Registering a Company
A self-employed person or a sole proprietor runs the risk of losing their personal property because they have unlimited liability. The private entrepreneur may find themselves in debt through no fault of their own. For example, they may fall prey to fraudsters. Besides, certain circumstances may change overnight in a way that will make the entrepreneur lose money. In addition, the entrepreneur’s partner or supplier may fail them.
One way of avoiding this risk is incorporating your own company that will give you limited liability. An LLC brings an outstandingly huge advantage: your personal possessions are well protected even if you make business debts and your company goes bust. There are other good reasons why register a company too but we would like to point out that incorporating a company also involves certain hardships for the owner along with bringing benefits to them. In the text below, we will highlight the difficulties associated with incorporating a company that you should take into account if you plan to start a company.
The hardships of the process of registering a company
First, registering a company can be rather expensive depending on the form of company ownership that you choose and the country where you want to incorporate. Maybe you did not think of it, but you don’t necessarily have to register your company in your home country. Registering a foreign company is quite possible even though the process is going to be more complicated and you will need professional assistance in the matter. Besides, as we have suggested, registering a company in some foreign countries can be quite costly. This is true, first of all, for the world’s leading national economies.
If you decide to register a company at home, less money is going to be required but more time and effort. If you would like to economize and hire nobody to help you register a company, you will have to do everything yourself. You will have to pay a visit to the Registrar, collect the application documents, fill them out at home, bring them back to the Registrar’s office, find out that you have made several mistakes, go back home, then go to the Registrar’s office again, and so on.
Please bear in mind that in addition to the company registration certificate, you will have to apply for a taxpayer identification number (as you will create a new taxpayer by registering a company) a VAT number and probably other identification numbers. These tasks normally do not cost anything but they can be time-consuming.
If you do not want to go through the hassle of the company registration process, you can hire a lawyer. But you will have to pay the lawyer a fee in this case. Other costs involved in starting a company include the state duty (even though it is usually rather low) and the registration fee. In some countries, the company registration has to be extended annually, which means that you have to pay the registration fee every year.
Company maintenance costs
If you have a company, you have to pay corporate taxes. The larger your company grows, the more attention you are going to receive from the fiscal authorities. If you are a sole proprietor or a self-employed individual, the tax authorities do not usually bother too much about you. Pay them something in taxes and they will leave you alone pretty much. When you are the owner of a large company, they will want every penny that is due to them. You cannot evade taxes in the modern world.
In addition, your company will have to have an office, at least a small one at the beginning. Office rent can be costly in large cities.
If you decide to register a company in a foreign country, you may have to purchase or rent some property that will belong to the company. Most offshore jurisdictions take the ‘economic substance’ issue seriously now. They have been forced by the global regulators to require that companies registered on their territories have some ‘substance’ such as an office or a warehouse, for example. Companies that exist only on paper are a thing of the past.
The annual company registration extension fee that we have mentioned above is also included in the company maintenance costs. When deliberating company establishment, you have to understand that maintaining the company is going to cost you some money – monthly and annually. This means that you have to be able to earn more with our company than its maintenance is going to cost.
Company personnel
Two issues are associated with hiring personnel for your company. First, you have to pay them salaries. Second, well-qualified personnel are sometimes hard to find depending on what kind of specialist you are looking for. Therefore, you have to make sure that you will be able to find qualified staff before launching your business venture and registering a company. Besides, you have to make sure that you will be able to pay the staff.
Paperwork associated with owning a company
When you register a company, the amount of red tape is going to be much greater in comparison with the situation when you work for yourself. You have to file different sorts of reports every year and sometimes every quarter – financial, fiscal, accounting, and other types of reports. If your company is subject to audit, your Accounting Department is going to have a tough time right before the inspection: they will have to prepare tons of papers for the auditors.
If you register a company in an offshore jurisdiction, you will not have to submit any reports in this jurisdiction. This should not sound surprising: why should they bother processing your reports if they are charging you nothing in taxes? However, you will have to submit the reports to your home country’s fiscal authorities anyway! An offshore-registered company cannot spare you the paperwork.
As you can see, some hardships are associated with registering a company but the benefits that this move can bring will outweigh all the disadvantages if you manage to make your company successful.
