Company Formation in Jersey
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Jersey Company Formation
Business structure will depend highly on the size of the operation and whether it is being set up by an individual as a sole trader, in partnership with other individuals or by an already extant corporate group. The option of legal structure for the new company will probably be driven by tax, regulation and internal organisational considerations. Anyone, whether setting up a business as a sole trader, or as part of group, should really consider whether the incorporation of a limited liability company for the business would be an appropriate step to take. Particular tax advice should be consulted from a professional to assist. It will help you to arrive at a well-informed decision of a structure for the business.
The first choice for an already established corporation is whether to set up a new company in Jersey or to carry out operations as a branch in the existing structure. Any regulatory board applicable to the existing company may treat a branch and an offshore incorporated subsidiary differently. The regulatory authorities in Jersey should also be approached before any choice is made.
The government generally does not involve itself with the ownership operation of companies. However, some companies are publicly owned.
First you must apply for a licence grant from the Jersey Regulation of Undertakings office. Acquiring this licence is a legal necessity and takes approximately a month to receive. You need to decide what name you are going to trade under, too. Choosing to use a name which is different to your own name will require consultation and registration with Jersey Financial Services Commission. You may find it is already in use. There is a £200 registration fee for this.
You must enrol with the Social Security Department prior to commencing any operations, and inform them that you intend to be self-employed. Being self-employed, you will be liable for Class Two contributions, which for 2019 is £185.08 per month. As a newly-formed company, however, the Social Security Department will happily revise your contributions, but this needs to be finalised before you start business activity. In any case, it is advised that you discuss your venture with them.
Limited Liability Companies
Limited liability companies are the most favoured business structure in Jersey. They are formed through a government agency and take approximately a day to become to complete. The formation fee is £200, however there is commonly other admin, etc, payments to account for. There is no prerequisite that a national of Jersey be a participant, manager or director of the company. Also, there are no limitations on capital. However, a toll of 1/2% (up to a maximum of £5,000) is required. In general, a Jersey-based business run by non-residents will have to pay income tax only on income made on the island. However, there is a flat rate of £600 each year.
The benefits are unequivocal:
- Setting up is cheap and simple
- You can produce simple accounts
- You can form a limited company later as your business grows and transfer the business to it.
Unlimited Liability Companies
Unlimited liability companies are not allowed on the island. However, this is currently under consideration.
It is possible to be a sole trader without registering your company. The costs in setting up as a sole trader can vary. The owner's potential liability will not be restricted, and the consequential tax may vary.
Most small businesses find that organisation as a sole trader is the best option:
- Setting up is cheap and simple
- You can maintain simple accounts
- You can form a limited company in the future as your company develops
The disadvantages are few:
- You are personally liable for all your business debts
- Your options for raising money are limited
To set up a company as a sole trader, you are required to make an application to for a license under the Regulation of Undertakings law. You will also have to disclose your operations to the tax and social security departments.
A partnership essentially has the same advantages and disadvantages as a sole trader.
This is how it differs:
- A partnership is responsible for all the business deficits of the partnership
You may be possible to raise capital by welcoming new partners. A sleeping partner will provide funds and gain profits, however cannot not be part of the management.
If a company exceeds more than one owner, they must decide their working relationship. It is vital to determine the relationship when establishing yourselves. This cannot be specified enough. Seek professional advice to help outline the agreement.
The agreement should include:
- Names of partners and of the company
- The activity and objectives of the business
- The date the partnership commences and foreseeable longevity
- The money each partner is to invest
- How profits (and losses) are to be distributed and how much capital each partner can take
- How the business is to be operated, and responsibilities of each partner
- Holiday allowances
- What to do if a partner dies, is incapacitated, or wants to retire or decrease his involvement
- What the arrangements will be for introducing new partners
Deciding these issues from the start helps to lower the all round risks.
To establish a partnership, you must make a joint application for a licence under the Regulation of Undertakings Law, outline the terms of your partnership agreement and inform the tax and social security offices.
By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.
The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:
- Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
- Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
- Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
- Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
Characteristics of an offshore company:
- Memorandum and Articles of Association
- Certificate of Incorporation
- Registered Office/Agent
- Shareholders / Members
- Directors / Managers
- Company secretary
- Statutory Register
Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.
A business can be established in Jersey as a branch, subsidiary or representative office of a foreign parent business. The time taken establish one of these entities and the costs will fluctuate. There is no prerequisite that states a national of Jersey is required to be a participant, manager or director. There are also no limitations put on capitalisation.
The fundamental rules of trusts in Jersey are not dissimilar to those of the UK.
Upon devising your business plan, you will have decide the fundamental structure on which your operations will be modeled. Establishing your company in a deftly and eruditely manner will lessen your expenses and the damage which can be caused by a corporate relationship going awry.
The physical limitations of Jersey have necessitated the establishment of a handful of statutory obligations, and those persons embarking with a new project, or an existing one, must adhere to them.
There are other lawful forms of company which can be employed in specific circumstances. For example, a cooperative is owned by the employees and operated in a fashion of democracy and unanimity.
Whatever structure is chosen, it only affects the owners. You can have employees despite being a sole trader, partnership or limited company. It is possible to embark on venture as a sole trader and to establish a limited company at a later time when the business has had a chance to mature. There may be valid reasons, however, why your company should be established in one form favourable to another.
You will require a business license in order to establish in Jersey.
Where a venture is submitted, and where it is not deemed as offshore, the owner is obliged to apply for a license. Currently, there is no fee charged.
Organisations that can assist with Company Formation
TBA & Associates is a UK Company, with representative offices in Cyprus, Portugal, Spain and United States, providing an array of services to international private clients, and companies undertaking major cross-border business operations. Our clients include major banking organizations, trust companies, law firms, accountants, tax advisors and other professional advisors located in Europe, USA and Asia.
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