According to international studies, up to 40% of companies face banking refusals to open accounts after registering abroad due to document errors or non-compliance with compliance procedures. Even more alarming statistics: every third entrepreneur who opens a business in Europe or Asia faces tax risks and penalties within the first year of operation. Why is this happening, despite the availability of information?
The international company registration market is more complex today than ever: changing regulatory requirements, tightening of AML compliance, sanctions restrictions, as well as growing demands for substance and transparency of the corporate structure. An error at the registration stage can lead not only to financial losses but also to account blockages, reputational risks, and the inability to scale the business.
I observe how many entrepreneurs underestimate the depth of these challenges, relying on outdated schemes or unverified intermediaries. In this article, I will analyze 5 key mistakes in registering a legal entity abroad that the COREDO team has identified in practice and offer concrete strategies to prevent them. If you want to not just open a company, but build a sustainable international business, read until the end: you will receive not only risk analysis but also tools for their minimization.
Why do companies make mistakes when registering a business abroad
International corporate law imposes a complex set of requirements for registering a legal entity abroad, which often change depending on the jurisdiction. In practice, the COREDO team has repeatedly encountered situations where even experienced entrepreneurs make mistakes due to:
- Lack of information about the specifics of legislation in the selected country;
- Complexity of due diligence procedures and identification of beneficial owners;
- Lack of understanding of current compliance risks and requirements to the corporate structure;
- Rapidly changing regulatory standards (especially in the EU, Singapore, UAE, Cyprus, and Malta).
As a result, mistakes in registering a company abroad lead to delays, increased costs, refusals in banking services, and even the impossibility to start operational activities.
Mistake #1. Wrong choice of jurisdiction for business
How to choose a jurisdiction to register a company in the EU, Asia, or Africa
One of the most common missteps is choosing a jurisdiction “on the advice of acquaintances” or based solely on the low cost of registration. In practice, COREDO has demonstrated that the optimal jurisdiction is determined not only by the tax rate but also by:
- Substance requirements (real presence): for example, in the EU and the UK, regulators increasingly require confirmation of the presence of an office, staff, and business activity.
- Political stability and transparency of legislation: business registration in Asia (e.g., Singapore) is attractive due to its predictable legal environment and developed investment protection system.
- Opportunities for business immigration and market access: for some COREDO clients, opening a company in Europe became a key to entering new markets and obtaining residency permits.
- Corporate structure features: In Poland, Cyprus, or Malta, charter requirements and PKD codes (types of activity) differ, affecting business opportunities.
Sanctions and regulatory risks when choosing a country
Sanctions restrictions and automatic exchange of tax information (CRS/FATCA) are another trap for international business. The solution developed by COREDO involves mandatory auditing of sanctions and political risks before registration: we analyze not only current restrictions but also the likelihood of their tightening. For example, registering a company in the UAE or Singapore requires considering beneficiary transparency requirements and readiness for automatic information exchange with tax authorities of other countries.
Mistake #2. Ignoring AML compliance and KYC procedures
How to ensure AML/KYC compliance when registering a business
Today, banks and payment systems (Payoneer, Wise, Stripe, PayPal) impose demands on foreign companies comparable to financial institutions’ requirements. In practice, COREDO confirms: insufficient attention to AML compliance and KYC procedures leads to account blocking, service refusal, and fines.
Key points:
- Identification and verification of founders and beneficiaries: a complete package of documents proving identity, source of funds, lack of criminal records, and sanction risks is required.
- Development and implementation of KYC/AML policy: for companies operating in the financial sector (crypto, payment services, investment platforms), this is a mandatory condition for obtaining a license and opening accounts.
- Compliance with international standards of corporate documents: banks and regulators require transparency in the ownership and control structure.
Problems with opening a business account for a foreign company
Even after successfully registering a company abroad, many face the problem of opening a business account. Reasons:
- Corporate documents not meeting bank requirements;
- Doubts about business substance;
- Lack of transparent corporate reporting.
The COREDO team has implemented comprehensive support for the registration of a legal entity and account opening: we prepare the document package in advance, taking into account the requirements of specific banks and payment systems, and conduct internal due diligence.
Mistake #3. Incorrect preparation of corporate documents
How to ensure corporate documents meet international standards
Errors in corporate documents are one of the most common reasons for a company’s registration or account opening refusal. An example from COREDO practice: a client, registering a business in Asia, did not consider local requirements for the operating agreement and charter, leading to the need for a complete revision of the documents and project startup delay.
Important aspects:
- The corporate charter and operating agreement should reflect the management structure, rights, and obligations of the participants, profit distribution order, and comply with international standards (especially in cross-border transactions).
- PKD codes and types of activity: errors in their selection can lead to the inability to obtain a license or refusal to open a bank account.
- Offshore company registration requires special attention to the requirements of registration authorities and compliance with corporate reporting.
Errors in choosing the type of activity and corporate structure
The choice of corporate structure influences tax residency, the possibility of using nominee services (nominee directors/shareholders), intellectual property protection, and tax burden optimization. COREDO’s practice shows that errors at this stage can pose not only legal but also reputational risks.
Mistake #4. Underestimating tax and reporting risks
How to avoid double taxation when registering internationally
Double taxation risks are one of the main causes of financial losses when registering a legal entity abroad. International tax optimization requires:
- Accurate determination of the tax residency of the company and its beneficiaries;
- Analysis of double tax treaties between the countries of presence;
- Consideration of automatic exchange of tax information requirements (CRS/FATCA).
At COREDO, we recommend modeling the tax load in advance and developing scenarios for interaction with tax authorities in different jurisdictions.
Corporate reporting issues and real presence requirements
Delayed reporting, non-compliance with substance requirements (presence of an office, staff, business activity) are frequent reasons for fines and denial of banking services. Company registration without a physical office requires specific attention to corporate reporting issues and audit preparedness.
COREDO clients receive detailed instructions on maintaining reporting and preparing for regulator audits in each selected jurisdiction.
Mistake #5. Working with unreliable intermediaries and lack of comprehensive legal support
How to choose a reliable consulting partner
One of the most dangerous mistakes: trusting the registration of a company abroad to unverified intermediaries. Consequences: loss of funds, data leaks, registration or account opening refusal, reputational risks.
Recommendations from COREDO:
- Conduct due diligence on intermediaries: check for licenses, reviews, legal history, experience with the chosen jurisdiction.
- Check board members for criminal records and sanction risks.
- Demand transparency in judicial fees, nominee service, and corporate beneficiaries.
Practical recommendations for service quality control
- Use electronic company registration only through official portals and accredited agents.
- Carefully study licensing conditions for specific activity types (financial, insurance, investment services).
- Include force majeure and intermediary liability for regulatory requirements clauses in contracts.
COREDO’s implemented projects demonstrate: comprehensive legal support for business: the key to the long-term stability and scalability of an international company.
Key conclusions and practical recommendations
| Mistake | Consequences | Best practices |
|---|---|---|
| Wrong choice of jurisdiction | Sanctions, tax risks, account denial | Analyze substance, political risks |
| Ignoring AML/KYC | Account block, fines, service denial | Implement KYC/AML policy, prepare documents |
| Errors in corporate documents | Registration denial, bank issues | Check standards, involve experts |
| Underestimating tax and reporting risks | Double taxation, fines | Optimize structure, meet deadlines |
| Working with unreliable intermediaries | Loss of funds, reputational risks | Conduct due diligence, choose verified |
Practical recommendations:
- Conduct a thorough jurisdiction analysis: consider substance requirements, political stability, sanctions, and tax risks.
- Prepare corporate documents according to international standards: consider requirements for charter, operating agreement, PKD codes.
- Implement AML/KYC policy considering your sector’s specifics: prepare a full document package for banks and regulators.
- Optimize tax load and corporate structure: model tax scenarios, consider double tax treaties.
- Conduct due diligence on all intermediaries and partners: check their licenses, reputation, legal history.
FAQ: Frequently Asked Questions about registering a business abroad
The package usually includes the charter, operating agreement, beneficiary documents, address confirmation, KYC/AML policy, and a business plan.
Consider the business goals, tax residency requirements, asset protection, and nominee service opportunities.
Most jurisdictions require a physical office, staff, real business activities confirmed by corporate reporting.
Use international databases, requests in state registers, conduct due diligence with expert involvement.
Audit corporate documents, fix mismatches, prepare an alternative package for other banks or international payment systems.
Involve lawyers familiar with local requirements, check compliance of corporate documents with international standards.
Fines, account blockage, loss of tax benefits, difficulties in subsequent licensing and business scaling.