Published at: 03:03 pm - Monday March 08 2010
Creating a Company
Modern day companies have many diverse components that must all be operating 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 elements such as human resources.
Whilst this fact may be very evident in large, established 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 crucial stage of the building procedure since everything else depends on them being laid correctly. The same idea can be applied to the commercial world.
Setting your business off on the right foot is extremely 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 very important process and should not be taken casually. It can also be a complicated process that can easily go wrong without the right 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 undertake the required work. It makes sense to spend money on your most valuable resources to ensure they operate correctly.
Perhaps the most problematic aspect in creating 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 boundaries 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 employees.
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 many tangible advantages associated with offshore company formation is potential levy prevention due to more relaxed taxation regulations.
Company Distinctions
Before you begin to setup your own company you should understand 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 structures that exist underneath the exterior are essentially different.
These corporate set ups exist to fulfill the broad scope of circumstances that cover the business world. Companies vary a great deal, in terms of the number 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. 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 business where the owners have only limited liability. In very basic terms, anybody who has complete 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 business.
A Limited Liability Company shares qualities with both a partnership and corporation business framework. It provides its owners with restricted liability (like a corporation) but allows for pass-through income taxation (like a partnership). This makes it financially advantageous to its owners.
There is also much less paperwork involved in running an LLC than a corporation, where necessary levels of management and record keeping are exceptionally 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, such as fraudulent business activities, a court retains the right to hold the owners individually liable beyond their liability limit.
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 differences in national laws. Limited companies can be created in the United Kingdom, the Republic of Ireland or Australia.
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 company were to go bust. This amount refers to what was unpaid on the shares when they were issued rather than any funds exchanged when shares were exchanged.
One of the numerous rewards of Seychelles incorporation entails paying set fees for a business license irrespective of future rises.
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 upon where it was incorporated, although they generally share certain characteristics, such as increased flexibility of operation and laid back trading laws. The most prominent feature of an IBC however is the possible tax planning permitted 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 primary operations.
Benefits of creating an offshore company
Offshore companies are usually used as one part of an overall tax planning plan. Taxation rules differ between the various offshore financial centres out there, although companies 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 demand 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 operations can be carried out under the business name without having to release the names of the key members of the company. Offshore companies are normally not required to submit the amounts of paperwork that domestic corporations do, and as such are less difficult to run.
Because the regulations for offshore companies are readily available, it gives potential new business owners the chance to select 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 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 primary concern. These may include property companies that are looking to avoid capital gains tax and inheritance tax, or by investment companies that do not want to pay tax on investment interest made.
Limited companies are the most common kind because the actual register Ltd company operation is still cost-effective 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 expression. 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 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. 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 corporations.
Seychelles
The Seychelles is a modest territory located in 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 industry in this region. Future economic development is predicted.
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 choose the name of your organisation, but if that is not a critically important aspect then there are great benefits to buying a company in this manner.
Creating a company like this can also reduce the difficulties that are sometimes encountered when registering a new company. Using a respected corporate services provider to handle the paperwork required will get around this problem. It is not the perfect solution for everybody but it is an option that is worth consideration.
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 business then you can still get assistance registering a company in the United Kingdom. You may 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.
There are legal procedures that need to 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 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 setting up a new business.