Let me let you into a secret from the City and International Corporate practice…. Ok … not that much of a secret given the recent media reports ….
One of the key considerations taken before pursuing any business or viable project is the position on TAX! Assuming the project goes well – the biggest eroder of profits is TAX so its imperative that you choose the most tax efficient route that you can.
Therefore, it goes without saying that a good accountant or tax advisor is most certainly your best friend when it comes to protecting your hard earned profits!
There is nothing wrong with taking an active interest in protecting your profits. Governments around the globe are enthusiastic about promoting their growing economy; they encourage commerce by giving tax advantages to register companies operating within their jurisdiction.
Notwithstanding the additional formalities with the administration of running a registered company – its ordinarily worth it for the tax advantages available – ask your accountant!
However – don’t stop at speaking to your accountant! Next stop should be your helpful solicitor!
Your solicitor will likely focus on the potential liabilities of the proposed business or project.
The starting points in your conversation will likely be that:
A registered limited company is a separate legal entity that exists separately from you as an individual.
If a limited company fails – then the liability of the company is limited to the value of the business. Provided a Director has not provided a personal guarantee, then a Director’s personal assets are protected from creditors of the business.
As a sole trader – you are one and the same as the business itself. In the event of business failure, your personal assets (car, house, money etc.) are at risk!
If you have an international or complex corporate set up – it is even more important that you look at the big picture of the tax and legal implications of the potential corporate structures available. Don’t forget to take into the account that you might be considering partnering with another company, engaging sub-contractors and local regulatory compliance issues! It’s a tricky business to get it right!
These are just some of the early conversations that I’ve had with my clients at the outset of considering which path to choose when looking at potential projects – both domestic and overseas, small and large.
When was the last time that you spoke to your professional advisors about whether your chosen corporate structures were the most suitable given your 12 month project plan?
Feel free to get in touch to discuss your corporate structures – whether working alone or with other third parties. We’d be happy to help.