Incorporation | Basic Facts

Incorporation: Basic facts for onshore and offshore incorporation. An offshore IBC is the easiest to do

What is the process of incorporation? This page deals with the basic facts of offshore and other incorporation.

What is incorporation?

Incorporation is the process of getting approval from the appropriate authorities of creating a legal entity – some kind of a ‘corporation’ to conduct business.

“A corporation is a legal entity (technically, a juristic person) which has a legal personality distinct from those of its members.

The defining legal rights and obligations of a corporation consisting of the capacities

(i) To sue and to be sued

(ii) To own assets

(iii) To employ agents

(iv) To engage in contracts and

(v) To make by-laws governing its internal affairs

(vi) Other legal rights and obligations may be assigned to the corporation by governments or courts. These are often controversial.” – Source: Wikipedia

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Incorporation: Difference between a corporation and a sole proprietorship

1. The basic difference between a sole proprietorship and a corporation is that after incorporation the company becomes a separate legal entity and can act as an individual on its own behalf.

The owner of the company can be one or many, depending on the percentage of shares they own in the company and are legally separate from the company.

2. Unlike in a sole proprietorship, in a corporation, its shares can be listed on a stock exchange for trading subject to the terms of the relevant stock exchange. Also, a board of directors is appointed by the shareholders to deal with the business the company handles.

In many countries, the board of directors are held liable for many of the company’s actions and can be prosecuted.

3. A Chief Executive or Managing Director is appointed to head the management team which deals with the task of running the company on a day to day basis. Of course, in closely held [owned] corporations, the owners are often also on the board of directors and in senior positions of management.

4. Every corporation must have at least one director and a shareholder. For incorporating an offshore company also there is a requirement of at least one director and shareholder. Their residency requirements and nationality vary by tax haven jurisdiction.

Every country and state have different laws for incorporation and so the jurisdiction must be chosen based on the specific purpose the company is being formed.

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Incorporation: Articles of incorporation

The Articles of incorporation is the document which describes the basic information about the company and its intent of formation. Name of the company, its registered office, list of board of directors, basic rules and regulations are the key points covered in it.

Clarify everything beforehand!

In many countries, there still exist complicated and bureaucratic laws for new onshore corporations. So it is essential for a new investor to know the incorporation basic facts.

It may be better to hire an incorporation agent who knows the rules & regulations of the concerned state or country.

Incorporation: About the International Business Corporation [IBC]

The International Business Corporation has become trendy with investors due to many financial and non-financial reasons. Some specific offshore incorporation basic facts are discussed below:

• Simple offshore business incorporation has become easy and is not a lengthy or tiring task anymore. [Unless you are in a jurisdiction that requires lots of documentation.]

• In most cases, this cannot be done by the investor himself and he must appoint one of the many offshore incorporation service providers available for this purpose

• Many countries now have tax free zones for offshore incorporation and you can easily avail of them

• Your wealth will be protected against legal issues

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• Due to the rapidly increasing offshore registrations, many offshore company incorporation service providers have started incorporation of shelf companies which have been incorporated in the past and are just waiting to be bought

You will get them quickly especially if due diligence has been done on you and this is not your first company with the registration offshore company. But you will pay more than for a new company

• All the basic work for incorporation is done for these readily available offshore companies for sale and you just have to buy and start your business

• For various reasons, all countries put some restrictions on foreign investors so it’s better to be aware of your constraints before incorporation

Things mentioned above are just incorporation basic facts and in no way to cover everything. But this information is a start and should trigger other questions in your mind!

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Incorporation was last modified: July 13th, 2022 by Manu Raj

Manu Raj

Has a positive attitude towards the job, is friendly and a team player.

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