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By miguel-ingles
- In Uncategorized
Many entrepreneurs locate their company’s offices in the so-called tax havens, due to economic and administrative benefits. However, setting up a corporation in the UK may result even more beneficial than in these previous zones. In this article, I will explain the process of forming an offshore company in the UK.
What is an Offshore Company?
An offshore company is simply a business that has located its headquarters in a country other than the one of its owners. Some of the most chosen territories to constitute offshore companies are the so-called tax havens. Some of them are: The Cayman Islands, Bermuda, Seychelles, or Switzerland.
Each region offers different incentives, but some of them are the same. These are: a quick and affordable forming process, a lack of nationality rules for the company’s shareholders, several fiscal benefits, privacy and confidentiality of information and asset protection.
Why Forming an Offshore Company in the UK?
Firstly, the UK also counts with some of the previous characteristics. In comparison with other European countries, the needed paperwork and fees to incorporate a company are lower. In addition, fiscal rules are more relaxed than in neighbouring nations.
On the other hand, if you wish to create a corporation with a Limited Liability Company (LTD) or sole trader business structure, you will not need any more founding members other than you. Also, there is no need to reside in the country. That being said, the main headquarters of the company must be in British territory.
Lastly, the UK has a high economic reputation and, thanks to the many trade deals they have signed with other nations, companies can access to many other international markets. Therefore, the corporations that set up in the country will enjoy an improvement on their business image. However, establishing in tax havens may have the opposite effect: it can harm the reputation of the company.
The Process of Forming an Offshore Company in the UK
1. Choosing the Best Business Structure for Forming an Offshore Company in the UK
The two most appealing options to form this type of company in the UK are Limited Liability Companies and Limited Liability Partnerships (LLP). Depending on our needs, one type of business or the other will be more beneficial.
In this article, I explain the differences between both business structures. The most relevant are the following ones: LLPs do not have to pay the Corporation Tax while LTDs must. LLPs allow a more flexible organization than LTDs do. To form an LTD, you only need one founding member, but authorities require LLPs a minimum of two partners. Finally, funding an LTD is easier than an LLP.
2. Registering the Company
You must choose a unique name, the location of the headquarters and a tax address for the company. In the case of LTDs, it is necessary to write the Memorandum of Association and the Articles of Association, in addition to appointing a director and the shareholders. For LLPs, you must specify the designated partners of the company, who will have extra responsibilities, such as formulating the annual accounts of the business. You must register all of this into the Companies House.
3. Opening a Commercial Bank Account
Its main objective is to separate personal and business economies, so you will have a clearer image of the financial health of the company. Moreover, it allows the corporation to ask private and public organizations for funding. This is usually a requisite to access extra investments.
To open a commercial bank account, first, you will have to investigate the terms and conditions of the entities that operate in the country. Once you have chosen one, you will hand over the documentation they ask for. At last, you will pay the corresponding fees. After these processes and if everything is correct, they will give you the account number after several days of the petition.
4. Paying Taxes and other Fees
If the company has earned more than 90 000 GBP, you must sign it up for VAT. On the other hand, LTDs must pay each year Corporation Tax. To do so, you must register the business into HMRC. In the case of LLPs, each partner will pay their corresponding Income Tax fee.
In addition, you must also pay other fees, such as civil liability insurances, the employer number, so you can hire workers legally, or other specific tariffs attached to a certain business sector.