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 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 elements such as human resources.
Whilst this fact may be very evident in large, well-known businesses with many employees, departments and offices, it is also true of lesser 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 procedure 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 financial instability. By creating your company in an intelligent and forward thinking manner you will be able to enjoy the rewards long into the future. However, creating your company in the wrong fashion could have long felt repercussions.
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. 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 issues. 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 region you will be operating in and any specific needs of your employees.
It is also becoming more involved and complex to setup a business. As new markets present themselves, new trade links are brokered and new legal clauses are defined you need to keep up-to-date with the relevant requirements. Most of us do not have time to do this, so employing expert help offers an easy way to access this expertise.
It is critically important that managers of an offshore business know the legal guidelines which govern the jurisdiction of their organisation.
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 surface are fundamentally different. You need to use the correct company structure for your own company.
These corporate structures exist to satisfy the broad scope of situations 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 models have been created to cater for this broad variety.
A few business 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 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 company.
A Limited Liability Company shares qualities with both a partnership and corporation business structure. It provides its owners with restricted liability (like a corporation) but enables pass-through income taxation (like a partnership). This makes it financially 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 exceptionally high. It is worth noting though that the levels of limited liability security offered by an LLC do not cover every possible circumstance. In cases where the law has been broken, for example 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, however it is limited to use in certain countries due to the differences in national laws. Limited companies may be created in the United Kingdom, the Republic of Ireland or Australia. It is the most common form of privately held company in use.
A limited company offers limited liability to its shareholders by making them individually accountable for only the unpaid amount remaining on their own shares if the company were to go bust. This sum refers to what was unpaid on the shares when they were issued rather than any monies exchanged when shares were sold.
Many modern corporations look to Seychelles incorporation to get simplified financial as well as currency flexibility.
International Business Company (IBC)
An International business company, abbreviated as IBC, is a type of offshore company that isn’t allowed to trade within 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 characteristics, such as greater flexibility of operation and laid back trading laws. The most prominent characteristic of an IBC however is the potential tax planning permitted by being registered offshore.
Offshore Companies
One idea that you might consider when choosing 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 operations.
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 available, although organisations will generally pay tax as a fixed yearly sum that is insignificant in relation to the levels of taxation applicable in other parts of the planet.
These tax savings can be offered by the governments of offshore financial centres because the businesses that benefit 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 businesses.
There are other benefits 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 having to release the names of the key people in the company. Offshore companies are normally not required to submit the levels of paperwork that domestic companies do, and as such are less complicated to run.
Since the regulations for offshore companies are easily 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 might be better suited to incorporation in a particular area.
Typical Uses
IBC or other offshore companies will be typically 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 do not want to pay tax on investment interest earned.
The main reason to set up any Ltd company is the safeguard afforded to the owners regarding personal monetary liability.
Possible locations for offshore companies
There are many parts of the world that can be described as an offshore financial centre due to the ambiguous nature of the expression. However, there are a particular few that stand out above the others, including Bermuda, The British Virgin Islands, The Cayman Islands, Luxembourg and The Seychelles.
Two of these locations are briefly 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 percentage of residential income is powered by tourism, more than 50 percent of the governmental income of the territory is made from licensing agreements for offshore corporations.
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.
Off-the-shelf companies
Another option to consider when creating your own business is to not create it at all! It is possible to simply buy a new company “off the shelf” and become incorporated extremely swiftly. You do not get to pick 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 manner.
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 manage the paperwork required will get around this problem. It is not the perfect solution for everybody but it is an alternative that is worth consideration.
Creating a company in the UK
If after looking through 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 help 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. As always, every situation is different and will have specific requirements.
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 on it’s own 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 starting a new business.