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 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, laying the foundations is the most crucial stage of the building procedure 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 extremely important, and is particularly crucial during times of financial 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 complex process that can easily go wrong without the right level of appropriate knowledge and experience. Would you prefer to pay a little extra money today or suffer large financial losses later?

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 money on your most valuable resources to ensure they function correctly.

Perhaps the most challenging aspect in setting up 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 working 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 navigate through.

It is also becoming more involved and complex to setup an organization. As new markets emerge, new trade links are brokered and new legal clauses are described 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 owners of any offshore business understand any legal guidelines which govern the jurisdiction of their business.

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 operate on the premise of bringing in more income than they expend, the components that exist underneath the exterior are essentially different.

These corporate set ups exist to satisfy the broad scope of situations that cover the business world. 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 solutions have been created to cater for this broad variety. Different situations require different business strategies, and these in turn require different business structures.

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 accountable for a fixed sum which usually reflects the amount they have invested in the company. An LLC is sometimes referred to as a WLL, or company With Limited Liability.

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 permits pass-through income taxation (like a partnership).
There is also much less paperwork involved 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. 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, although it is limited to use in certain countries due to the variations in national laws. Limited companies may be created in the United Kingdom, the Republic of Ireland or Australia. It is the most typical 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 amount relates to what was unpaid on the shares when they were issued rather than any monies exchanged when shares were exchanged.

One of the numerous benefits of Seychelles incorporation entails paying set fees for a business license irrespective of future rises.

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 registered. The specific rules that govern an IBC will depend on where it was incorporated, although they generally share certain traits, such as increased flexibility of operation and laid back trading laws. 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 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 an area where it does not undertake its main functions.

Benefits of creating an offshore company

Offshore companies are usually used as one aspect of an overall tax planning strategy. Taxation rules vary between the different offshore financial centres out there, although companies 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 planet. This possible 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 zone. This means there is not the same demand for administrative support and commercial infrastructure that would be required 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 advantages to establishing an offshore company, such as the levels of anonymity that can be enjoyed. Business operations can be carried out under the company name without needing to release the names of the key members of the company. Offshore companies are generally not required to submit the amounts of paperwork that domestic corporations do, and as such are less complicated to run.

Because the regulations for offshore companies are easily available, it gives potential new business owners the opportunity to select which rules they want their enterprise to be governed by. Certain types of business might be better suited to incorporation in a particular region. Owners can also weigh up short term gains, 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 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 earned.

There are three forms that must be presented before you can register Ltd company that must be delivered to Companies House; Form IN01, Memorandum of Association and Articles of Association.

Possible locations for offshore companies

There are many areas of the world that can be described as an offshore financial centre due to 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 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 portion of residential income is powered by tourism, more than 50 percent of the governmental income of the region is made from licensing agreements for offshore companies.

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 wealthiest 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 alternative 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 incredibly quickly. You do not get to select the name of your organisation, but if that is not a vitally important factor then there are great benefits to buying a company in this way. 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 may also reduce the difficulties that are sometimes encountered when registering a new business. Using a reputable 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 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 better having the company registered onshore. As always, every circumstance is different and will have specific needs.

There are legal procedures 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 on it’s own may be challenging but there are plenty of corporate services companies that are specialists in this field and can be of use.