international business liability litigation
Can we set up our company in a different country in order to protect our IT and assets from litigation?
<p>I'm working with a startup in a country where laws are loose at best. After reviewing the privacy laws that bind us by doing business in this country, there seem to be an endless amount of ways that we could be in violation without any malicious intent because of the vagueness of the language.</p>

<p>My idea to pitch to my partners is to set up the company in a country where laws are more explicit and the legal system is robust which holds all of our assets, processes payments, and where all the ownership lies, then use a local pass-through entity in the country we are targeting that has all of the liabilities of handling the sensitive information, but with which we are not technically affiliated.</p>

<p>Given this situation, is such an arrangement viable from a legal perspective in terms of protecting our assets and ourselves from liabilities and litigation?</p>

<p>EDIT Feb 19, 2018</p>

<p>Great answers and responses. Given me a great deal to think about.</p>

<p>Just a few points of clarification:</p>

<ul>
<li><p>In the future our business will likely expand to markets other than "A", however, that is likely many years in the future. This consideration could render the question moot I suppose.</p></li>
<li><p>Since "B" is a purely hypothetical, my first choice was Singapore.</p></li>
<li><p>The legal system in "A" is fundamentally corrupt, its really just a contest of who has the most resources/connections.</p></li>
</ul>

<p>Okay, let's call the "<em>country where laws are loose at best</em>" <strong>A</strong>, and the "<em>country where laws are more explicit and the legal system is robust</em>" <strong>B</strong>.</p>

<p>The answer pretty much depends on whether you mostly do business in A or not.</p>

<p>No matter what country B your business is domiciled in, if you do business (have customers) in country A, you won't be protected from <em>litigation</em> in that country. Noone of your adversaries in A would say "Hmmm, they're from B, we can't sue them here in A". If they can't get you in B, they will at least be able to <strong>ban</strong> you from A.</p>

<p>In most countries, if your business is present physically — offices, physical stores etc. — those need to belong to your entity registered in that country. You cannot have a food supermarket in the EU directly owned by a US company — it needs to be owned by an entity registered in the EU (which in turn can be owned by the US company though). If your business is purely online then you could get away without a local entity — but only until you become noticeable: Google, PayPal etc. all have entities in Europe and those are the targets for any litigation coming from Europe.</p>

<p>It is true though that having your <em>assets</em> registered in B would require your adversaries in A to litigate in B to get hold of your assets (unless they are present in A physically; it is not uncommon for two states in confrontation to arrest each other's property).</p>

<p>Bottom line:</p>

<ul>
<li>if your customers are mostly/entirely in A, then having your business domiciled in B can only be justified if there are assets that can stay outside A without adversely affecting the business (e.g. intellectual property)</li>
<li>if your customers can be anywhere then definitely chose B to domicile your business.</li>
</ul>
