating in the country.

Adherence to global compliance requirements will make entity management more complex at a local level, but increased transparency will drive greater investor appeal.

Opening a business bank account

Opening a bank account is a key complexity factor in an increasing number of jurisdictions. The time it takes to open a bank account from abroad has increased in many jurisdictions: in 2020, the average time was under one month in 65% of jurisdictions, dropping down to 44% in 2023.

In Austria, for example, opening a bank account has become more complex due to enhanced Know Your Client (KYC) requirements.

Similarly, the incorporation process in Brazil can take 60-90 days, but opening a bank account can take from a few days to a few months as it involves extensive KYC procedures.

Looking ahead

Although there is an expectation that entity management will become more complex globally over the coming years, 80% of TMF Group experts are still positive that there will be an increase in investment in their jurisdiction in the next five years. Despite an increase in global compliance and the complexities that come with it, investors remain keen to explore new markets and new opportunities.

Ready to start the incorporation journey? Read our resources below for practical tips and guidelines to help you set up a business in some of the world’s most dynamic and promising jurisdictions.