Principles of structuring business

When registering a foreign legal entity, you must consider the nuances of the local law. Make sure you choose the proper structure because it affects the specifics of the daily work and the degree of personal responsibility in that business. Business ideas are essential, but if you do not consider some procedures, your results might be less efficient than you planned. There are at least two ways to determine what structure suits your business the best. Either you take time and do your research or save your time and consult the profile specialist who knows the specifics of the legislation and can help you find the fitting variant which suits your goals and needs, meets expectations about expected responsibility level and have reasonable reporting requirements. This article gives you essential keys that will help you understand what to look for and what questions you need to ask the lawyer to get the most out of consultations.

Contribution of the lawyer in corporate structuring

British common law is one of the most recognised legal systems in the world. Therefore, it influences how people conduct and operate the business in various countries. The corporate structure reflects the legal requirements placed on a particular type of business in the chosen jurisdiction. Advice from experienced UK, Australian and Singaporean lawyers with many years of experience will provide you with a guide to innovative solutions that will help broaden the outlook of your business and ensure better protection for your business and assets in the future, which is undoubtedly beneficial and strategic in the long run.

It would help if you chose the business structure, taking into consideration analysing normative acts and regulations. Take time to examine the possibilities of protecting the assets, should this be necessary for the future, taking into account local legal specificities, etc.

The procedure of establishing a business entity consists of several stages:

• the preparation of the business plan;
• detailed market research;
• selection of the right professionals who will form the staff of the business;
• obtaining the necessary permits from the competent authorities of the chosen jurisdiction.

In summary, the business project's success depends on the right choice of country of incorporation and the proper business structure.

Choosing the jurisdiction for your company

If you think of registering the business abroad, ponder these points, and it would help your business to succeed in the future:

• the geographical location of your business;
• the reputation of the country you wish to choose (check that there is no blacklisting);
• geographically where are your future clients;
• the availability of natural, technological and other resources needed for successful development;
• the location of your primary business partners and logistics.

During the consultation, the profile specialists will provide the following information regarding the conditions and specifics of the jurisdiction you wish to choose:

• conditions and approximate value of the registration procedures, including all formal stages;
• information on whether the selected country is on the black or grey list;
• whether you need to apply for licences and permits there;
• whether the lists of beneficiary owners of the company and the company's management are publicly available;
• tax requirements;
• particularities of the mentality in the country concerned.

The legal requirements for companies in each state, some states, provinces, and cantons have nuances. Remember that global and worldwide trends influence internal regulations. If you know these trends and interpret them correctly, you can determine possible complications and undesirable consequences in the future.

How to choose the correct form of business structure?

Choosing the right form of organisational structure is one of the most critical stages. An efficient structure means that it is the best option for your business reality from legal and tax points of view. A lack of strategic planning can lead to future financial difficulties.

Each business structure brings different advantages. If you think of the partnership structure, it offers legal benefits in terms of low initial and ongoing costs. LLC form makes it possible to minimise the owners' risks, as their private and company assets are in different baskets. Nevertheless, qualified legal advice on business structuring is necessary, as it allows you to choose the business structure that suits your goals and needs.

The most accessible and popular options are the following:

• Sole Proprietorship;
• LLC or Ltd;
• Partnership;
• Corporation;
• Trust.

We want to draw your attention to the following: If there are any changes in the limited liability company, you must inform the regulatory authorities. This type of company is associated with more complicated and stringent accounting and filing requirements than the sole proprietorship. Some jurisdictions require the annual filing of forms confirming that the information about the company in the state register is up-to-date.

Registration of a foreign company

The corporation is a legal entity owned by the shareholders, managed by a board of directors and created by registration in the local register. The share is used as a unit of ownership, measured as a certain percentage. If the company has issued a share, the sole shareholder (the owner) owns 100% of this business entity shares.

Permitted shares are the number of securities the business entity can issue.

Shares issued: general volume of securities issued to shareholders.

Class of shares: a group of shares with certain rights and privileges.

Remember that there is a required number of directors, and you must onboard them before your company's first shareholders' meeting. The company's director oversees the election, control and dismissal of the company's officers. Regular board meetings help to control the efficiency of management, operational activity, and informational flow between the structural units of the company.

Registration of a foreign trust

One of the structure options for your business is trust. The trust has a natural or legal director who performs the control under the trust agreement. If the trust has a trustee, that person is responsible for the structure's liabilities. The shareholders benefit from limited liability if the trust has a corporate manager. Remember that business structure is not something you choose once and for all times. If and when needed, you can change the corporate structure while restructuring your business.

Creation of business structure

Corporate governance

Once the organisation is registered, it does not mean that it no longer needs a business lawyer. Many procedures require competent legal assistance, such as maintaining corporate status, holding regular shareholders' meetings, directors'/shareholders' meetings, taking minutes, appointing corporate representatives, etc. The ongoing involvement of the company's business consultant will help to stay informed of and comply with applicable standards; otherwise, there is a risk that the company may violate the laws of a particular country or state/canton/province/region and jeopardise the company's status, cause conflict between owners or shareholders, and potentially hold the company's owners personally liable for the violation.

Due diligence

Due diligence is necessary to understand potential risks and find ways to minimise them; it identifies how to protect one's assets and ensure that the assets acquired will remain profitable. The legal audit of the business includes a detailed analysis of the legal, financial, operational and tax risks and ways to minimise them. Such an audit may also include an analysis of cash flows and corporate governance structure. A complex legal audit can be carried out in the interest of the owner and/or a potential investor.

Development of statutory documents

When starting the registration of a company from scratch, the owners usually recognise that the articles of association, the memorandum of association and other statutory documents will influence the development and future operation of their company. Professionally drafted statutory documents allow for efficient management and quick response to changes in the business environment.

Some companies need to practise reviewing contracts before signing them because otherwise, they have a high risk of not understanding the obligations they are entering into by signing the document. Often these are supply or rental contracts. In other cases, a company may assume that if it is dissatisfied with a particular contract supplier, it can terminate the contractual relationship without consequence. Any situation of this nature depends on the agreements made. Before entering into a contract or taking any action, it is worthwhile to contact a consultant with a deep knowledge of the legal aspects and formalities of entering into a contract. Such a specialist would review the agreement and make recommendations on rights and obligations. Without advice on business structuring from a profile expert, the company may find itself in a liability burden, a long and costly legal battle.

Formalities and the procedure for paying in share capital

The conditions vary from country to country. Some countries have regulations on the amount of share capital and the procedure for paying it during registration. Some jurisdictions require the formation of capital and its support in a certain amount as a condition for granting a licence. Regardless of the type of business or start-up you are planning, a clear understanding of the conditions before registering and launching the business would enable you to plan resources and minimise project costs.

Intellectual property protection

Companies often have few or many intangible assets worth legally protecting (trademarks and distinctive goods/services, e.g. software, inventions, vehicles, manufacturing items). As part of the business structuring services, our specialists are ready to assist with registering trademarks, copyrights and patents and help you develop a strategy for their protection and ensure that it is efficient.

Partners, Co-owners and their exit from the structure

Substance requirements

We remind entrepreneurs that at the beginning of 2019, the legal norms of most countries, especially the former offshore countries, have been changed. As a result of this change, companies will have to confirm their economic substance in the land of business registration.

Our team provides advice and legal support on corporate structuring. We are ready to answer the following questions:

• To which organisations does the substance rule apply?
• What is the scope of the substance rules in the chosen jurisdiction?
• Does the organisation's activity fall within the definition of regulated activity?
• Is there a mandatory substance rule compliance audit?

Restructuring or franchising

One of the options to restructure the business is to acquire a licence or franchise. Our specialists are ready to help you restructure or buy a franchise for your business.

Conclusion

Jurisdiction and structure variants are critical decisions when opening a foreign business. These two things affect the amount of tax payable, the type of tax and the amount of paperwork, and the personal level of responsibility of the owner.

The legal advisers at IncFine provide complex business structuring services and a personalised approach to each client. When developing the strategy, we consider all the client's wishes.