Creating a Company

Modern companies have many diverse components that must all be operating well and working collectively 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 production and sales, to the less tangible aspects like human resources.

Whilst this fact may be very evident in large, well-known businesses with many employees, departments and office buildings, 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. The same 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 very important process and should not be taken casually. It can also be a complicated process that can easily go wrong without the correct level of appropriate knowledge and experience.

If a complex part 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 assets to ensure they function correctly. This same principle is true when it comes to creating 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 problems. Not only do you have to take into account the legal restrictions of the industry you will be operating in, but also any specific legal requirements of the geographical area you will be operating in and any specific needs of your workforce.

It is also becoming more involved and complicated to setup an organisation. As new markets present themselves, new trade links are forged and new legal clauses are defined you will need to keep up-to-date with the relevant demands. Most of us do not have time to do this, so employing expert help offers an easy way to access this expertise.

One of the most tangible benefits of offshore company formation is prospective tax prevention due to more relaxed taxation laws.

Company Distinctions

Before you begin to setup your own company you should understand the different types of company that can be created and the key distinctions between them. Although almost all businesses work on the premise of bringing in more income than they expend, the components that exist underneath the exterior are essentially different.

These corporate structures exist to fulfill 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 setting, so different business models have been created to cater for this broad variety.

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 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 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 permits pass-through income taxation (like a partnership). This makes it financially advantageous to its owners.
There is also much less paperwork called for 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 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 personally liable beyond their liability restriction.

Limited company (Ltd)

A Limited company is similar to an LLC as a business entity, however it is restricted to use in certain nations due to the variations in national laws. Limited companies can 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 business were to go bust. This amount relates to what was unpaid on the shares when they were issued rather than any funds exchanged when shares were sold.

Despite the potential advantages, it is worth noting the fact that offshore registration for financial reasons does not necessarily always match the needs of every business.

International Business Company (IBC)

An International business company, abbreviated to IBC, is a type of offshore company that is not allowed to trade within the country or jurisdiction where it was registered. The specific rules that govern an IBC will depend upon where it was incorporated, although they usually share certain traits, such as increased flexibility of operation and laid back trading regulations. The most prominent feature 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 business you are going to launch 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 undertake its main functions.

Benefits of creating an offshore company

Offshore companies are typically used as one part of an overall tax planning strategy. Taxation rules vary 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 applicable in other parts of the world. 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 area. This means there is not the same demand for administrative support and commercial infrastructure that would be required by onshore businesses.

There are other benefits to establishing an offshore company, such as the levels of privacy that can be enjoyed. Business procedures can be carried out under the business name without needing 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 companies do, and as such are less complicated to run.

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 business to be governed by. Certain types of business may be better suited to incorporation in a particular area. Owners can also balance short term gains, 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 companies that are hoping to avoid capital gains tax and inheritance tax, or by investment companies that don’t want to pay tax on investment interest made.

Limited companies are the most common kind since the actual register Ltd company operation remains cheap and relatively simple.

Possible locations for offshore companies

There are many parts of the world that can be defined as an offshore financial centre due to the ambiguous nature of the term. 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 centres 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 should not be mistaken with the U.S. Virgin Islands. Whilst a large portion of residential income is driven by tourism, more than 50 percent of the governmental income of the region is derived from licensing agreements for offshore corporations.

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 principally driven by the record setting offshore industry in this region.

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 very swiftly. 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 way. 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 handle the paperwork required will get 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 looking through 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 may not be able to take advantage of the tax gains and anonymity afforded by an offshore company, but you may feel better having the company registered onshore.

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 specialists in this field and can be of use.

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