Creating a Company
Modern companies have many diverse components that must all be operating 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 elements like human resources. If each division is not working well together there will be problems with the business.
Whilst this fact may seem very evident in large, well-known businesses with many employees, departments and offices, 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 critical stage of the building procedure 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 financial instability. By creating your company in an intelligent and forward thinking manner you will be able to reap the benefits 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 sometimes go wrong without the proper level of suitable 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 funds on your most valuable assets to ensure they operate correctly. This same principle is true when it comes to establishing a company.
Perhaps the most challenging aspect in setting up 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 marketplace you will be operating in, but also any specific legal conditions 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 a company. As new markets emerge, new trade links are forged and new legal clauses are defined you will 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.
If you read or hear the term BVI incorporation it regards registration of companies in the British Virgin Islands in the Caribbean.
Company Distinctions
Before you begin to setup your own enterprise 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 structures that exist underneath the exterior are fundamentally different.
These corporate structures 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 approaches, 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 extremely basic terms, anybody who has complete 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 business.
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).
There is also much less paperwork called for in running an LLC than a corporation, where necessary levels of administration and record keeping are incredibly 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 restricted 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 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 sum remaining on their own shares if the company were to go bust. This sum refers to what was unpaid on the shares when they were issued rather than any monies exchanged when shares were exchanged. Since shares are usually issued as being fully paid, the shareholders are no longer personally liable.
Before undertaking the sometimes complicated process of offshore formation, corporate advice should be found to avoid possible pitfalls in the future.
International Business Company (IBC)
An International business company, abbreviated as IBC, is a type of offshore company that isn’t allowed to trade inside 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 characteristics, such as increased flexibility of operation and relaxed trading regulations.
Offshore Companies
One idea that you might consider when selecting what type of company 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 carry out its main operations.
Benefits of creating an offshore company
Offshore companies are typically used as one element of an overall tax planning plan. Taxation rules vary between the various offshore financial centres available, although organisations will usually pay tax as a fixed yearly sum that is insignificant in relation to the levels of taxation applied in other parts of the planet.
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 area. This means there is not the same need for administrative support and commercial infrastructure that would be required by onshore organisations.
There are other advantages to establishing an offshore company, such as the levels of anonymity that can be enjoyed. Business procedures can be carried out under the company name without needing to release the names of the key people of the company. Offshore companies are normally not required to submit the levels of paperwork that domestic corporations do, and as such are less complicated to run. This doesn’t apply to regulated businesses.
Given that the regulations for offshore companies are readily available, it gives potential new business owners the chance to choose which rules they want their enterprise to be governed by. Certain types of business might be better suited to incorporation in a particular area.
Typical Uses
IBC or other offshore companies will be typically used by businesses where tax is a key concern. These may include property businesses that are looking to avoid capital gains tax and inheritance tax, or by investment firms that don’t want to pay tax on investment interest made.
Every fresh business owner could set up company plans and processes in advance of starting trading on a significant level.
Possible locations for offshore companies
There are many parts of the world that can be described as an offshore financial centre because of the ambiguous nature of the phrase. However, there are a certain 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 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 shouldn’t be mistaken with the U.S. Virgin Islands. Whilst a large portion of residential income is driven by tourism, more than fifty percent of the governmental income of the region is made from licensing agreements for offshore companies. It is believed that around 40% of the planet’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 principally driven by the record setting offshore industry in this region. Future economic growth is predicted.
Off-the-shelf companies
Another alternative to consider when creating your own company is to not create it at all! It is possible to actually buy a new company “off the shelf” and become incorporated incredibly quickly. You do not get to choose the name of your organisation, but if that is not a vitally important aspect then there are great benefits 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 immediately.
Establishing a company like this can also reduce the complexities that are sometimes encountered when registering a new company. Using a reputable corporate services provider to manage 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 creation of an off-shore company would be beneficial to you and your business 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 privacy afforded by an offshore company, but you may feel far better having the company registered onshore. As always, every situation is different and will have specific needs.
There are legal proceedings that must be undertaken, and the amount of paperwork needed 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 firms that are experts in this field and can be of use. They should be part of your planning when starting a new business.