Creating a Company

Modern 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 manufacturing and sales, to the less tangible elements 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, laying the foundations is the most crucial stage of the building procedure since everything else depends 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 a sensible and forward thinking manner you will be able to reap the rewards long into the future.

Why get help creating a company?

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

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 carry out the required work. It makes sense to spend money on your most valuable resources to ensure they operate correctly. This same principle is true when it comes to establishing a company.

Perhaps the most problematic aspect in setting up a new business is the level of paperwork that is needed in regards to legal problems. 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 conditions 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 plot a course through.

It is also becoming more involved and complex to setup a company. As new markets emerge, new trade links are brokered and new legal clauses are defined you need to keep up-to-date with the relevant requirements.

One of the most prominent advantages associated with offshore company formation is prospective tax planning due to more relaxed taxation laws.

Company Distinctions

Before you begin to setup your own enterprise you should understand the different types of company that can be established and the key distinctions between them. Although almost all businesses work on the premise of bringing in more money than they expend, the components that exist underneath the surface are essentially different. You need to use the correct company structure for your own company.

These corporate structures exist to fulfill the broad scope of circumstances that cover the business arena. 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 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 extremely basic terms, anybody who has complete or partial ownership of an LLC can only be held financially liable for a predetermined sum which usually reflects the amount they have invested in the business. An LLC is occasionally referred to as a WLL, or company With Limited Liability.

A Limited Liability Company shares qualities with both a partnership and corporation business structure. 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 exceptionally high. It is worth noting though that the levels of limited liability protection 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 nations 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 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 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 exchanged.

Despite the potential benefits, it is well worth observing that offshore registration for financial purposes does not necessarily always match the needs of every business.

International Business Company (IBC)

An International business company, abbreviated as IBC, is a form of offshore company that isn’t allowed to trade inside the country or jurisdiction where it was registered. The specific rules that control an IBC will depend on where it was incorporated, although they generally share certain traits, such as greater flexibility of operation and laid back trading laws. The most prominent characteristic of an IBC however is the potential tax planning afforded 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 an area where it does not carry out its main 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 annual sum that is inconsequential in relation to the levels of taxation applicable 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 need for administrative support and infrastructure that would be expected by onshore businesses.

There are other benefits 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 having to release the names of the key members in the company. Offshore companies are normally not required to submit the levels of paperwork that domestic corporations do, and as such are less difficult to run.

Because the regulations for offshore companies are readily accessible, it gives potential new business owners the opportunity to choose which rules they want their business to be governed by. Certain types of business might be better suited to incorporation in a particular area. Owners can also balance short term benefits, such as easy incorporation laws, against longer term rewards 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 companies that do not want to pay tax on investment interest earned. They can also be beneficial when employing expatriate staff since tax can be averted at source.

There are three forms that must always be presented so one can register Ltd company that need to be sent to Companies House; Form IN01, Memorandum of Association as well as Articles of Association.

Possible locations for offshore companies

There are many areas of the world that can be defined as an offshore financial centre due to the ambiguous nature of the phrase. However, there are a particular few that stand out above the rest, including Bermuda, The British Virgin Islands, The Cayman Islands, Luxembourg and The Seychelles.

Two of these locations are lightly 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. Although a large portion of residential income is driven by tourism, more than fifty percent of the governmental income of the territory is made from licensing agreements for offshore corporations. It is believed that around 40 percent of the world’s offshore companies were incorporated in the British Virgin Islands.

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 industry in this region. Future economic development is forecast.

Off-the-shelf companies

Another option 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 swiftly. You do not get to choose 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 performed, and payment must be made, but if that goes smoothly you can be in business instantly.

Creating a company like this can also reduce the difficulties that are sometimes encountered when registering a new business. Using a respected corporate services provider to manage the paperwork required gets around this problem.

Creating a company in the UK

If after looking through this article you do not feel that the formation of an off-shore company would be advantageous to you and your enterprise then you can still get assistance 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. As always, every circumstance is different and will have specific needs.

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 on it’s own may be daunting but there are plenty of corporate services companies that are experts in this field and can be of use. They should be part of your planning when setting up a new business.