The legal structure of your company
Before incorporating a company, or even choosing a jurisdiction, you need to plan a corporate structure for your business and, based on this, decide the purpose of the company you wish to incorporate. Understanding the business structure of your company is essential, as it will determine the jurisdiction and type of company you choose in order to best meet your needs.
As different legal entities are usually subject to different taxation rules, it is essential to have a clear vision for your company, including its scope of activity and corporate structure. For tax planning purposes, it is crucial to choose the right legal structure for your business; otherwise, you risk incurring extra expenses that could easily have been avoided. Also, some company types are bound by certain restrictions in terms of incorporating new business partners or third-party investors, which may be a problem if you plan to work with invested capital. One of the most important aspects is the liability of the owners: different legal entities have different levels and mechanisms of liability for the business owner with respect to the company’s relationships with third parties. In order to avoid unnecessary risks, we strongly advise you to think twice before choosing a legal structure.
A company’s legal structure refers to its internal composition and its management and supervisory bodies as well as the liability of the owners in relation to third parties. On this basis, we can offer you the following legal company structures:
- Limited liability company (LLC)
- Joint-stock company (JSC)
- Limited partnership (LP)
- Limited liability partnership (LLP)
- General partnership (GP)
- Branch office
- Representative office
Confidus Solutions can provide you with in-depth legal consultation regarding business and tax planning strategies, as well as advising on a suitable legal structure for your company. As each type of entity has its own benefits and disadvantages, we strongly recommend that you contact us before proceeding with the company formation procedure.
Limited liability company
A limited liability company (hereafter referred to as an LLC) is a commercial company type with legal personality status. One of the major features and benefits of any LLC is the fact that shareholders can’t be held personally responsible for the company’s debts or liabilities — only the assets of the business itself are at risk. A major difference between a joint-stock company and an LLC is that the latter is always a close company and its shares are not publicly traded.
In a joint-stock company, the share capital is made up of the total contributions of the shareholders. Shares may be subject to public trading, providing an incentive to investors, who are needed for further business development. In a private company, stock can be transferred to anyone the current shareholder chooses, and usually shares are transferred under the terms of a share purchase agreement. A public joint-stock company‘s shares can be freely traded on the open market through a stock exchange, and so the list of shareholders is not fixed and can be changed in a flexible manner.
A limited partnership is a type of legal entity in which there are at least two partners, one of whom has limited liability and one of whom does not. The number of partners can be greater than two, but nevertheless each is either a general partner (unlimited liability) or a limited or
silent partner (limited liability).
Limited liability partnership
A limited liability partnership is a type of partnership in which each partner’s liability is limited to the total value of their contributions. In other words, the liability of each partner does not place their personal assets at risk, only the assets they have contributed to the partnership. This can vary to some degree, depending on the jurisdiction and the provisions of the partnership contract.
A general partnership is a type of legal structure where two or more individuals co-operate or form an association in order to establish a business, for the purpose of making a profit as a group. Moreover, all partners are considered to be liable if at least one has dealings with a third party, as any one partner can enter into and perform agreements on behalf of the partnership as a whole.
A branch office is a unit of a parent company established in a foreign market or otherwise separate location with the aim of conducting business. A branch office is not an independent entity in a legal or functional sense — it is created as an extension of the parent company, which is responsible for its liabilities and taxes.
A representative office of a company is an office established in a foreign market for the purposes of carrying out marketing functions, data collection and other operations that do not involve selling products or providing services. A key feature of a representative office is that, by definition, it cannot be involved in transactions, invoicing or other forms of buying or selling products.
Confidus Solutions will help you evaluate all of the possible options and choose the most efficient, tailored solution to achieve your personal goals. We have many years of expertise in this area and our experienced agents and lawyers can incorporate your company in any jurisdiction worldwide. If you require more information, take a look at our offered solutions or contact us for an offer unique to you.