Establishing A Limited Company
March 9th, 2010Creating 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 profitable for any length of time. This idea extends 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 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 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 an intelligent and forward thinking manner you will be able to reap the rewards long into the future. Conversely, creating your company in the wrong fashion could have long felt consequences.
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 easily go wrong without the correct level of appropriate knowledge and experience. Would you prefer to pay a little extra money today 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 assets to ensure they function correctly.
Perhaps the most challenging aspect in creating a new business is the level of paperwork that is necessary 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 conditions of the geographical area you will be operating in and any specific needs of your workforce.
It is also becoming more involved and complex to setup an organization. As new markets emerge, new trade links are brokered 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 hiring expert help offers an easy way to access this expertise.
If you read or pick up the term BVI incorporation it means incorporation of businesses in the British Virgin Islands in the Caribbean.
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 operate on the premise of bringing in more money than they expend, the structures that exist underneath the surface are fundamentally different. You need to use the appropriate company structure for your own company.
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 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. Different situations require different business approaches, and these in turn require different business structures.
A few corporate 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 accountable for a fixed sum which usually reflects the amount they have invested in the company. An LLC is sometimes 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 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 required levels of management and record keeping are incredibly high. It is worth noting however that the levels of limited liability security 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 limited to use in certain countries 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 sum 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.
Tips about creating offshore companies can be seen at this website or even via local business advice centres and training courses.
International Business Company (IBC)
An International business company, abbreviated as IBC, is a form of offshore company that is not allowed to trade inside the country or jurisdiction where it was registered. The specific rules that govern an IBC will depend on where it was incorporated, although they generally share certain characteristics, such as greater flexibility of operation and relaxed 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 selecting 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 a region where it does not carry out its primary 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 different offshore financial centres available, 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. This potential 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 zone. This means there is not the same need for administrative support and commercial infrastructure that would be required by onshore businesses.
There are other advantages to creating an offshore company, such as the levels of privacy that can be enjoyed. Business operations can be carried out under the company name without having to release the names of the key people in the company. Offshore companies are generally not required to submit the levels of paperwork that domestic companies do, and as such are easier to run.
Given that the regulations for offshore companies are readily available, it gives potential new business owners the opportunity to choose 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 primary concern. These may include property businesses that are looking to avoid capital gains tax and inheritance tax, or by investment firms that do not want to pay tax on investment interest earned.
The primary reason to set up any Ltd company is usually the protection afforded to the owners regarding personal financial liability.
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 others, 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 simply 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 percentage of residential income is powered by tourism, more than 50 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 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 sector in this region.
Off-the-shelf companies
Another alternative 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 quickly. You do not get to choose the name of your company, but if that is not a critically important aspect then there are great advantages 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 may also reduce the complexities that are sometimes encountered when registering a new business. Using a respected corporate services provider to handle the paperwork required gets around this problem. It is not the perfect solution for everybody but it is an alternative that is worth thought.
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 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 gains and privacy afforded by an offshore company, but you may feel far 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. They should be part of your planning when setting up a new company.