Starting an Affiliate Marketing Business

Company Formation | Bank Accounts

This article is essential reading for anyone involved in affiliate marketing, affiliation online and digital marketing.

In this article we will deal with the financial and business side of operating an affiliate program, for example payments and banking issues faced by affiliate businesses. Instead of looking at various affiliate systems and programs we will focus on the banking needs of affiliate businesses.

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Banking Needs of Affiliate Businesses:

Paying Suppliers

    1. Traffic Generators – Affiliate businesses need to pay Google, Facebook or any other platform that directs traffic to their site, leads, expressions etc.
    2. IT Networks – Affiliate businesses need to pay for the creation, maintenance and operation of their websites. This can involve several suppliers including content writers, social media accounts, servers, domains, computers and office expenses.
    3. Business Operation – The affiliate business will have to have a physical address and office where payments will need to be made to employees, legal services, office space, office equipment, utilities and more.

Receiving Funds

    1. Affiliate Programs – The main income channel for an affiliate business is the revenue made from marketing products listed in the affiliate program. Your affiliate business needs to have a way of receiving these profits.
    2. B2B Income – If your business runs an affiliate program for a specific product connected to the business then you will need a way of receiving the profits from the direct customers.
    3. Income from Third Parties – Some affiliate companies act as media brokers selling traffic and media to a third party. These funds will also need to be received.
    4. Other Income – Some affiliate companies receive revenue from digital marketing agencies that pay for your online assets.

Banking and Finance Options for Affiliate Marketing Businesses

As an affiliate marketing company you need to set up certain official channels for receiving funds and making payments. The minimum financial requirements for an affiliate company are:

  • A business bank account at a brick-and-mortar bank.
  • An digital emoney account
  • A business debit card
  • An ewallet such as those offered by Skrill, Paypal etc. A business ewallet can only be opened once you have officially established your new business and opened your business bank account.

Once you have set up the essential financial infrastructure of your business you can make payments and receive funds. Ideally you can find one service that offers all or most of the above mentioned financial services instead of spreading your company across several financial institutions. For example a brick-and-mortar bank that also offers digital emoney accounts and debit cards.

All-in-One EMI Affiliate Bank Account in Europe

You can get all the financial services you need for your affiliate business from an EMI (Electronic Money Institute). A full-service account offered by EMIs in Europe allows you to receive and send funds; make wire transfers, SWIFT transactions; SEPA transactions; take out an international debit card and withdraw money from ATM machines. Affiliate businesses with an account at an EMI receive their own dedicated IBAN making international wire transfers and currency exchange streamline. You can access your EMI business account via your desktop computer or mobile device for hassle-free, speedy and secure transactions.

Opening an Affiliate Business Bank Account

Where to open your affiliate company bank account – If most of your transactions; customers and affiliate programs are in Europe and if most of your transactions are in Euros – SEPA or SWIFT, then the best place to open a bank account for your affiliate business is in a European country. You can open the account remotely without even setting foot in Europe.

How to Open an Affiliate Business Bank Account – Opening a corporate bank account at a traditional bank can be challenging especially for affiliate companies where it may be difficult to explain their business model to the bank. If the bank can’t understand your business model they won’t be able to assess your level of risk for onboard process Compliance (KYC, AML) and may reject your bank account application. EMIs on the other hand tend to be more flexible, receptive to affiliate company business plans and often more technically up-to-speed than traditional banks. For this reason many new start-up businesses including affiliate companies are moving away from traditional banking and opting for EMI business accounts.

The Legal and Corporate Aspects of Starting an Affiliate Marketing Business in Europe

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 insuring 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 insuring 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 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 You Tube 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 the Seychelles can seem the easier and cheaper option but it comes with disadvantages and hidden pit-falls. 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.