8 Benefits of Starting a Business in Europe

The COVID-19 pandemic halted growth for many businesses, but as the world has recovered from the events of the past two years, businesses are looking to expand to new territories. The European Union (EU) presents a great opportunity for expansion because of the size of the market, its unique one-stop-shop rules, fair competition laws, and more. 

Whether it’s accessing important trade routes, taking advantage of tax laws, or benefiting from catering to a large market, starting a business in Europe has many advantages. In fact, some of the best European countries to start a business in are Germany, Spain, Portugal, France, Italy, and the Netherlands. Keep reading to learn more about business formation and expansion in European nations.

Benefits of Starting a Business in Europe

Expanding to European countries can be extremely lucrative, which is why so many new companies are founded there. As of August 2022, there were 23.1 million small and medium-sized enterprises (SMEs) in the EU. In fact, SME contribution to the European Union’s economy is estimated to be 56%. This article delves into the many advantages of starting a business in Europe and the ease with which it can be done using Start Company Formations.

1. The European Union Is One of the Largest Economies in the World

One of the main incentives for starting a business in Europe is taking advantage of the European Union (EU)’s status as one of the largest economies in the world. As of 2021, the gross domestic product (GDP) of all goods and services produced in the EU was a startling €14.5 trillion. In addition to this, the EU accounts for approximately 14% of global trade. 

In addition to being one of the largest economies in the world, the EU consists of countries that are rapidly growing and large economies in their own right. This includes countries such as Germany, France, Italy, Spain, and the Netherlands.

2. The EU Operates as a Single Market

The EU is made up of 27 countries and operates as a single market. This is significant for intra-EU trade, which came in at €6786 billion in 2021. Since there’s free movement of goods, services, and capital in the market, businesses don’t have to worry about tariffs. Yet another advantage of starting a business in Europe is that freedom of movement also applies to people. If you opt for business formation or expansion in Europe, you can hire any EU citizen and have access to a larger talent pool.

Starting a business in Europe also means being able to take advantage of the huge market that comes with the EU operating as a single market. As of January 2022, the EU is estimated to have 446.8 million inhabitants. This enormous market size means you can market your products or services to a larger audience. 

Furthermore, the one-stop-shop (OSS) rules that the EU has implemented mean businesses can cater to all of Europe from a single central location. Thus, by establishing your business in one European country, you can do business in the entire region, all without the hassle of too much paperwork and red tape.

3. The EU Has Many Favourable Trade Agreements

In addition to favourable intra-EU trade, businesses can also take advantage of the many trade agreements the EU has with other nations. The EU describes itself as “one of the most outward-oriented economies in the world.” Currently, the EU has 41 trade agreements with 72 countries, including free trade agreements, economic partnership agreements, and association agreements. Some of the most well-known agreements include the EU-Japan Economic Partnership Agreement (EPA) and the EU-Canada Comprehensive Economic Trade Agreement (CETA). 

Since one in seven jobs in Europe depend on trade with the rest of the world, these agreements are ongoing, and new agreements are agreed upon frequently. They result in reciprocal market opening and some even eliminate customs duties when it comes to bilateral trade. 

4. Many European Countries Have Low Corporate Income Tax Rates

One of the major advantages of starting a business in Europe is taking advantage of the low corporate income tax rates. While European countries do require businesses to pay corporate income taxes on the profits they earn, this can be extremely low as compared to other regions in the world. The European OECD nations have an average corporate income tax rate of 21.7%. This is below the global average of 23.54%. 

While the corporate income tax rate is lower for Europe in general, this is even more favorable for businesses depending on the country their business is based in. For example, the United Kingdom, Slovenia, Poland, and the Czech Republic have a corporate income tax rate of only 19%. This is even lower in other European nations, such as Hungary (9%) and Lithuania (15%).

5. The Majority of EU Countries Use a Single Currency

19 of the 27 EU member countries use the euro as their official currency. This is around 341 million individuals using the euro, making the euro the second-most used currency globally. Whether it’s individuals travelling abroad and using their goods or services or shopping online, there are no problems in trying to figure out exchange rates or prices being impacted by the exchange rate. This makes business much simpler. 

6. Europe Has Reimbursable Costs and Other Protections 

When starting a business in Europe and filing as a sole proprietorship, LLC, partnership, or another type of business, you can take advantage of reimbursable costs. Some of these deductibles may not be available in your home country. Maximizing deductions can positively impact your bottom line without necessarily having to grow. Furthermore, you can benefit from other protections, including protections for your business name. Your European business name will be safeguarded, and other organizations cannot use your name in your market. 

Forming a private limited company also protects you from personal liability. This is an option in many different European nations and is known as a SARL in France and a GmBH in Germany. In addition to this being a type of business that’s quicker and cheaper to set up, you have fewer compliance requirements to meet and are only liable for the capital you contribute. If you’re interested in business expansion instead of business formation, don’t worry – you can also do this for an existing business. This involves setting up a subsidiary company. 

7. The EU Has Fair Competition Laws

If you’re starting a business in Europe and are worried about competition, don’t be. The EU has fair competition laws in place to protect small and medium-sized businesses. This ensures “fair and equal conditions for businesses” so that innovation can thrive. If larger firms try to use their bargaining power against smaller companies, the EU fines these companies and ensures a competitive market.

Additionally, the EU has a history of standing for competition. In fact, it was a founding member of the International Competition Network (ICN) and assesses competition breaches both nationally and globally to this day.

8. The EU Supports Small and Medium Sized Businesses

Starting a business abroad can seem daunting, but this is much easier in the EU than in other regions. The EU supports SMEs by helping them access markets, providing opportunities for growth, and aiding them with financing opportunities. 

The following are some of the ways in which the EU supports SMEs:

• Common Agricultural Policy (CAP) for funding to small companies 
• Providing access to finance and markets through the European Innovation Council and SMEs Executive Agency (EISMEA)
• Financing SMEs that support energy, transport, and digital networks 
• Providing support for businesses and entrepreneurs from many programs, including the “Access to finance” portal
• Training and opportunities and improving competitiveness through the European Social Fund Plus (ESF+)

Are You Starting a Business in Europe? Let Start Company Formations Help!

With so many opportunities, a huge market, and access to a large workforce, there are many incentives to expand into Europe. However, doing so can seem daunting because of the paperwork and due diligence required. When it comes to the business formation or business expansion, look no further than Start Company Formations. 

Contact us today to discuss the details of opening a branch or subsidiary in Europe.

We’re veterans in the business formation and international expansion field and have over ten years of experience helping organizations set up and reach their growth goals. Whether it’s ensuring compliance with tax laws and regulations, setting up an office, or a virtual address, taking care of legal documents, or hiring accounting services, we can handle every aspect of business formation and expansion.

Furthermore, since we specialize in international business formation and expansion, it doesn’t matter where you want to set up your business or which locations you want to expand to. Whether setting up your business in the UK or expanding to countries like Italy, France, Germany, or Portugal, we can handle the paperwork and legal aspects while you focus on your business. 

Establish or grow your business today by calling us at 0204 504 1544 or reaching out to us here, and we can get started.