Based on commercial regulations in several common law jurisdictions, Directors possess a duty of care requiring each of them to act in good faith when it comes to the company’s favour, and using reasonable consideration of all available options before acting.
In the court, such duty might be interpreted to mean acting to be able to make a business successful. I.e. increasing income, and earning as much revenue as they possibly can and likewise making sure all decisions will offer the business the ideal tools to continue making profit in future. It can be actually unlawful for Directors to take into account the interests of society plus the environment in any aspect that conflicts with being profitable.
In Cyprus, corporations have similar legal standing as humans, they actually can legally own property, commence court proceedings, own shares in other companies, and perhaps even exclusively own other companies (holding companies) as per Chapter 113 of Cyprus company law. Companies can claim the legal right to a fair trial, to freedom of expression, and also to property rights. This could easily cause it to be extremely difficult to bring corporate powers to court, since companies certainly not only have these rights, but could also provide the best lawyers to defend them. In any case, company registration in Cyprus, needs to be taken seriously.
Therefore, when setting up a new business venture or project, there are plenty of deliberations that is required in an effort to ensure success. Having commercial legal standing is not meant to be taken lightly and not being thorough when incorporating can lead to difficulties afterward. Often, a start-up is the outcome of an excellent concept with the drive and financial support to create it. See below the considerations that ought to be established to make sure you have grabbed the required steps to guard yourself along with your new business.
1. Choosing the type of business entity
A start-up must make a decision on the kind of legal structure or entity that this company will be; to incorporate as well as to remain being a sole proprietorship. Many entrepreneurs will postpone incorporating their business to refrain from the costs linked to this process. While delaying incorporation is financially economical within the immediate term, invariably, the delay can also create legal risk.
Incorporating a business in the early stages offers significant benefits for founders and subsequent partners. A corporate entity provides liability protection and tax savings through benefits and deductions that are not typically released to sole proprietorships or partnerships. Additionally, in the case you are in need of investments, an incorporated business is significantly more appealing to Shareholders with the limited liability and transferability of shares. Investors often prefer collaborating with established firms as they simply possess an established share structure with different classes of shares.
2. Location of incorporation
The commercial laws of each and every jurisdiction vary wherever you choose to incorporate your corporation. Each country possesses different laws which should directly affect taxing, running costs, and essentially the way in which the business will be governed. Deciding this probably explains possibly the most crucial for your company. As with every new business, it is always logical to either incorporate in the country which you currently inhabit, where your main operations exist or elsewhere which have tax and value benefits like perhaps Cyprus, as well as the Seychelles.
By choosing to do business in a different jurisdiction, you inevitably become dependant upon that jurisdictions’ company laws and legal regulations, which must be followed with a purpose to maintain the company in good standing. Many Business Owners will simply prefer to incorporate in the country where their main business processes have been carried out. Even though this might be the simpler option, based on where they might be located, it could mean a sluggish incorporation both time and excessive audit requirements that may be burdensome to comply with.
If you are able to pay the incremental cost, relocating could be a wise business move. You may also want to think about whether an offshore parent company structure will be beneficial. Even though the analysis might be complex, incorporating your company elsewhere like perhaps Cyprus or Belize will work at reducing the tax burden substantially. Contact me in case you have questions regarding your options.
3. Naming the company
Sometimes, new Business Owners aren’t knowledgeable with the processes involved with naming and registering their company. For instance if you are thinking to incorporate a business in Cyprus, the name must not be exactly the same or even identical to another entity upon the company registrar’s file. Except if you are functioning being sole proprietorship under own name, you ought to register your company name within the jurisdiction for which you intend to operate in.
To register a company’s business name it should meet these requirements:
- Firstly, the name has to be unique, this is going to be applied to differentiate your proposed name from the names of other businesses.
- Secondly, it will probably assist the business to include a descriptive component to the name or to help advertising by an online search engine or on signage.
- Finally, the very last word in the name of an incorporated company must show the abbreviation stating the business structure or type of legal entity like perhaps LLC or PLC.
4. Structuring the ownership
It is vital to have a sound understanding with each of your co-founders with regards to the regulations of your company arrangement. A lot of time is spent in courts worldwide resolving professional relationships which were poorly planned or documented. Provided that you are ready to document basic processes, a legal contract exists for just about any situation and kind of relationship in the business world.
The equity (including stock and options) of your own company might be owned in several forms and subject to various conditions. The most effective way to structure the ownership of your firms is to create fully-vested stock shares in exchange for getting a purchase price. However, this method doesn’t always function for every company’s situation.
A Shareholder Agreement is a beneficial method to document a company
Most disagreements might be avoided through control documents such as shareholders’ agreements or founder vesting agreements. Additionally, an obvious definition of responsibilities, rights and expectations may help the realization of whatever could happen in case of certain contingencies or issues arising.
As the company grows in size and value, the founders tend to have a greater concern in protecting against death, fall outs or any other unforeseen events. In case there is no shareholder or member agreement set up, it is not too late to put together one.
A shareholders’ agreement is basically a contract that really is signed between some or every one of the shareholders of a company that states certain key issues just like the management positions and basic running operations of the company, the shareholders’ rights, and limitations with regards to the shares of the company. It should also comprise dispute resolution provisions and contingency plans in case of basically any disagreement amongst the founding parties. Think of it just like a signing a prenuptial agreement before marriage!
5. Protection of intellectual property
Most companies have intellectual property (IP) which is used to construct and store the value of the company. This intellectual property may include copyrights, patents, trade secrets, trademarks or maybe even website names. Maybe you own a “secret ingredient” that gives your business or services a competitive edge over other companies.
Discovering a way for you to protect these intellectual property rights early might be critical towards the lasting value of your company. This could be achieved by all company founders assigning their intellectual property onto the company and renouncing all moral rights for their own work for the company on the time before and after the incorporation.
Various kinds of intellectual property rights can defend you in other ways:
- Patents might be somewhat expensive and sometimes complicated to acquire nevertheless the power to stop others from practicing your company creation can provide your company a competitive edge over other new start-ups which have precisely the same ideas just like you.
- Copyrights© and trademarks™ can prevent competitors utilizing your ideas to potentially even earn profit at your expense.
A sound portfolio of intellectual property rights can build and secure value in your business. It definitely will also protect the value of the corporation, causing it to be more desirable for potential investors.
While selecting an attorney or service provider, consider their grade of expertise beyond general commercial law. It can be beneficial to make use of a team who understands the industry plus the unique challenges facing any offshore company. Locating a service provider or lawyer who recognises the precise needs plus the growth cycle of start-ups or SMEs can really help protect your company along with maximising the long-term success of your business.