Dragoni Insights · Geography

WHY GEOGRAPHY
STILL
MATTERS.

Business may feel increasingly borderless. The legal, commercial and regulatory world surrounding it remains stubbornly attached to place.
Perspective 02
Europe & International
Approx. 6 minute read
Dragoni Partners LLP

A customer in Paris can buy from a British business in seconds. A meeting in Nicosia can take place without anybody leaving London. A designer in Barcelona, developer in Warsaw and director in Manchester can work on the same project before lunch.

It is easy, therefore, to conclude that geography has become irrelevant.

Commercially, the world has certainly become smaller. Digitisation has transformed where businesses find customers, people, capital and opportunity.

But there is an important distinction between a business being able to reach across borders and the structures surrounding that business becoming borderless.

Customers may cross borders effortlessly. Companies, ownership, regulation, taxation and people do not.

THE BORDERLESS BUSINESS IS ONLY HALF THE STORY.

Behind every apparently frictionless international transaction sit legal entities, contracts, banking arrangements, directors, employees, intellectual property, tax systems, regulatory obligations and decisions made by real people in real places.

Those things have geography.

A company is incorporated somewhere. People are resident somewhere. Assets are legally owned somewhere. Contracts are governed by a system of law. Regulatory permissions are granted by authorities with jurisdiction. Tax consequences can depend upon residence, source, activity, management, control and other factual connections.

None of this makes international business undesirable. It simply means that international business deserves international thinking.

The seductive assumption

“MY BUSINESS IS ONLINE.
SO LOCATION DOESN'T MATTER.”

Technology may remove distance from the customer experience. It does not remove jurisdiction from the business behind it.

BREXIT CHANGED THE RELATIONSHIP. IT DID NOT MOVE EUROPE.

The United Kingdom's departure from the European Union materially changed the legal and trading relationship between Britain and the EU. It did not alter the fact that Europe remains on Britain's doorstep, nor remove the commercial reasons why British entrepreneurs may wish to trade, invest, establish operations or develop relationships there.

For many businesses, an entirely UK-based model remains appropriate. For others, genuine European activity may make a European presence worth examining.

The important point is that the answer should follow the commercial facts. Establishing an entity in another jurisdiction merely because the jurisdiction appears attractive on paper is very different from designing an arrangement that reflects actual operations, decision-making, customers, investment or strategic ambition.

THREE GEOGRAPHIES MAY MATTER AT ONCE.

01
THE BUSINESS.
Where does the company actually operate, create value and undertake meaningful commercial activity?
02
THE OWNER.
Where are the people behind it based, and what personal circumstances may interact with the business?
03
THE OPPORTUNITY.
Where is the business genuinely trying to go over the next five or ten years?

Those three answers need not be identical.

A British entrepreneur may own a UK company that develops meaningful operations elsewhere in Europe. A European business may seek UK customers. A family may have assets, beneficiaries or interests in several jurisdictions. An investment strategy may be wider still.

The task is not to force all of those realities into one geographic box. It is to understand how they interact.

LOCATION IS NOT THE SAME AS SUBSTANCE.

A registered office is an address. Substance is a much broader question.

Where relevant, serious cross-border planning may need to consider where decisions are made, who makes them, what functions are carried out, where records and administration sit, what commercial activity occurs and whether the arrangement behaves in practice as its documentation suggests it should.

That is why geography cannot sensibly be reduced to choosing a country from a list of tax rates.

The most attractive jurisdiction on a spreadsheet may be entirely wrong for the business standing in front of it.

THE QUESTIONS CHANGE WHEN THE MAP GETS BIGGER.

01
WHERE ARE THE CUSTOMERS?
Not simply where the website is hosted, but where meaningful commercial activity is developing.
02
WHERE IS VALUE CREATED?
People, intellectual property, contracts, capital and decision-making may each tell part of the story.
03
WHERE ARE DECISIONS MADE?
Governance is not merely what minutes say. It should reflect how responsibility actually operates.
04
WHERE WILL THE BUSINESS BE IN FIVE YEARS?
Today's structure should not ignore tomorrow's credible commercial direction.
05
WHERE ARE THE OWNERS?
Personal circumstances and business circumstances may cross jurisdictions in different ways.
06
WHAT IS THE COMMERCIAL REASON?
If the reason for being somewhere cannot be explained without beginning with tax, the analysis may be starting in the wrong place.

BRITISH BUSINESS. EUROPEAN CAPABILITY.

There is sometimes an unhelpful assumption that a British business considering European structuring is somehow becoming less British.

That need not follow at all.

A company can retain its British identity, people, customers and commercial roots while also developing genuine capabilities elsewhere. International groups have long used different entities and jurisdictions for different legitimate commercial functions.

The question is not whether British businesses should become European businesses.

It is whether a business whose commercial world has expanded beyond Britain should automatically assume that every part of its architecture must remain confined to Britain too.

THE ANSWER MAY STILL BE: STAY WHERE YOU ARE.

Internationalisation has costs. Additional companies, advisers, banking relationships, governance, accounting, reporting and administration can create burdens as well as opportunities.

A review that concludes there is no sufficient commercial reason to add another jurisdiction is therefore a successful review.

Complexity should earn its place.

But where a business already has, or genuinely intends to develop, international activity, dismissing geography as irrelevant can be just as simplistic as assuming that international is automatically better.

A Dragoni perspective

THE WORLD MAY FEEL
BORDERLESS.
YOUR STRUCTURE ISN'T.

The objective is not to chase jurisdictions. It is to understand where the business is, where its owners are, where opportunity lies — and whether the architecture connecting them still makes sense.

One final thought

GEOGRAPHY SHOULD
FOLLOW PURPOSE.

There is no prize for having the most international-looking corporate diagram.

There is value in having arrangements that reflect commercial reality, are properly governed and remain understandable to the people responsible for them.

For some businesses, that means Britain.

For others, the map may deserve to become a little wider.

And finding out begins with the right conversation.

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This Insight is provided for general information and discussion only. It does not constitute legal, tax, investment, financial or other professional advice, nor a recommendation to establish an entity or adopt an arrangement in any jurisdiction. Appropriate advice depends upon individual facts, objectives, jurisdictions and circumstances.