Creating a Company
Modern companies have many different components that must all be working well and working together if the company is going to succeed and be prosperous for any length of time. This idea reaches from the core aspects of the business such as manufacturing and sales, to the less tangible aspects such as 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 depends on them being laid correctly. The same idea can be applied to the business world.
Setting your business off on the right foot is extremely important, and is particularly crucial during times of economic instability. By creating your company in a sensible and forward thinking manner you will be able to reap the rewards long into the future. However, creating your company in the wrong fashion could have long felt consequences.
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 sometimes go wrong without the right level of suitable knowledge and experience. Would you prefer to pay a little extra money now or suffer large financial losses later?
If a complex part on your car were to break, or if a safety critical structure 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 funds on your most valuable resources to ensure they function correctly.
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 marketplace 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 is also becoming more involved and complex to setup an organization. As new markets emerge, new trade links are forged and new legal clauses are described you need to keep up-to-date with the relevant demands.
Using experts to assist you throughout offshore company formation improves the pace, quality and effectiveness of the process.
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 work on the premise of bringing in more income than they expend, the structures that exist underneath the surface are fundamentally different.
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 strategies, 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 complete or partial ownership of an LLC can only be held financially liable for a predetermined 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 framework. 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 exceptionally high. It is worth noting though that the levels of limited liability protection offered by an LLC do not cover every possible circumstance.
Limited company (Ltd)
A Limited company is similar to an LLC as a business entity, although it is limited 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 individually accountable for only the unpaid sum remaining on their own shares if the business were to go bust. This sum relates to what was unpaid on the shares when they were issued rather than any monies exchanged when shares were sold. Since shares are normally issued as being fully paid, the shareholders are no longer personally liable.
One of the many advantages associated with Seychelles incorporation entails paying fixed fees for a business license regardless of future increases.
International Business Company (IBC)
An International business company, abbreviated as IBC, is a form of offshore company that is not allowed to trade within the country or jurisdiction where it was authorized. The specific rules that control an IBC will depend upon where it was incorporated, although they usually share certain characteristics, such as greater flexibility of operation and laid back trading laws.
Offshore Companies
One idea that you might consider when selecting what type of company you are going to start 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 typically used as one aspect of an overall tax planning strategy. Taxation rules vary between the various offshore financial centres out there, although organisations will generally pay tax as a fixed yearly sum that is inconsequential in relation to the levels of taxation applicable in other parts of the world.
These tax discounts can be offered by the governments of offshore financial centres because the businesses that gain from them are not trading within that zone. This means there is not the same need for administrative support and commercial infrastructure that would be expected by onshore organisations.
There are other advantages to establishing an offshore company, such as the levels of privacy that can be enjoyed. Business procedures can be carried out under the company name without having to release the names of the key people 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.
Given that the regulations for offshore companies are easily available, it gives potential new business owners the opportunity to choose which rules they want their enterprise to be governed by. Certain types of business might be better suited to incorporation in a particular area. Owners can also balance short term benefits, 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 major concern. These may include property companies that are hoping to avoid capital gains tax and inheritance tax, or by investment firms that do not want to pay tax on investment interest earned.
One of the necessary steps to register Ltd company will involve separating shares between members with a controlling interest.
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 locations 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 should not be mistaken with the U.S. Virgin Islands. Whilst a large portion of residential income is powered by tourism, more than fifty percent of the governmental income of the region is derived from licensing agreements for offshore corporations. It is thought that around 40% 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 wealthiest 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 forecast.
Off-the-shelf companies
Another option to consider when creating your own company is to not create it at all! It is possible to simply buy a new company “off the shelf” and become incorporated very quickly. You do not get to select the name of your company, but if that is not a critically important factor then there are great advantages to buying a company in this manner. Due diligence must be performed, and payment must be made, but if that goes smoothly you can be in business immediately.
Creating a company like this can also reduce the difficulties that are sometimes encountered when registering a new business. Using a respected corporate services provider to handle the paperwork required gets around this problem.
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 advantageous 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 benefits and privacy afforded by an offshore company, but you may feel far better having the company registered onshore.
There are legal proceedings that need to be undertaken, and the amount of paperwork required 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 firms that are specialists in this field and can be of use. They should be part of your planning when setting up a new company.