Risk is a threat to every business on this earth. That is why all multinational corporations invest in building capabilities in risk management, scenario planning, continuity planning, and all that jazz. Risk management and mitigation is a significant area of research nowadays. Though there is an excessive focus on the financial aspects of risk mitigation, the operational aspects of this issue are quite important too. Banks and financial institutions are more exposed to risk, as they are vulnerable to both sector-specific as well as economy-specific threats. As for businesses in other sectors, they would do well not to ignore this underlying aspect of participating in a free market economy such as the US.
Only in a communist government is there no risk, and there too, if the government fails or falls, then the industrialists have no one to save them. The collapse of Communism in the USSR led to the existing govt-owned businesses going down without a trace. There was no one to manage them, but they still held a lot of valuable assets such as machinery and a skilled workforce. The oligarchs of Russia emerged from the debris of Communism as they provided leadership and exploited these strengths to create massive value for themselves. The current corona virus epidemic shows that companies need to prepare for all kinds of situations, even those which are beyond their control. If you build your buffers and focus on risk management, then and only then, you have a fighting chance to survive against any odds. It is a sad fact that many unprepared businesses will not be able to withstand the disruption caused by the current lockdown prevailing in most of the major nations in the world. Only if we learn from what history tells us, we will be able to do better than we have in the past.
Recommended Reading – Best Practices to get funding for your shelf company
Risk management for small businesses
Ours is a blog where we talk about the myriad aspects of business and how shelf corporations can help you streamline and expand your business. So, it is quite natural that quite a lot of you would be wondering as to why we went on a historical journey, but we hope that by the end of this series of blogs, you will be able to understand what we’re trying to explain.
Many of you would be racking your brains as to what you can do as an owner of a small business to mitigate risk. The next thing on your mind would be to find out the technique of using shelf corporations on sale for risk management. Most of our readers run small scale firms and do not have the resources or the capabilities of large firms. However, there is no need to fret as there is a lot that you can learn and apply to your specific situation.
In this post, as well as the next, we are going to address these two aspects by elaborating on how shelf corporations can help manage risk. Then, we are going to explain to you the ways through which you can unlock the potential of your business by using shelf companies.
Minimize political risk using a US shelf corp
The first kind of risk is political risk, and this is why we spoke to you about the fall of Communism in the USSR. This risk emerges when a change in the politics of your country of origin threatens your business. Imagine the government of the day in your country suddenly imposes restrictions on your sector. How will your business survive?
Again, most emerging economies do not have a stable tax policy, and this makes it difficult for businesses to make solid plans for the future. Suppose the government suddenly increases the tax on business, where will that leave your company? Thus, if you have an international presence, then at least you have an option to diversify or hive off profits. Now you can understand why large firms always have a presence in more than one country. These companies prefer having a subsidiary or a holding company in tax havens such as Panama or the Bahamas.
For the firms in the US, this threat is not that much. There is a kind of unwritten compact between the two opposing political parties concerning the economy. However, that compact is getting a bit frail with the fringe emerging in both the parties. So, maybe in the future, businesses in the US will have to analyze this aspect as well. The land of the free offered political stability to industry for a continuous period of more than a century. That is the precise reason why the country has emerged as the biggest economy in the world.
However, for companies owned by foreign nationals, the US is considered a haven as compared to many other nations in the world. Most of the trade in the international market is in the United States Dollar, the pre-eminent reserve currency of the world. US tax laws are highly favorable to foreign businesses, as the country is always open to foreign investment, and wants to incentivize capital from abroad. You can read more about this aspect in one of our previous posts. Also, in case of any disputes, you have a relatively efficient judicial system. This system does not discriminate on nationality, and you can hope to get swift and fair justice here.
Thus, if you are a firm that has dealings with companies in the US, it makes eminent sense for you to buy shelf corporations here. It will give you the advantage of a local presence as well as a vintage in the US market. Also, it will allow you to diversify your presence into another country, apart from your nation of origin. Imagine if anything untoward happens in your land, then it is your diversified presence that might save you. Through your investment in one of the many Delaware shelf corporations that we offer, you can always win back all that you lost!
Finally, if you are looking to buy a shelf corporation and confused when to buy it then explore our beginner’s guide on – When should you buy a Shelf Corporation?
