Obuka Finance

Creating a Company

Modern 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 like human resources.

Whilst this fact may seem very evident in large, established businesses with many employees, departments and office buildings, 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 depends on them being laid correctly.

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 reap the benefits long into the future.

Why get help creating a company?

As previously mentioned, the creation of your business is a highly important process and should not be taken lightly. It can also be a complex process that can sometimes 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 carry out the required work. It makes sense to spend funds on your most valuable assets to ensure they operate correctly. This same theory is true when it comes to establishing a company.

Perhaps the most problematic aspect in creating a new business is the level of paperwork that is necessary in regards to legal issues. Not only do you have to take into account the legal boundaries of the industry 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 workforce.

It is also becoming more involved and complicated to setup an organisation. As new markets emerge, new trade links are brokered and new legal clauses are described you will need to keep up-to-date with the relevant demands.

It is critically important that owners of any offshore business understand any legal guidelines which govern the jurisdiction of their organisation.

Company Distinctions

Before you begin to setup your own company you should know the different types of company that can be established and the key distinctions between them. Whilst almost all businesses work on the premise of bringing in more income than they expend, the components that exist underneath the surface are essentially different. You need to use the correct company framework for your own business.

These corporate structures exist to fulfill the broad scope of situations that cover the business arena. Businesses vary a great deal, in terms of the quantity of employees, the industry they work in and also their sales environment, so different business solutions have been created to cater for this broad variety.

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 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. An LLC is occasionally referred to as a WLL, or company With Limited Liability.

A Limited Liability Company shares characteristics 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).
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 protection offered by an LLC do not cover every 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 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 monies exchanged when shares were exchanged.

One remarkable statistic about Seychelles incorporation says the procedure could be completed within just 24 hours!

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 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 laws.

Offshore Companies

One idea that you might 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 a region where it does not undertake its primary operations.

Benefits of creating an offshore company

Offshore companies are typically used as one element of an overall tax planning strategy. Taxation rules vary between the different offshore financial centres out there, although organisations will usually pay tax as a fixed annual sum that is insignificant in relation to the levels of taxation applicable in other parts of the world.

These tax discounts can be offered by the governments of offshore financial centres because the businesses that gain from them are not trading within that zone. This means there is not the same demand for administrative support and commercial infrastructure that would be required by onshore organisations. This “no trade” policy 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 of the company. Offshore companies are normally not required to submit the levels of paperwork that domestic corporations do, and as such are less complicated to run.

Since the regulations for offshore companies are easily available, it gives potential new business owners the opportunity to choose 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 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 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 firms that do not want to pay tax on investment interest earned.

Limited companies are the most popular form because 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 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 50 percent of the governmental income of the territory is made from licensing agreements for offshore companies.

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 sector in this region. Future economic growth is predicted.

Off-the-shelf companies

Another alternative to consider when creating your own company is to not create it at all! It is possible to actually buy a new company “off the shelf” and become incorporated very quickly. You do not get to select the name of your company, but if that is not a critically important factor then there are great benefits to buying a company in this way. Due diligence must be carried out, and payment must be made, but if that goes smoothly you can be in business immediately.

Creating a company like this could also reduce the complexities that are sometimes encountered when registering a new company. Using a reputable corporate services provider to handle the paperwork required gets around this problem.

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 enterprise then you can still get help registering a company in the United Kingdom. You might not be able to take advantage of the tax benefits and anonymity afforded by an offshore company, but you may feel far better having the company registered onshore.

There are legal proceedings 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 on it’s own may be challenging but there are plenty of corporate services companies that are experts in this field and can be of use.