Creating a Company
Modern companies have many different components that must all be operating well and working together if the company is going to succeed and be profitable for any length of time. This idea extends from the core aspects of the business such as production and sales, to the less tangible aspects like human resources.
Whilst this fact may seem very evident in large, established businesses with many employees, departments and offices, it is also true of smaller companies that are still in their infancy. To draw an analogy with house building, setting the foundations is the most critical stage of the building process since everything else relies on them being laid correctly.
Setting your business off on the right foot is incredibly important, and is particularly crucial during times of economic instability. By establishing your company in an intelligent and forward thinking manner you will be able to reap the rewards long into the future.
Why get help creating a company?
As previously mentioned, the creation of your company is a very important process and should not be taken casually. It can also be a complex process that can easily go wrong without the right level of appropriate knowledge and experience.
If a complex part 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 undertake the required work. It makes sense to spend funds on your most valuable resources to ensure they operate correctly. This same principle is true when it comes to creating a company.
Perhaps the most problematic aspect in creating a new business is the level of paperwork that is needed in regards to legal problems. Not only do you have to take into account the legal restrictions of the industry you will be operating in, but also any specific legal requirements of the geographical region you will be operating in and any specific needs of your employees. It can be a legal minefield, but an expert will be able to help you plot a course through.
It is also becoming more involved and complicated to setup an organisation. As new markets present themselves, new trade links are forged and new legal clauses are described you need to keep up-to-date with the relevant demands.
It is critically important that owners of any offshore business understand the laws that govern the jurisdiction of their business.
Company Distinctions
Before you begin to setup your own enterprise you should know the different types of company that can be created and the key distinctions between them. Although almost all businesses operate on the premise of bringing in more income than they expend, the structures that exist underneath the surface are fundamentally different. You need to use the appropriate company structure for your own business.
These corporate structures exist to satisfy the broad scope of circumstances that cover the business arena. Companies vary a great deal, in terms of the number of employees, the industry they work in and also their sales setting, so different business solutions have been created to cater for this broad assortment.
A few corporate structures are outlined below.
Limited Liability Company (LLC)
A Limited Liability Company, abbreviated as LLC, is a form of business where the owners have only limited liability. In extremely basic terms, anybody who has complete 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 company.
A Limited Liability Company shares characteristics with both a partnership and corporation business framework. It provides its owners with restricted liability (like a corporation) but permits pass-through income taxation (like a partnership). This makes it fiscally advantageous to its owners.
There is also much less paperwork called for in running an LLC than a corporation, where necessary levels of administration and record keeping are incredibly high. It is worth noting however that the levels of limited liability security offered by an LLC do not cover all possible circumstance.
Limited company (Ltd)
A Limited company is similar to an LLC as a business entity, however it is restricted to use in certain countries 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 personally accountable for only the unpaid amount remaining on their own shares if the company were to go bust. This amount relates to what was unpaid on the shares when they were issued rather than any funds exchanged when shares were exchanged. Since shares are typically issued as being fully paid, the shareholders are no longer personally liable.
In terms of offshore companies it should become clear that Seychelles incorporation refers to registration of an offshore company in the Seychelles.
International Business Company (IBC)
An International business company, abbreviated to IBC, is a form of offshore company that isn’t allowed to trade inside the country or jurisdiction where it was authorized. The specific rules that govern an IBC will depend on where it was incorporated, although they usually share certain traits, such as increased flexibility of operation and laid back trading laws.
Offshore Companies
One idea that you might consider when choosing what type of business you are going to launch is choosing to register 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 undertake its primary functions.
Benefits of creating an offshore company
Offshore companies are typically used as one element of an overall tax planning strategy. Taxation rules differ between the various offshore financial centres out there, although companies will usually pay tax as a fixed annual sum that is insignificant in relation to the levels of taxation applied in other parts of the world. This potential tax planning makes them an amazingly attractive business proposition.
These tax savings can be offered by the governments of offshore financial centres since the businesses that benefit from them are not trading within that area. This means there is not the same need for administrative support and infrastructure that would be needed by onshore businesses. This “no trade” policy is a requirement and offshore companies must follow it, depending on the jurisdiction they operate in.
There are other advantages to creating an offshore company, such as the levels of privacy that can be enjoyed. Business procedures can be carried out under the company name without needing to release the names of the key members in the company. Offshore companies are generally not required to submit the levels of paperwork that domestic companies do, and as such are less difficult to run. This doesn’t apply to regulated businesses.
Since the regulations for offshore companies are easily accessible, it gives potential new business owners the opportunity to choose which rules they want their business to be governed by. Certain types of business may be better suited to incorporation in a particular area. Owners can also weigh up short term gains, such as easy incorporation laws, against longer term rewards such as relaxed requirements on record keeping.
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 looking to avoid capital gains tax and inheritance tax, or by investment companies that don’t want to pay tax on investment interest earned. They can also be advantageous when hiring expatriate staff since tax can be averted at source.
One of the necessary procedures to register Ltd company entails separating ownership between members with a controlling interest.
Possible locations for offshore companies
There are many parts of the world that can be described as an offshore financial centre because of the ambiguous nature of the phrase. However, there are a certain few that stand out above the others, 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 just 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. Whilst a large portion of residential income is driven by tourism, more than 50 percent of the governmental income of the territory is made from licensing agreements for offshore companies. It is thought that around 40 percent of the planet’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 richest nation in Africa in terms of GDP and this is principally driven by the record setting offshore industry in this region. Future economic development is predicted.
Off-the-shelf companies
Another alternative 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 very swiftly. You do not get to choose the name of your organisation, but if that is not a critically important factor then there are great benefits to buying a company in this way. Due diligence must be carried out, and payment must be made, but if that goes smoothly you can be in business instantly.
Creating a company like this could also reduce the difficulties that are sometimes encountered when registering a new company. Using a respected corporate services provider to handle the paperwork required gets around this problem. It is not the best solution for everybody but it is an option that is worth thought.
Creating a company in the UK
If after looking through this article you do not feel that the formation of an off-shore company would be advantageous to you and your business then you can still get help registering a company in the United Kingdom. You might not be able to take advantage of the tax benefits and anonymity afforded by an offshore company, but you may feel 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 greater than registering an equivalent offshore company. The workload alone may be challenging but there are plenty of corporate services companies that are experts in this field and can be of use. They should be part of your planning when setting up a new company.