Creating a Company
Modern companies have many different components that must all be working well and working collectively if the company is going to succeed and be prosperous for any length of time. This idea extends from the core aspects of the business such as production and sales, to the less tangible elements like human resources.
Whilst this fact may be very evident in large, established businesses with many employees, departments and office buildings, it is also true of smaller companies that are still in their infancy. To draw an analogy with house building, laying the foundations is the most crucial stage of the building procedure since everything else depends on them being laid correctly.
Setting your business off on the right foot is extremely important, and is especially crucial during times of financial instability. By creating your company in an intelligent and forward thinking manner you will be able to reap the benefits long into the future.
Why get help creating a company?
As previously mentioned, the creation of your company is a highly important process and should not be taken casually. It can also be a complicated process that can easily go wrong without the right level of appropriate knowledge and experience.
If a complex component on your car were to break, or if a safety critical system such as the boiler in your house were to fail, you would hire an expert to carry out the required work. It makes sense to spend money on your most valuable resources to ensure they operate correctly. This same theory is true when it comes to establishing a company.
Perhaps the most problematic aspect in creating a new business is the level of paperwork that is necessary in regards to legal problems. Not only do you have to take into account the legal boundaries of the industry you will be operating in, but also any specific legal conditions of the geographical area you will be operating in and any specific needs of your workforce.
It is also becoming more involved and complex to setup a business. As new markets emerge, new trade links are brokered and new legal clauses are described you will need to keep up-to-date with the relevant requirements.
Using experts to aid you throughout offshore company formation increases the pace, caliber and effectiveness of the process.
Company Distinctions
Before you begin to setup your own company you should know the different types of company that can be created and the key distinctions between them. Whilst almost all businesses work on the premise of bringing in more income than they expend, the structures that exist underneath the exterior are fundamentally different. You need to use the appropriate company framework for your own company.
These corporate set ups exist to satisfy the broad scope of circumstances that cover the business arena. Companies vary a great deal, in terms of the quantity of employees, the industry they work in and also their sales environment, so different business models have been created to cater for this broad assortment. Different situations require different business approaches, and these in turn demand different business structures.
A few corporate structures are outlined below.
Limited Liability Company (LLC)
A Limited Liability Company, abbreviated as LLC, is a form of company where the owners have only limited liability. In extremely basic terms, anybody who has total or partial ownership of an LLC can only be held financially liable for a fixed sum which usually reflects the amount they have invested in the business.
A Limited Liability Company shares qualities with both a partnership and corporation business structure. It provides its owners with limited liability (like a corporation) but allows for pass-through income taxation (like a partnership).
There is also much less paperwork called for in running an LLC than a corporation, where necessary levels of management and record keeping are incredibly high. It is worth noting however that the levels of limited liability protection offered by an LLC do not cover all possible circumstance. In cases where the law has been broken, such as fraudulent business activities, a court retains the right to hold the owners individually liable beyond their liability restriction.
Limited company (Ltd)
A Limited company is similar to an LLC as a business entity, although it is limited to use in certain nations due to the variations in national laws. Limited companies can be created in the United Kingdom, the Republic of Ireland or Australia.
A limited company offers limited liability to its shareholders by making them individually accountable for only the unpaid sum remaining on their own shares if the company were to go bust. This amount refers to what was unpaid on the shares when they were issued rather than any monies exchanged when shares were sold. Since shares are typically issued as being fully paid, the shareholders are no longer personally liable.
There are business services companies having expertise in Seychelles incorporation and specific knowledge about the area and the trading laws.
International Business Company (IBC)
An International business company, abbreviated as IBC, is a type of offshore company that is not allowed to trade within the country or jurisdiction where it was registered. The specific rules that govern an IBC will depend on where it was incorporated, although they generally share certain characteristics, such as greater flexibility of operation and laid back trading laws. The most prominent feature of an IBC however is the possible tax planning afforded by being registered offshore.
Offshore Companies
One idea that you may consider when choosing what type of company you are going to launch is choosing to create an offshore company. An offshore company is one that is incorporated in an offshore financial centre, or one that is incorporated in an area where it does not carry out its primary functions.
Benefits of creating an offshore company
Offshore companies are usually used as one element of an overall tax planning plan. Taxation rules vary between the different offshore financial centres out there, although organisations will generally pay tax as a fixed yearly sum that is insignificant in relation to the levels of taxation applied in other parts of the world. This possible tax planning makes them an incredibly attractive business proposition.
These tax discounts can be offered by the governments of offshore financial centres because the businesses that benefit from them are not trading within that area. This means there is not the same demand for administrative support and commercial infrastructure that would be required by onshore organisations.
There are other benefits to creating an offshore company, such as the levels of anonymity that can be enjoyed. Business procedures can be carried out under the company name without having to release the names of the key members in the company. Offshore companies are normally not required to submit the levels of paperwork that domestic corporations do, and as such are less difficult to run. This doesn’t apply to regulated businesses.
Since the regulations for offshore companies are readily available, it gives potential new business owners the chance to choose which rules they want their enterprise to be governed by. Certain types of business may be better suited to incorporation in a particular area.
Typical Uses
IBC or other offshore companies will be commonly used by businesses where tax is a key concern. These may include property companies that are hoping to avoid capital gains tax and inheritance tax, or by investment companies that do not want to pay tax on investment interest earned. They can also be advantageous when employing expatriate staff since tax can be avoided at source.
The primary purpose to create any Ltd company is usually the safeguard given to the owners regarding personal financial liability.
Possible locations for offshore companies
There are many parts of the world that can be defined as an offshore financial centre due to the ambiguous nature of the term. However, there are a particular few that stand out above the rest, including Bermuda, The British Virgin Islands, The Cayman Islands, Luxembourg and The Seychelles.
Two of these centres are lightly profiled below:
British Virgin Islands
The British Virgin Islands, also known as simply the Virgin Islands or BVI, is a British overseas territory in the Caribbean Sea. They shouldn’t be mistaken with the U.S. Virgin Islands. Although a large portion of residential income is powered by tourism, more than half of the governmental income of the territory is made from licensing agreements for offshore corporations. It is believed that around 40 percent of the world’s offshore companies were incorporated in the British Virgin Islands.
Seychelles
The Seychelles is a small territory located in the Indian Ocean, off the Eastern shore of mainland Africa and to the North of Madagascar. Seychelles is the wealthiest nation in Africa in terms of GDP and this is largely driven by the record setting offshore sector in this region.
Off-the-shelf companies
Another option to consider when creating your own company is to not create it at all! It is possible to actually buy a new company “off the shelf” and become incorporated extremely rapidly. You do not get to select the name of your organisation, but if that is not a critically important factor then there are great advantages to buying a company in this manner.
Establishing a company like this could also reduce the difficulties that are sometimes encountered when registering a new business. Using a respected corporate services provider to manage the paperwork required gets around this problem. It is not the perfect solution for everybody but it is an option that is worth thought.
Creating a company in the UK
If after reading this article you do not feel that the creation of an off-shore company would be beneficial to you and your enterprise then you can still get assistance registering a company in the United Kingdom. You might not be able to take advantage of the tax gains and privacy afforded by an offshore company, but you may feel far better having the company registered onshore.
There are legal procedures that must be undertaken, and the amount of paperwork needed is likely to be a lot higher than registering an equivalent offshore company. The workload on it’s own may be challenging but there are plenty of corporate services companies that are experts in this field and can be of use.
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