The use of a corporate vehicle in the establishment and structuring of a financial transaction is commonplace.
However, before establishing any kind of structure it is important to remember implementation is key to the success of any form of tax planning, as is the use of the right vehicle in the right jurisdiction, to ensure that a structure is fit for purpose and yields success.
Our latest blog post aims to help make sense of some company formation fundamentals, including key roles, responsibilities and requirements. Let’s break it down…
Company incorporation can be defined as “the act of making a company or organisation into a legal corporation”. – Cambridge Dictionary
A company is a specific type of business structure formed to be a separate legal entity from its owners, who are working towards achieving a common objective.
The difference between a business and a company is that a company is a legal entity in its own right, rather than being the responsibility of an individual.
A company may be set up for a variety of reasons and whatever line of business the company will be operating in will determine the business structure such as a partnership which will donate the ownership structure.
– Asset Protection
– Succession Planning
– Effective Tax Planning
– Investment Opportunity
– Flexibility for future growth
– Ease of transfer of ownership
The time in which it takes to incorporate a company depends on how and where you choose to incorporate it.
In some countries if you choose the online formation route it can take a little as 24 – 48 hours but if you submit the documents via post it can take anything between eight and ten days (this time scale can change from one jurisdiction to another).
Each company must have its own unique, distinctive name so be wary of choosing a name that is too similar to that of another company’s business or trading name.
You can check with the relevant companies’ registry before you proceed too far into the process, in order to ensure that the name is not already in use by someone else, does not fall under any prohibitions and that it will receive name approval from the respective company registry when you apply.
When choosing a registered address for your company, it must be a physical address and must be in the jurisdiction of incorporation.
If you are resident outside your jurisdiction of incorporation, you may wish to engage a licensed corporate service provider to provide registered office services, which consequently allows you to use their address. A company’s registered address will be publicly available on most online company registers.
A Director is an individual or corporate entity who is legally responsible to make decisions and act on behalf of a company.
A company Director is appointed by the shareholders and has a fundamental role ensuring that legal and regulatory requirements are complied with and be aware of their decision-making powers which will be set out in the company’s M&As.
A Company Secretary, also known as a ‘Co Sec’, is an individual or body corporate that plays a critical role in the governance and administration of a company.
The company secretary is normally responsible for generating minutes of board meetings, register of directors, register of shareholders and for developing and implementing company procedures and best practice.
A Registered Agent is an individual or entity who acts as corporate liaison designated to receive documentation on behalf of a business.
The Registered Agent should ensure the adequate recording and retention of information on behalf of a registered business, ensuring they comply with regulatory obligations such as filing and maintaining statutory documentation in the jurisdiction in which the company was incorporated.
A shareholder of a company can be an individual or ‘body corporate’ who have invested money into the company in exchange for a “share” of the ownership.
A shareholder will gain from company profits and have the ability and right to vote on how the company is effectively controlled. However, said control can also be determined by the shareholding percentage owned.
A company’s share capital is the total value of shares issued to investors either on or after the incorporation of a company.
The Share capital is how much shares were bought for and the amount of shares a company has can change over time if the company expands. For example, if you have issued 1000 shares at a nominal value of £1 each, then the authorised share capital would be £1000.
Ordinary Shares are the most common type used but there are different classes of shares which will have differing rights for the shareholders.
A Certificate of Incorporation is a legal document and conclusive evidence that your company has been successfully formed and registered with an official registry.
The certificate will outline key information such as the name of the company, date of incorporation, registration number, type of company and the company’s registered office.
The Memorandum and Articles of Association is a legal requirement for a company to produce when the company has completed the formation process.
The Memorandum of Association is a legal statement which will include the company’s name, date of incorporation, type of company, Act the company is registered under and the names and signatures of all shareholders.
The Articles of Association is a set of rules that govern how the company is run and owned by its members. It will include director’s powers and responsibilities, shares, distributions and dividends, shareholders, general meetings, voting rights and capitalisation of profits.
The Registers are statutory registers that show a record of all individuals that are or have been involved in the company – it can include Members (aka Shareholders), Directors and Secretaries.
Typically, the Register of Members records the name and addresses of all shareholders past and present, distinguishing the number and value of the shares held by each of them as well as their share certificate number. Any changes should be updated and reflected in the Register accordingly.
The Register of Directors and Secretaries records information on all of the officers (past and present) of the Company. The information recorded typically comprises names, addresses, nationality, passport number, the dates they were appointed and where applicable, the date they resigned.
A share certificate provides ‘proof of ownership’ that an individual or body corporate is the registered owner of a certain number of shares of a certain class and value within the company.
The share certificate usually contains key information such as a unique share certificate number, the name and address of the shareholder, the company name, registration number, registered address, number of shares assigned and the class and value of the shares.
Tax is fundamental to the effective running of any business.
Organisations should have a clear vision and tax strategy in place, which should be underpinned by the appropriate processes and procedures to mitigate associated risks and liabilities across the business as much as possible.
Setting-up a company can be a time-consuming and sometimes complex process, with various matters and stages needing careful consideration to ensure that the company is set up correctly and is fit for purpose.
From incorporating a limited company to bookkeeping and accounting, to tax and VAT registration and administration, we can assist and guide you through the company formation process and provide the ongoing back office support required.
If you would like to know more about setting up a company or would like to discuss our back office support services and how they can help your business, contact our team on +44 1624 616544 or email firstname.lastname@example.org.