Business incorporation in 2021: How Cyprus and Hungary compare with the US

A key theme for entrepreneurs globally, where to incorporate their business. Cyprus has a longstanding tradition of serving as one of the most reliable business hubs around the world – and recently, other nations like Hungary, Bulgaria, Romania and Malta have sought to join the club of attractive E.U. nations to base an international business. 

When deciding where to incorporate a business, companies first define their priorities. One of their main considerations is the operating costs of the business, including labour. Other considerations for companies include political stability, taxes, and the ease of incorporating their business entity.

Here in Cyprus, the government has made it easy for foreign entities with a transparent official information portal to enable company formation available in English. Other European countries where the English language was less prominent, are yet to get up to speed with the advances made by the Cyprus government over the last decade. 

What does business incorporation mean?

If you want your business to become a separate legal entity, you need to incorporate it. In the United States, another attractive country for this purpose, it means you must form a Limited Liability Company (LLC) or a corporation. Thereafter, your business has the same rights as any individual citizen.

What are the benefits of business incorporation?

One of the main benefits of incorporating your business is that you are not responsible if the company faces a legal battle or suffers losses. Additionally, an LLC can initiate lawsuits, acquire assets, and remain in existence even if the shareholders disperse.

Key factors to consider when choosing a country to incorporate your business?

Depending on the country, residency is often a prerequisite for starting a business. Other considerations include the availability of reliable human capital and the price of hiring workers. Depending on the country you decide to incorporate in, corporate governance requirements, and the process for mergers and acquisitions will vary.

The tax implications for a business are one of the major considerations when a business decides where to incorporate. Income tax and capital gains liabilities are important and tax relief is often an important deciding factor.

The ease with which a business can form an LLC or corporation is vital. Faster filing of registration papers, getting a reliable registered agent service, quickly sorting out the process of doing tax documents, getting an Employee Identification Number (EIN), and creating an Operating Agreement are just some of the processes required at the start. In some countries, these are easier to get done without any help, whereas in foreign countries it is best to get someone to take you through the process.

 Thereafter, a business needs to conform to the required reporting intervals, company filings, and keeping the business compliant.

Comparing business incorporation in Cyprus, Hungary, and the US

There are different reasons why some countries are considered easier to incorporate in than others. These include excellent corporate banking, quick and easy setup, flexible labor laws, and tax efficiency.

Incorporating in Hungary

One of the most developed countries in central Europe, this member of the European Union is an excellent location because it is the gateway to a market of 500 million people. Hungary has a cost-effective labor force with excellent qualifications.

 Across the EU, Hungary has the lowest corporate tax rate, at 9%. Non-resident companies have no withholding tax on payments. The country is known for its stability, both financial and political. Non-EU residents must apply for a residence permit if they want to incorporate a business there.

Incorporating in Cyprus

Cyprus is known for being easier and faster than many other European countries for business incorporation. The process starts with an application submitted to the Registrar of Companies, and the business is usually registered within a week.

Procedures that need to be followed before registering the company include the drafting of the Memorandum and Articles, stipulating the rights and obligations of the shareholders. A Cypriot company is considered a respected EU entity and the country has one of the lowest corporate taxes in Europe at 12,5%. You can also operate your company remotely and closing a company in Cyprus is a simple procedure.

Incorporating in the U.S.

Even though the US has quite a high tax bracket and imposes a tax on foreign income, it continues to remain one of the top countries to start a business. Besides a skilled and diverse workforce, the U.S. is the world leader in research and development. Startups also have a huge variety of funding sources to choose from.

In any of the country’s 50 states, new business owners can apply for incorporation online. The process is fast, cheap, and easy. U.S. nationals usually incorporate a business in the state they live in. One of the most popular states to incorporate a business for non-US residents is Delaware.

The fastest and easiest way to form an LLC in the U.S. is to use a business formation service. Besides being budget-friendly, LLC formation services offer a range of services, including registered agent services and ongoing business support. Read this ZenBusiness review to get a better idea of how a good business formation service helps your business as it grows.

Final Word

There are various benefits to starting a business in Hungary, Cyprus, or the U.S. However, the  U.S. still comes up tops with its federal and state business-friendly laws, access to capital, research and development, and availability of skilled manpower.