Mistake 2: Wrong Location

Mistake 2: Wrong Location

Say you assembled the team, and you are ready to share with the world your genius idea. The next question would be, where should my company be located?

Now, I understand that some ideas and startups can work anywhere anytime given the nature of their business, but nonetheless you still need a location of some sort to handle the legal matters such as CR (commercial registration, no not cute rabbit), the financial transactions (getting paid and what not), the documentation of shareholders agreements, and others.

A friendly alert: be careful of your choice as it could impact the future of your business dramatically.

In our case for example, we decided to locate our business fully in Saudi Arabia. Now that had its advantages and disadvantages, but we agreed that it’s the location that makes sense for us.

Here are few things to consider while thinking of your startup location:

  • How easy is it to set up the legal entity? (you can use the “Ease of Doing Business Index” as a reference)
  • What type of investor are you looking to attract? (local vs international, is there a certain risk that might discourage international investors? laws and regulations that protect both you and the investors)
  • Where do you expect the biggest chunk of your revenues to come from? (online vs offline, which country, etc).
  • You have to also consider the social norms in the location, and the views of local companies vs international ones.
  • How efficient is the payment system in that location, and does it have several options? (for example credit cards in certain countries are not as common as others)
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  • Trade regulations (specially external ones like export and import, customs, etc)
  • Taxes and IP / patent registration

Finally, in brief I would highly recommend avoiding registering your company in a place where it could:

  • Give you a lower level of protection for your own IP, ownership, or personal liability
  • Hinder your business progress by having complicated and inefficient regulations and laws (where you end up spending a lot of money and effort to deal with legality that you lose focus on your core business)
  • Hinder your company’s growth and potential for international markets / partnerships

 

Obviously, I can’t cover all risks and issues that could result in choosing a certain location for your startup, as I am not the oracle of that topic, and for sure there’s no such location as the perfect location, but all what I am trying to say here is that please think carefully before registering your company somewhere and make sure it has low risks on your business.

Thanks for reading the second article, almost there, 38 to go.

 

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