Explore the keys to launching a business in Europe
12 March 2024
The European market offers several solutions for starting a new company or expanding your business into an EU country. To establish a foothold in a particular country, it’s crucial to understand the specific rules that apply and identify the relevant national contact point.
This article delves into the various options for setting up a company in Europe, providing a definitive guide to navigating the complexities of European business expansion.
Why Europe?
Firstly, the EU’s single market is the largest internal market in the world, ensuring the free movement of goods, capital, services, and people. This guarantees that you can base your business in one EU country and conduct business across other European countries with minimal bureaucratic hurdles.
Moreover, Europe consistently ranks top in numerous indicators, boasting the highest living standards, the least corruption, and the region with the lowest average corporate tax rate. This competitive advantage makes it an attractive destination for foreign investors and business owners looking to tap into the European market.
Most European countries have also adopted a common currency: the Euro. This shared currency is a significant advantage for businesses engaged in cross-border trade within the European Economic Area, simplifying transactions and reducing exchange rate risks.
The single market comprises 27 EU member states, with a few minor conditions, including Iceland, Liechtenstein, Norway, and Switzerland. It’s important to note that the UK is not a member of the European Single Market.
But which European country is ideal for establishing your business?
Selecting the perfect European country for your business setup will hinge on your company’s specific requirements. Nevertheless, several objective measures exist to compare EU countries when conducting business in Europe.
Factors to consider:
1. Market Quality and Size
Establishing your business in a country with a reasonable-sized market for your product or service is logical. A substantial domestic market is crucial, particularly if your product or service targets a specific population. Conversely, a larger country and population often translate into increased competition. Moreover, a smaller country with high purchasing power might be more appealing than a larger population with lower spending capacity. For instance, Romania has a larger population than the Netherlands, but its total economic output is 40 percent less.
Nonetheless, many other factors come into play when determining the quality and size of a market, largely dependent on your business type and industry. For example, if you’re selling a product or service online, understanding the size of the online market in a specific country or region is essential.
2. Workforce: Skilled, Availability, and Flexibility
If your business strategy involves hiring staff, it’s imperative to have access to a pool of quality talent. An alternative approach is to recruit foreign employees and relocate them to your business’s host country. EU citizens have the flexibility to work across the entire EU, enhancing workforce mobility.
Additionally, some EU countries provide tax benefits and/or visa opportunities to facilitate hiring overseas talent, supporting your business’s growth and global mobility compliance.
3. Residency and Right to Work for Non-EU Nationals
As an EU citizen, you can live, work, and establish a business in any EU country (including Norway, Switzerland, Iceland, and Liechtenstein). While you would still need to apply for a residence permit in your country of stay, this is typically a straightforward process. However, individuals outside the EU/EEA do not enjoy this automatic right to work in their European country of choice.
Non-EU/EEA citizens looking to move to Europe to start a business should explore European countries’ various visa programs to facilitate market entry and business expansion. For example, an American must apply for a residence permit in a specific European country to stay there.
Nonetheless, it’s important to note that you are usually not required to have a residency permit to register a business in an EU/EEA country, which can be a significant advantage for foreign investors and business owners.
4. Physical Infrastructure
Numerous businesses rely on robust physical infrastructure to facilitate the swift and safe movement of goods and individuals. In today’s digital age, the quality of a country’s digital infrastructure has become an increasingly critical factor for new businesses and conducting business in Europe.
For companies engaged in importing and/or exporting goods within Europe, it’s important to note that not all European countries possess seaports. A prominent example is landlocked Switzerland, which may influence your decision regarding the logistics and business registration process in different European countries.
5. Technology Adoption
If your business revolves around developing or selling a new digital product or service, targeting a population receptive to adopting new technology is essential. In other words, you need to assess the likelihood that a country, its citizens, government, and businesses will embrace technology’s opportunities. This involves evaluating the digital literacy, infrastructure, and openness to innovation in various European countries to ensure your business can thrive in an environment conducive to technology adoption.
6. The Ease of Starting and Running a Business
Each EU country boasts its unique array of legal entities and company registration processes. The ease with which you can start and operate a business varies significantly across the continent.
In certain European countries, establishing a business can be accomplished within days; in others, the process may extend over several months. While time may be of the essence, it’s crucial to consider which country best aligns with your long-term business objectives and offers the most favourable environment for your company’s growth and success.
7. Tax Advantages, Funding Support, and Security
Europe is renowned for its diverse array of countries offering enticing government-backed financing and support initiatives.
For instance, Romania boasts a remarkably low corporate tax rate for very small businesses, while the Netherlands offers a reduced corporate tax rate for highly innovative companies.
The Netherlands also provides generous grant schemes for various R&D projects, whereas France and Portugal have introduced corporate tax relief for innovative activities. Moreover, countries like Germany grant access to public funding for innovation, while Belgium and Ireland offer attractive tax exemptions for businesses engaged in R&D activities.
The EU Council and Parliament have also reached a provisional agreement on parts of the anti-money laundering package to safeguard EU citizens and the EU’s financial system against money laundering and terrorist financing. This agreement is poised to close potential loopholes exploited by criminals to launder illicit proceeds or finance terrorist activities through the financial system, enhancing the overall security and attractiveness of the European business environment.
8. The Cost and Standard of Living
If you’re considering relocating to the country where your business is based, the quality, functionality, and affordability of the standard of living are paramount. Most European countries boast healthcare systems partially or fully financed by the state, contributing to a high standard of living.
Our Cost of Living Calculator is an excellent tool for evaluating a country’s standard of living. We invite you to book a demo to understand better how the cost of living varies across European countries and how it might impact your decision to establish a business in Europe.
For UK businesses, establishing a presence in the EU can serve as a strategic move to mitigate the complexities of new customs rules, required paperwork, and customs checks that emerged post-Brexit.
However, it is crucial to examine all the aforementioned factors thoroughly. Should you wish to delve deeper into this topic or seek expert guidance, please do not hesitate to contact a member of our immigration team here.
European Business Structures
Establishing a European business structure can offer significant advantages for companies operating across multiple European countries. Here are the three main options to consider:
1. European Public Limited Company (Societas Europaea, SE)
The European Company, also known as SE (Societas Europaea in Latin), is a public limited liability company that enables you to expand your business across different European countries under a unified set of rules.
This business structure is recognised in all European Union countries, making it easier for companies from different EU countries to merge by establishing an SE. It also simplifies setting up a holding company or a joint subsidiary.
The European Company (SE) is not tied to any specific EU Member State, allowing the company’s official address (registered office) to be moved to another country without dissolution, provided the company is not undergoing legal proceedings such as winding up, liquidation, or insolvency.
To set up an SE company, the following criteria must be met:
- Your registered and head offices must be located in the same EU country.
- You must have a presence in other EU countries (subsidiaries or branches), or all companies involved must be governed by the laws of at least two different EU countries.
- You must have a minimum subscribed capital of EUR 120,000.
- You and your company’s employees’ representatives must decide on employee participation in the company bodies and how employees will be consulted and informed.
2. European Cooperative Society (Societas Cooperativa Europaea, SCE)
The European Cooperative Society, or SCE, is a legal form that blends the characteristics of a cooperative and a public limited company. The SCE is not bound to any specific EU Member State, allowing the company’s official address (registered office) to be moved to another country without needing dissolution or re-establishment.
The SCE’s capital consists of the shares of its members, with a collective minimum contribution of €30,000.
You can establish an SCE with:
- At least five natural persons residing in at least two Member States.
- A combination of natural persons and legal entities, requiring at least five natural persons, legal persons, and/or companies residing in or governed by the law of two Member States.
- At least two legal persons and/or companies if these are governed by the law of at least two Member States.
- A cross-border merger between cooperatives from at least two Member States.
- Conversion of a Dutch cooperative into an SCE if it has had a branch or subsidiary for at least two years under the law of another Member State.
3. European Economic Interest Grouping (EEIG)
Companies from the EU or those with a subsidiary in the EU can establish a European Economic Interest Grouping (EEIG) to develop or enhance their economic activities collaboratively. This can be achieved by pooling resources, activities, and expertise. It’s important to note that generating profit for the EEIG cannot be a primary objective.
Requirements to establish your business in European countries
Generally, the same EU rules apply to companies in all EU countries. However, depending on the country where your company is established, there may be different rules for some aspects. These variations may influence which authorities you must engage with or what arrangements for employee participation you must follow.
Nonetheless, the EU encourages all member states to meet certain targets to facilitate the setup of new companies, including:
- Setting up in no more than three working days.
- Costing less than EUR 100.
- Completing all procedures through a single administrative body.
- Completing all registration formalities online.
- Registering a company in another EU country online (through the national contact points).
It’s advisable to speak with our immigration team today to determine which EU business structure is suitable for your situation.
A Regional Perspective on EU Business Opportunities
Opportunities can shift rapidly in today’s fast-paced, technology-driven entrepreneurial landscape. This is why looking beyond borders and exploring European opportunities can be strategic.
Firstly, it can be advantageous to establish your business in a European location where you have access to a larger market of similar customers. This refers to countries that share common features and are often regarded as a single “market” from a business standpoint. These are typically groupings of several countries where people share a similar language, culture, politics, and living standards. The most frequently used regional groupings are outlined below.
DACH
DACH is an acronym that represents Germany (D), Austria (A), and Switzerland (CH). This regional grouping encompasses nearly 100 million inhabitants with similar living standards and cultural values. Most notably, it forms the largest German-speaking block in the world. If your business aims to tap into a market of around 100 million German-speaking individuals, establishing a presence in the DACH region could be a strategic move.
Nordics
The Nordics typically encompass Denmark, Norway, Sweden, Finland, and Iceland. The Faroe Islands and Greenland (both autonomous areas of Denmark) and Åland (an autonomous area of Finland) are considered part of the Nordics. Most Nordic countries share similar languages, and English proficiency is exceptionally high across the region. Moreover, the Nordic region is culturally more cohesive than other parts of Europe, contributing to significant intra-regional trade. The Nordics are also renowned for having the highest spending power globally and being the most digitally adapted region in the world.
Benelux
The Benelux region comprises Belgium, the Netherlands, and Luxembourg. Some key advantages of doing business in the Benelux include its central European location, a highly skilled workforce, and well-developed infrastructure. Additionally, the Netherlands and a significant portion of Belgium share the Dutch language, which can facilitate communication and business operations. Furthermore, the Benelux collectively represents around 30 million people, making it one of the most densely populated areas in the world.
The British Isles – The UK and Ireland
This “business region” encompasses the entire English-speaking part of Europe: England, Scotland, Wales, Ireland, and Northern Ireland, along with a few smaller affiliated islands, such as the Channel Islands and the Isle of Man. This area represents a significant potential market with relatively high purchasing power and favourable tax conditions.
However, it’s important to note that the UK is not a member of the EU or the single market, which may pose challenges to cross-border trade and attracting talent to the UK.
Looking Ahead
Timing is of the essence when expanding your business into new markets. The ideal moment to introduce your product or service in one country may be premature or overdue in another. If you’re contemplating doing business in Europe and need guidance navigating the diverse landscape, please do not hesitate to contact us.
Our expertise encompasses the business registration processes for each European country, ensuring a smooth and efficient setup for your chosen destination. We will manage the necessary documentation, arrange bank accounts, and provide office space tailored to your needs.
With our support, you can confidently embark on your European business venture.
