COMPANY FORMATION - REGISTERING A COMPANY
Advantages of incorporation?
Registering a company and trading with limited liabilities has both advantages and disadvantages. The most obvious advantage following company formation is that the liability of the directors is usually limited and in the event of the company becoming insolvent the personal assets of the directors are usually protected except in cases where the directors have been fraudulent or have not complied with company law.
There are however disadvantages and the law relating to limited companies does put responsibilities on the directors that may not be there for partnerships or sole traders. The most obvious disadvantage relates to accounting rules which must be strictly observed and accounts must be audited annually by a qualified account and in most cases after the accounts are filed at companies house the contents and information contained in those accounts becomes public property available for all to see.
Off the shelf or bespoke?
There are two ways of registering a company :-
- The least expensive method of company formation is to buy an ‘off the shelf’ company which has already been registered, but has not traded, from specialist company agents. All that is necessary in this case is to file forms at company’s house to change the companies name to one of your choice and to file notification of change of directors, company secretary and shareholders. This process usually takes a day or two at best before the changes are reflected on the register. This is a very common method of registering a company with no serious disadvantages save and except that banks and finance companies may query the change of directors and shareholders.
- A limited company can be set up from scratch after the directors have provided all of the necessary information including the directors names, the name of the company secretary, the anticipated share capital and the number to be issued, the shareholders names, the aims of the company and the company name. In this case the company would be formed as a brand new company with supporting documentation specifically drafted for that particular business. The company formation can take place on the same day with absolutely no delays and appear on the Companies Register within a few hours of giving your instructions.
An offshore company can be formed which are usually registered in low tax havens such as Gibraltar or the British Virgin Islands and Delaware. Offshore companies can have several advantages but there may also be pitfalls for the unwary. The main uses and advantages of an offshore company is as follows :-
- Bank accounts, funds, stocks and shares may not be subject to tax
- The profits from chartering yachts and ships may not be subject to tax
- Capital gains tax can be avoided on the sale of property in the host country
- Day to day operations of a business can be structured to avoid tax
- Holding of family assets in a trust company can reduce or remove tax