Creating a Company
Modern 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 reaches 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 business.
Whilst this fact may seem 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, 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 financial instability. By creating your company in a sensible and forward thinking manner you will be able to reap the benefits long into the future. Conversely, creating your company in the wrong manner could have long felt repercussions.
Why get help creating a company?
As previously mentioned, the creation of your company is a highly important process and should not be taken lightly. It can also be a complicated process that can sometimes go wrong without the correct level of appropriate knowledge and experience. Would you prefer to pay a little extra money now or suffer large financial losses later?
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 resources to ensure they function correctly.
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 operating in, but also any specific legal requirements of the geographical region you will be operating in and any specific needs of your employees.
It is also becoming more involved and complicated to setup an organisation. As new markets present themselves, new trade links are brokered and new legal clauses are defined you will need to keep up-to-date with the relevant demands.
If you read or hear the particular 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 company you should know 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 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. Businesses vary a great deal, in terms of the quantity of employees, the industry they work in and also their sales setting, 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 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 permits 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 administration 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 all 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 countries due to the variations in national laws. Limited companies may be created in the United Kingdom, the Republic of Ireland or Australia.
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 amount refers to what was unpaid on the shares when they were issued rather than any funds exchanged when shares were sold.
Despite the potential benefits, it is well worth observing that offshore registration for tax purposes does not necessarily always match the requirements of every business.
International Business Company (IBC)
An International business company, abbreviated to IBC, is a type of offshore company that isn’t allowed to trade within the country or jurisdiction where it was registered. The specific rules that control an IBC will depend upon where it was incorporated, although they generally share certain traits, such as increased flexibility of operation and laid back trading laws.
Offshore Companies
One idea that you might consider when choosing what type of business 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 primary functions.
Benefits of creating an offshore company
Offshore companies are usually used as one part of an overall tax planning strategy. Taxation rules vary between the different offshore financial centres available, although companies will generally 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 because 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 needed by onshore businesses. This “no trade” rule is a requirement and offshore companies have to follow it, depending on the jurisdiction they operate in.
There are other benefits to establishing an offshore company, such as the levels of anonymity that can be enjoyed. Business procedures can be carried out under the business name without having to release the names of the key members in the company. Offshore companies are normally not required to submit the amounts of paperwork that domestic companies do, and as such are easier to run.
Because the regulations for offshore companies are easily available, it gives potential new business owners the opportunity to select which rules they want their enterprise to be governed by. Certain types of business may 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 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.
You can tackle the company registration process yourself, though www.creata.co.uk offer expert advice to smooth the process out.
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 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 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 shouldn’t be mistaken with the U.S. Virgin Islands. Although a large portion of residential income is driven by tourism, more than half of the governmental income of the region is made from licensing agreements for offshore companies. It is thought that around 40 percent of the planet’s offshore companies were incorporated in the British Virgin Islands.
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 business is to not create it at all! It is possible to simply buy a new company “off the shelf” and become incorporated extremely swiftly. You do not get to select the name of your organisation, but if that is not a vitally important factor 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.
Establishing a company like this could also reduce the complexities 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 best solution for everybody but it is an option 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 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 requirements.
There are legal procedures that need to be undertaken, and the amount of paperwork needed is likely to be a lot greater 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 starting a new company.