List of scams from company formation agents

Here is a list of scams from company formation agents in Europe

Fake company formation agents:

Usually, those companies ask you for much due diligence and at some point they make you believe that something is wrong with your papers. If this happens to you, you have to identify the location of the company and report it to the police & the local Investment board. While many governments try to their best to attract people, the work of scammers ruin their efforts, it is very important to report them to the government because they can be aware of it and reinforce the reputation of their jurisdiction.

The mandatory VAT registration:

In many countries of the European Union, a turnover threshold has to be reached before being forced to register for a local VAT number and being forced to report every month the VAT. For instance, in Latvia, the threshold is 50,000 euros. Company formation agents may make you believe that it is mandatory in order to create some workload that they can bill you. First of all they will bill the VAT registration and then, they will bill the monthly report of the VAT which may be zero if you sell outside of the jurisdiction.

The accounting fees per transactions:

That is when you are billed per transactions and not per documents. Usually there are many more transactions than documents so that your accounting expenses literally blow up. So, if you have 100 payments behind 1 invoice it is going to be very expensive. Accountant companies can act like a mafia in this case as their revenue will increase as your profit will increase too. We have noticed that some accounting services were overpriced. A company formation agent may attract with cheap formation costs and then bill you very high rates for accounting.

Very quickly it will be more interesting to hire someone under your own company, especially in countries where salary are low.

The abusive power of attorney:

Read carefully the lines of the power of attorney to see whether there is no too much delegation of your power. Don’t forget that in the end whatever the country, the directors are always responsible for being in compliant with the local requirement of a jurisdiction (annual returns, Financial statements…).

Hidden fees:

That’s when a company formation agent only display prices that don’t include everything like the government fees. They hide the additional fees on another webpage or you discover those additional fees when they send an email to you. In fact, because of that, the real price of a company formation can double.

Our advice:

  1. Take the time to read and read again the prices, the services, the terms
  2. Ask questions if you don’t get clear answers go somewhere else.
  3. Check to see if someone has written a comment about the company formation agent.
  4. Never sign any agreements too quickly. Take the time to read it. The best would be to ask company formation agents to send agreements by mail.


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