Sonic Articles

Creating a Company

Modern companies have many different components that must all be working well and working collectively 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 aspects such as 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, established 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 critical stage of the building procedure since everything else depends on them being laid correctly. The same idea can be applied to the business world.

Setting your business off on the right foot is incredibly important, and is especially crucial during times of economic instability. By establishing your company in an intelligent and forward thinking manner you will be able to enjoy the rewards long into the future.

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 complex process that can easily go wrong without the proper 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 system 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 funds on your most valuable assets to ensure they function correctly.

Perhaps the most problematic aspect in setting up 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 boundaries of the marketplace you will be operating in, but also any specific legal conditions of the geographical region you will be operating in and any specific needs of your employees. It can be a legal minefield, but a specialist will be able to help you navigate through.

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 described you need to keep up-to-date with the relevant demands.

It is critically important that owners of an offshore business understand the laws which govern the jurisdiction of their company.

Company Distinctions

Before you begin to setup your own enterprise you should understand the different types of company that can be created 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.

These corporate structures exist to fulfill the broad scope of circumstances that cover the business arena. Companies vary a great deal, in terms of the quantity 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.

A few corporate 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 very basic terms, anybody who has complete 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 company.

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 permits pass-through income taxation (like a partnership). This makes it fiscally advantageous to its owners.
There is also much less paperwork involved in running an LLC than a corporation, where necessary 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 every possible circumstance. In cases where the law has been broken, for example fraudulent business activities, a court retains the right to hold the owners personally 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 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 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 funds exchanged when shares were sold.

Start-up businesses that would like to fully use offshore corporation to fulfill specific business requirements should explore other options as well.

International Business Company (IBC)

An International business company, abbreviated to IBC, is a form of offshore company that isn’t allowed to trade within the country or jurisdiction where it was authorized. The specific rules that control an IBC will depend upon where it was incorporated, although they usually share certain characteristics, 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 selecting 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 a region where it does not carry out its main functions.

Benefits of creating an offshore company

Offshore companies are usually used as one element 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 inconsequential in relation to the levels of taxation applied in other parts of the planet. This possible tax planning makes them an amazingly attractive business proposition.

These tax savings can be offered by the governments of offshore financial centres because the businesses that benefit from them are not trading within that area. This means there is not the same need for administrative support and infrastructure that would be expected by onshore organisations.

There are other benefits to establishing an offshore company, such as the levels of anonymity that can be enjoyed. Business operations can be carried out under the company name without needing to release the names of the key members in 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. This doesn’t apply to regulated businesses.

Because the regulations for offshore companies are readily accessible, 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 region. Owners can also weigh up short term benefits, 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 typically used by businesses where tax is a primary concern. These may include property companies 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.

You can tackle the company registration process yourself, though www.creata.co.uk offer professional guidance that will smooth the process out.

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 term. However, there are a certain few that stand out above the others, 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 should not be mistaken with the U.S. Virgin Islands. Although a large portion of residential income is driven by tourism, more than fifty percent of the governmental income of the territory is made from licensing agreements for offshore corporations.

Seychelles

The Seychelles is a small 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. Future economic development is forecast.

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 very rapidly. You do not get to select 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 manner. Due diligence must be performed, and payment must be made, but if that goes smoothly you can be in business immediately.

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 manage the paperwork required gets around this problem. It is not the best solution for everybody but it is an option that is worth consideration.

Creating a company in the UK

If after looking through this article you do not feel that the formation 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 benefits and privacy afforded by an offshore company, but you may feel far better having the company registered onshore.

There are legal procedures 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 experts in this field and can be of use. They should be part of your planning when setting up a new business.