Creating a Company

Modern day companies have many different components that must all be operating well and working collectively if the business 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 such as 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, setting the foundations is the most critical stage of the building procedure since everything else relies on them being laid correctly. The same idea can be applied to the commercial world.

Setting your business off on the right foot is incredibly 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 enjoy the benefits long into the future.

Why get help creating a company?

As previously mentioned, the creation of your business is a highly important process and should not be taken lightly. It can also be a complicated process that can sometimes go wrong without the right level of suitable knowledge and experience.

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 undertake the required work. It makes sense to spend money on your most valuable assets to ensure they function correctly.

Perhaps the most challenging aspect in creating a new business is the level of paperwork that is needed in regards to legal issues. 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 workforce. 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 a business. As new markets present themselves, new trade links are forged and new legal clauses are defined you will need to keep up-to-date with the relevant demands.

It is critically important that owners of any offshore business know any legal guidelines which govern the jurisdiction of their business.

Company Distinctions

Before you begin to setup your own company you should understand 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 components that exist underneath the exterior are fundamentally different.

These corporate structures exist to satisfy the broad scope of circumstances that cover the business world. Companies vary a great deal, in terms of the number of employees, the industry they work in and also their sales environment, so different business models have been created to cater for this broad variety.

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 very 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 characteristics with both a partnership and corporation business framework. It provides its owners with restricted liability (like a corporation) but enables pass-through income taxation (like a partnership). This makes it fiscally advantageous to its owners.
There is also much less paperwork involved in running an LLC than a corporation, where required levels of administration 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 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 personally 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 differences in national laws. Limited companies may 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 business were to go bust. This sum relates to what was unpaid on the shares when they were issued rather than any funds exchanged when shares were sold. Since shares are normally issued as being fully paid, the shareholders are no longer personally liable.

Despite the potential benefits, it is worth noting the fact that offshore registration for financial purposes does not always match the requirements of every company.

International Business Company (IBC)

An International business company, abbreviated as IBC, is a type of offshore company that is not 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 characteristics, such as greater flexibility of operation and laid back trading regulations.

Offshore Companies

One idea that you might consider when choosing what type of company 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 a region where it does not undertake its primary operations.

Benefits of creating an offshore company

Offshore companies are usually used as one part of an overall tax planning strategy. Taxation rules vary 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 applied in other parts of the world.

These tax discounts can be offered by the governments of offshore financial centres since the businesses that gain 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 expected by onshore businesses. This “no trade” policy is a requirement and offshore companies must follow it, depending on the jurisdiction they function in.

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 amounts of paperwork that domestic corporations do, and as such are easier to run. This doesn’t apply to regulated businesses.

Because the regulations for offshore companies are readily accessible, it gives potential new business owners the opportunity to select 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 balance short term benefits, such as easy incorporation laws, against longer term benefits 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 looking to avoid capital gains tax and inheritance tax, or by investment firms that do not want to pay tax on investment interest made.

You can utilize the services of a legal company to register company details pertaining to newer companies or you can undertake the procedure by your self.

Possible locations for offshore companies

There are many areas of the world that can be described as an offshore financial centre because of the ambiguous nature of the expression. 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 locations are briefly 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. Whilst a large percentage of residential income is driven by tourism, more than 50 percent of the governmental income of the territory is derived from licensing agreements for offshore corporations.

Seychelles

The Seychelles is a modest territory located within 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 largely 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 actually buy a new company “off the shelf” and become incorporated extremely rapidly. You do not get to pick the name of your company, but if that is not a vitally important aspect 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 company. Using a reputable corporate services provider to manage the paperwork required gets 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 reading this article you do not feel that the creation 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 may not be able to take advantage of the tax benefits and anonymity afforded by an offshore company, but you may feel far better having the company registered onshore. As always, every circumstance is different and will have specific requirements.

There are legal proceedings that must 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 daunting 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.