Let’s take a look at the inner workings of setting up an affiliate marketing business. You’ll need to choose which jurisdiction to incorporate your business and open a corporate bank account in Europe. Both these steps are vital in the initial stages of starting an affiliate marketing business in Europe and ensuring that it is successful and long-running.
What is an online affiliate business?
Online affiliate businesses have an arrangement with websites, blogs and e-commerce businesses whereby the affiliate is paid commission for driving traffic or generating sales for the website or blog. The affiliate business can make money online without having its own blog, website or e-store. The affiliate business’s profit is from performance-based marketing where the affiliate is rewarded for each sale or visitor it generates for its clients.
When affiliate businesses first made an appearance on the internet it was easy and fast for anyone to start an affiliate business. Today it is much harder to succeed in the competitive online affiliate business and many new elements that previously didn’t exist. You will need to put a lot of time, energy and expertise into ensuring that your online affiliate business succeeds.
Online Affiliate Businesses and Corporate Banking
Affiliate businesses need a bank account in order to receive payment for their services. Affiliates use their marketing skills to generate sales or drive traffic for other businesses and in return they receive payment. Like any business, the affiliate’s marketing techniques may involve expenses. For this reason, online affiliate businesses need a corporate bank account to receive revenues and make payments. The income and expenses will be sent and received from/to businesses and so you will need to incorporate a company. As a company, you will not be able to use your personal bank account and will need a corporate account. Finding a bank in Europe that is willing to open a corporate bank account for your affiliate business may be difficult. European banks tend to consider affiliate businesses as a medium to high risk because of the nature of the affiliate money cycle.
The In-and-Out of an affiliate Money Cycle
Outgoing Payments – Affiliate marketing businesses need to pay for online services in order to implement their marketing strategies. This can include buying traffic, clicks or links; setting up websites; preparing videos for YouTube, and managing ad campaigns on Facebook, Instagram, Google etc. To pay for these online services the affiliate business must send funds to suppliers in different locations across the globe and in various currencies. Sending money to onshore and offshore companies not located in Europe is considered by banks to be high risk.
Incoming Payments – With hard work affiliate businesses will start making a profit from their marketing through affiliate networks, agents, direct companies and other avenues. Some of the possible sources of income can include companies incorporated offshore; companies without the appropriate licenses; companies marketing services that are problematic and others. As some of the affiliate sector’s revenues can come from questionable sources banks consider online affiliate businesses high risk.
The Best Place to Incorporate an Affiliate Business
When choosing where to incorporate your business you have two choices – onshore and offshore. We strongly recommend incorporation in an onshore jurisdiction. Although onshore jurisdictions are known to have higher taxes than offshore locations it is possible to find jurisdictions within Europe where there are low corporate taxes such as Hungary, Gibraltar and Bulgaria. By incorporating your business in one of these European jurisdictions with low corporate tax you can enjoy the security of Europe’s well established financial environment and infrastructure; the respect of being a truly legitimate business; it will be easier for you to open a corporate bank account and you can enjoy reasonable taxation. In the long run, incorporating in an onshore jurisdiction will save you money and sleepless nights.
Offshore incorporation in places like the Virgin Islands, Belize or Seychelles can seem the easier and cheaper option but it comes with disadvantages and hidden pitfalls. For example, you will have to contend with the tax authorities in your home country; a foreign infrastructure; questionable political or economic stability of the foreign jurisdiction and distance from your home country. You may find some of the offshore country’s incorporation requirements hard to comply with, for example in the Seychelles your company must have local directors. Some businesses may be reluctant to work with companies incorporated offshore and banks will not always approve accounts for companies with offshore incorporation due to the high risk.