Creating a Company
Modern day companies have many diverse components that must all be working well and working collectively if the company 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 aspects like human resources. If each department is not working well together there will be problems with the company.
Whilst this fact may seem very evident in large, established 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 crucial stage of the building process since everything else relies on them being laid correctly.
Setting your business off on the right foot is incredibly important, and is especially crucial during times of economic instability. By creating your company in an intelligent 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 casually. It can also be a complicated process that can sometimes go wrong without the correct 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 component 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 funds on your most valuable resources to ensure they function correctly.
Perhaps the most problematic 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 restrictions of the industry you will be working in, but also any specific legal conditions 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 navigate through.
It is also becoming more involved and complicated to setup a company. As new markets present themselves, new trade links are forged 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 hiring expert help provides an easy way to access this expertise.
If you read or hear the expression BVI incorporation it means registration of companies in the British Virgin Islands in the Caribbean.
Company Distinctions
Before you begin to setup your own enterprise you should understand 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 money than they expend, the components that exist underneath the surface are fundamentally different.
These corporate set ups exist to satisfy the broad scope of situations 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 solutions have been created to cater for this broad variety. Different situations require different business strategies, and these in turn demand 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 extremely basic terms, anybody who has total or partial ownership of an LLC can only be held financially accountable for a predetermined 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 structure. 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 exceptionally high. It is worth noting however that the levels of limited liability security 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 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 individually accountable for only the unpaid amount remaining on their own shares if the company 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.
There are business services agencies having expertise in Seychelles incorporation and specific understanding about the region and the trading regulations.
International Business Company (IBC)
An International business company, abbreviated to 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 on where it was incorporated, although they usually share certain traits, such as increased flexibility of operation and laid back trading regulations. 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 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 carry out its primary operations.
Benefits of creating an offshore company
Offshore companies are usually used as one aspect of an overall tax planning plan. Taxation rules vary between the various offshore financial centres out there, although organisations will usually pay tax as a fixed annual sum that is insignificant in relation to the levels of taxation applied in other parts of the world.
These tax savings 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 infrastructure that would be expected by onshore organisations. This “no trade” policy is a requirement and offshore companies must follow it, depending on the jurisdiction they operate 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 business name without having to release the names of the key people of the company. Offshore companies are generally not required to submit the levels of paperwork that domestic corporations do, and as such are less difficult to run.
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 may be better suited to incorporation in a particular area. 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 major concern. These may include property companies that are looking to avoid capital gains tax and inheritance tax, or by investment companies that don’t want to pay tax on investment interest earned.
Limited companies are the most common form because the actual register Ltd company procedure remains cheap and relatively simple.
Possible locations for offshore companies
There are many areas of the world that can be defined as an offshore financial centre because of 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 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 portion of residential income is powered by tourism, more than fifty percent of the governmental income of the territory is made from licensing agreements for offshore companies.
Seychelles
The Seychelles is a small 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 principally driven by the record setting offshore sector 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 rapidly. You do not get to select the name of your company, but if that is not a vitally important factor then there are great advantages to buying a company in this manner. Due diligence must be carried out, and payment must be made, but if that goes smoothly you can be in business immediately.
Establishing a company like this can also reduce the complexities that are sometimes encountered when registering a new business. Using a respected corporate services provider to handle the paperwork required gets around this problem. It is not the best solution for everybody but it is an alternative that is worth thought.
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 privacy 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 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. They should be part of your planning when setting up a new business.