Creating a Company
Modern companies have many different components that must all be working well and working together if the business is going to succeed and be profitable for any length of time. This idea extends 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, well-known 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 crucial stage of the building process since everything else depends on them being laid correctly. A similar idea can be applied to the commercial world.
Setting your business off on the right foot is incredibly important, and is especially crucial during times of economic instability. By establishing your company in a sensible and forward thinking manner you will be able to enjoy 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 correct 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 carry out the required work. It makes sense to spend money on your most valuable assets to ensure they function correctly.
Perhaps the most problematic aspect in creating a new business is the level of paperwork that is required in regards to legal issues. Not only do you have to take into account the legal restrictions of the marketplace you will be working in, but also any specific legal requirements of the geographical area 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 navigate through.
It is also becoming more involved and complex to setup an organisation. 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.
One of the most prominent advantages associated with offshore company formation is prospective levy prevention due to more relaxed taxation laws.
Company Distinctions
Before you begin to setup your own company you should know the different types of company that can be established and the key distinctions between them. Whilst almost all businesses operate on the premise of bringing in more money than they expend, the components that exist underneath the exterior are essentially different.
These corporate structures exist to satisfy the broad scope of circumstances that cover the business arena. Businesses 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.
A few business 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 company.
A Limited Liability Company shares characteristics 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 involved in running an LLC than a corporation, where required 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, 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 countries due to the differences in national laws. Limited companies can 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 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 monies exchanged when shares were exchanged.
In terms of offshore companies it ought to become obvious that Seychelles incorporation refers to incorporation 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 is not allowed to trade inside the country or jurisdiction where it was authorized. The specific rules that control an IBC will depend upon where it was incorporated, although they generally share certain traits, such as greater flexibility of operation and relaxed trading regulations. 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 selecting what type of business 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 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 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 applicable in other parts of the world. This potential tax planning makes them an incredibly attractive business proposition.
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 zone. This means there is not the same need for administrative support and commercial infrastructure that would be required by onshore organisations.
There are other benefits to establishing an offshore company, such as the levels of privacy that can be enjoyed. Business operations can be carried out under the business name without needing to release the names of the key members in the company. Offshore companies are generally not required to submit the amounts of paperwork that domestic corporations do, and as such are easier to run.
Because the regulations for offshore companies are easily available, 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 region. Owners can also weigh up 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 key concern. These may include property businesses 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 made.
The primary reason to set up any Ltd company is usually the safeguard given to the owners regarding personal monetary liability.
Possible locations for offshore companies
There are many parts of the world that can be defined as an offshore financial centre because of 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 driven by tourism, more than half of the governmental income of the territory is derived from licensing agreements for offshore companies.
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. Future economic development is forecast.
Off-the-shelf companies
Another alternative 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 incredibly rapidly. You do not get to choose the name of your company, 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 immediately.
Creating a company like this may also reduce the difficulties that are sometimes encountered when registering a new business. Using a respected corporate services provider to handle the paperwork required will get around this problem.
Creating a company in the UK
If after reading this article you do not feel that the formation 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 benefits and anonymity afforded by an offshore company, but you may feel far better having the company registered onshore.
There are legal proceedings 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 alone may be challenging but there are plenty of corporate services companies that are experts in this field and can be of use.