Half-price lawyers, lawsuits and covering your bases – getting the right legal advice overseas
The process of incorporating in a foreign country can be a little daunting, especially if you have just landed and done no homework. So, let’s make sure you know what you are getting into.
Get your expectations in check about timing: The first thing you need to know about the actual incorporation process is that it will definitely take longer than the official government websites tell you and it will probably cost more money. Very little is done online and most (if not everything) is done in person.
Local ownership requirements: There are often local ownership requirements for certain types of companies. You probably don’t want to be partnering with a local businessperson you don’t know or someone you just met, so make sure you are focused on the right kind of company for you. Remember, you are setting up this company to do what you love, so don’t let administrative hassles and ownership struggles drag you into a pile of misery.
Capital Requirements: Countries will often require something called ‘paid-in capital’ before allowing you to incorporate. Paid-in capital refers to the amount of money transferred into company owned bank accounts. You can sometimes make creative arguments that alternatives to cash should count as paid-in capital (stuff like imported goods). Different types of businesses need different amounts of paid-in capital. For example, a ‘services’ business might require $50,000 USD in paid-in capital, whereas a ‘mining’ business might require $200,000 USD.
You should not navigate these potentially treacherous waters by yourself! Get advice from a lawyer
Locally based lawyers (always use lawyers situated in the country you want to work) will help you figure out your options. Lawyers will often have an initial consultation for free in order to solicit your business. So if you meet with 3 or 4 lawyers, you will not only figure out which lawyers are on top of their game, but also get a pretty good overview of what your options are… and at no cost to you.
I’d highly recommend meeting multiple law firms because lawyers are not created equal. You need to find a lawyer who understands what you are trying to achieve, is within your price range, and is able to complete the work on a timeline that suits your needs.
How do you find a lawyer?
- The best way to find lawyers is the way you would find a good mechanic, plumber or lawyer back home. Get a referral. Referrals from businesspeople are your best bet.
- If you can’t get a referral, you should aim to locate reputable law firms through Legal Networks, which are effectively group associations that tend to pride themselves on only having high quality members. These networks are often regional, which gives you a good selection of firms to choose from in a particular country. Some examples are listed below.
- LEX Africa has member law firms for 24 countries in Africa
- Africa Legal Network represents firms in another 13 countries.
- This website provides a long and useful list of networks in Asia.
- The Latin American Network and this website provide a large list of law firms in Latin America
You should know that the firms in these networks are probably higher cost and higher profile than other law firms in their country. This doesn’t necessarily equate to higher quality, but in the absence of any other knowledge, they are a good bet to start with.
What should you be asking the lawyers?
The actual process of incorporation is pretty simple, mundane stuff, but the initial thinking that gets done to figure out what kind of business you will be will end up being an incredibly important decision. So make sure you ask lots of questions, such as:
- Can I wholly own this business as a foreigner?
- What are the local ownership requirements?
- If there are local ownership requirements, what are standard ways to meet the requirements yet retain control of the business.
- What paid-in capital is required?
- Does paid-in capital have to be cash or can it be inventory, contribution of intellectual property etc.
- Can I count initial exploratory trips and other expenses towards paid-in capital?
- Over what time period am I able to contribute the required paid-in capital?
- What are the tax implications of this type of business structure vs. others
- How do I repatriate funds out of the country if needed
- Can I start business activities while incorporation is underway
- What are the visa requirements for foreigners who want to own/run a business?
During your meetings with the lawyers, you will start to understand other questions you should ask that may be important. As always, you can plan all you want, but nothing can replace actually being in the country and meeting people face to face.
Have you had any good, mediocre or ugly experiences with incorporation? Please share your thoughts below.