International Business Company/Corporation (IBC)
An international business company or international business corporation (IBC) is a company formed under the laws of some low tax (formerly no tax) jurisdictions which is usually limited in terms of the activities it may conduct in, but not necessarily from, the jurisdiction in which it is incorporated. IBCs are offshore companies that are most commonly used for international business such as trade and non-local services, offshore banking, investment, as a special purpose entity, as well as for asset protection. Offshore companies can be used for virtually any type of transactional activity (some requiring a special license) such as buying and selling goods and services, or holding of physical or digital assets, intellectual property, real estate or for banking and investment accounts.
Both terms Offshore company and an International Business Company (IBC) refer broadly to the same type of corporate structure and are often used interchangeably. They can be distinguished from traditional domestic companies in several ways such as business structure, tax obligations, reporting requirements etc. Each country defines and limits the scope of such companies through corporate laws. Most corporate laws in jurisdictions omit the word ‘offshore’ due to its negative connotations and non-specific character instead using IBC in reference to companies that engage in non-local activities outside the boundaries of the state. The term ‘offshore’ is used to refer to a company, or bank account, established outside the jurisdiction of residence or place of doing business.
In recent years countries such as Belize have changed their corporate laws in order to adhere to global transparency initiatives such as the Common Reporting Standard (CRS) and the United States version FATCA. Typically, an IBC is limited in its activities it may conduct in and must conduct transactions and business activities outside the boundaries of the country.
Business Company (BC)
At the end of 2018, many jurisdictions either passed or embarked on a path to enact legislation that stipulates that Companies would be subject to taxation and economic substance which results in tax filing and other requirements. These companies would be known as Business Companies (BCs) thereby replacing IBCs. Economic Substance (ES) regulations require companies to establish physical presence in SVG, hire local staff and engage in business with residents of their respective depending on the nature of business activity undertaken. These measures have been undertaken by various jurisdictions due to the requirements the OECD and EU who can place these jurisdictions on international listings that can be damaging to the jurisdiction.
A BC can be used for numerous purposes, including but not limited to:
- Provision of professional and consultancy services
- Establishing holding companies
- International trading and investment
- Ownership of real property and land
- Ownership of intellectual property
- Licensing and franchising
- The employment of staff working on overseas assignments
- Offshore e-business
- Investments
For details on this versatile corporate type, please contact us.
Limited Liability Company (LLC)
The LLC is a form of business organization that is widely recognized worldwide. It has unique attributes that make it the best entity to use in many, but not all, situations. The LLC can shield the owners (known as “members”) and the management (who may be the members or “managers”) from personal liability for the debts and liabilities of the company.
LLC’s are suited for entrepreneurial businesses with a small number of active investors. All members can enjoy limited liability protection while participating in the business.
Benefits:
• An LLC is designed to incorporate the best aspects of corporations, general partnerships, limited partnerships and other entities;
• Losses pass through to the owners;
• The LLC may make special allocations of income, gain, loss, credit and deductions to members;
• A member may increase his basis in the membership interest by the amount of LLC debt;
• The members, owners, and managers of the LLC receive the same limited liability protection as shareholders, officers, and directors of a corporation;
• The LLC is, overall, the most flexible vehicle for business;
Drawbacks:
• Venture capitalists normally prefer a corporation rather than an LLC because a 51 percent ownership of a corporation gives them control, while it may not in an LLC. Also, VC’s normally provide funding on the hope that they can take the business public, and LLC membership interests may not be publicly traded;
• Corporations give more certainty, due to the large body of case law on the record for corporations;
• Most businesses, lenders, investors are comfortable with a corporation, but may be unfamiliar with an LLC or how it operates.
Limited Liability Company (LLC)may be structured to provide their members with both limited liability and rights and liabilities to income and for losses, and clearly creates an economic interest which may be transferred separately from membership interest. In return for their contributions, members get to own an assignable interest in the LLC.
A written agreement (“LLC Agreement”) concerning the affairs of an LLC and the conduct of its business may be entered into by the members of the LLC, either before, after, or at the time of signing of the articles. Such an agreement takes effect whenever entered into, or upon such date as provided in the agreement. The LLC Agreement shall not be unenforceable by reason of there being only one person who is a party to it and may provide rights to any person, whether or not such person is a party to it.
A member has two forms of interest in an LLC; (a) his economic interest and (b) his membership interest. The former refers to his share of profits and losses plus his right to receive distributions of the company’s assets, the latter relates to all rights incidental to membership as set out in the LLC Agreement. Subject to the provisions of the LLC Agreement, a member’s economic interest may be transferred separately from his membership interest.
For more details on this Corporation please contact us.
Corporation
A corporation is a legal entity that is separate and distinct from its owners. Under law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
A corporation is a separate legal person as it is legally a separate and distinct entity from its owners. Corporations possess many of the same legal rights and responsibilities as individuals. An important element of a corporation is limited liability, which means that its shareholders are not personally responsible for the company’s debts.
A corporation may be created by an individual or a group of people with a shared goal. That does not always involve making a profit.
The basic elements of a Corporation are the same regardless of jurisdiction where established but they will differ in terms of tax rates, annual tax filings and other annual filings and rules surrounding directors and shareholders required under the laws and regulations of the jurisdiction where the corporation is formed.
C-Corporation
A C corporation (or C-corp) is a United States of America legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation. The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.
C-corps can be compared with S corporations and limited liability companies (LLCs), among others, which also separate a company’s assets from its owners, but with different legal structures and tax treatment. A newer type of organization is the B-corporation (or benefit corporation), which is a for-profit firm but different from C-corps in purpose, accountability, and transparency, but aren’t different in how they’re taxed.
C Corporations are the most common type of corporation, versus an S Corporation or an LLC.
Benefits of a C Corporation
C corporations limit the personal liability of the directors, shareholders, employees, and officers. In this way, the legal obligations of the business cannot become a personal debt obligation of any individual associated with the company. The C corporation continues to exist as owners change and members of management are replaced.
A C corporation may have many owners and shareholders. However, it is required to register with the Securities and Exchange Commission (SEC) upon reaching specific thresholds. The ability to offer shares of stock allows the corporation to obtain large amounts of capital which may fund new projects and future expansions.
For more details on this USA Corporation Type and the steps to form one, please contact us
S Corporation
An S corporation (S-Corp), for United States of America federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election under US tax law. In general, S corporations do not pay any income taxes. Instead, the corporation’s income and losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.
As with partnerships, the income, deductions, and tax credits of an S corporation flow through to shareholders annually, regardless of whether distributions are made. Therefore, income is taxed at the shareholder level and not at the corporate level. Payments to S shareholders by the corporation are distributed tax-free to the extent that the distributed earnings were previously taxed.
For more details on this USA Corporation Type, please contact us.