Offshore Corporations

Creating a Company

Modern companies have many diverse components that must all be working well and working together if the business is going to succeed and be prosperous 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. If each department is not working well together there will be problems with the company.

Whilst this fact may be very evident in large, well-known businesses with many employees, departments and offices, it is also true of lesser companies that are still in their infancy. To draw an analogy with house building, laying 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 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 company is a very important process and should not be taken lightly. It can also be a complex process that can sometimes go wrong without the proper 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 component 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 carry out the required work. It makes sense to spend funds on your most valuable resources 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 restrictions of the industry you will be working 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 complex to setup an organisation. 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 requirements. Most of us do not have time to do this, so employing expert help provides an easy way to access this expertise.

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

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 operate on the premise of bringing in more money than they expend, the structures that exist underneath the surface are essentially different.

These corporate structures exist to satisfy 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 assortment.

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 extremely 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 limited liability (like a corporation) but enables pass-through income taxation (like a partnership).
There is also much less paperwork involved in running an LLC than a corporation, where necessary 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 variations 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 individually accountable for only the unpaid amount 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 monies exchanged when shares were sold.

Despite the potential advantages, it is well worth noting that offshore registration for tax reasons does not always match the requirements of every company.

International Business Company (IBC)

An International business company, abbreviated to IBC, is a form of offshore company that isn’t 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 increased flexibility of operation and laid back trading regulations. The most prominent feature of an IBC however is the potential tax planning permitted by being registered offshore.

Offshore Companies

One idea that you may consider when choosing what type of company 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 a region where it does not carry out its primary operations.

Benefits of creating an offshore company

Offshore companies are typically used as one aspect of an overall tax planning plan. Taxation rules vary between the various offshore financial centres available, although organisations 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 discounts 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 expected by onshore organisations. This “no trade” rule is a requirement and offshore companies have to follow it, depending on the jurisdiction they operate in.

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

Because the regulations for offshore companies are easily accessible, 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 region.

Typical Uses

IBC or other offshore companies will be commonly 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 firms that do not want to pay tax on investment interest earned.

In the UK the standard fee to register Ltd company enables incorporation within 10 days, although faster options are available for a greater cost.

Possible locations for offshore companies

There are many areas of the world that can be defined as an offshore financial centre due to 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 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 should not be mistaken with the U.S. Virgin Islands. Whilst a large percentage 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 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.

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 extremely rapidly. You do not get to pick the name of your organisation, but if that is not a vitally 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.

Creating a company like this could also reduce the difficulties that are sometimes encountered when registering a new business. Using a respected corporate services provider to manage the paperwork required will get around this problem.

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 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 needs.

There are legal proceedings that must be undertaken, and the amount of paperwork needed is likely to be a lot higher than registering an equivalent offshore company. The workload alone may be challenging 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 starting a new company.

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