|
Select A Business Structure
Selecting the right type of company for your new business helps maximize your chances of financial and operational success.
A. OFFSHORE COMPANIES
As term, offshore company have no precise legal, tax or general business meaning. As the word offshore often means nothing more than anywhere other than the place of physical location of the person using the word (i.e. overseas). In most cases, clients use a very low or zero tax paying jurisdiction to incorporate a company such as British Virgin Islands (BVI), Belize, Anguilla, Seychelles or Bahamas.
Offshore business consists not only of tax havens but also of onshore high tax countries competing fiercely to attract international companies and individuals with all manner of tax planning regulations and opportunities. These tax advantageous regulations are used for a wide variety of tax planning business, such as double tax treaty planning relating to dividends, interest and royalty payments as well as for personal and family wealth management and tax planning.
B. FREE ZONE COMPANIES
Dubai with its tremendous growth and development has become an excellent business environment for many investors around the world. It has one of the most liberal and attractive operating conditions as far as rules and regulations are concerned. This present condition is brought by the increasing numbers of various free zones that can be found now in the whole country. Currently, there are about 38 free zones found in the UAE including the upcoming zones.
BENEFITS
- 100% foreign ownership
- 100% repatriation of capital and profits
- 100% free transfer of funds
- 100% exemption of import and export duties
- Tax free incentives
- 25 years lease options, warehouse facilities, availability of areas for production and assembling etc.
C. LOCAL UAE COMPANIES
LLC
Professional companies
The most common type of business in UAE is LLC. A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. However this requires a local UAE person to own 51% of the Company and only 49% of the company can be owned by a non-resident person or corporate.
On the other hand, a Professional Company is a partnership company between members of the same profession to supply a professional service eg. Accounting, educational services, medical and so on. Documents would have to be attested and the relevant work experience would be considered for such a licence. Approval from various ministries would also be required in most cases.
D. PARTNERSHIP
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
E. JOINT VENTURE
A joint venture is a legal organization that takes the form of a short term partnership in which the persons jointly undertake a transaction for mutual profit. Generally each person contributes assets and share risks. Like a partnership, joint ventures can involve any type of business transaction and the "persons" involved can be individuals, groups of individuals, companies or corporations.
Joint ventures are also widely used by companies to gain entrance into foreign markets. Foreign companies form joint ventures with domestic companies already present in markets the foreign companies would like to enter. The foreign companies generally bring new technologies and business practices into the joint venture, while the domestic companies already have the relationships and requisite governmental documents within the country along with being entrenched in the domestic industry.
F. HYBRID COMPANIES
A type of company where some participants have not an asset, but rather a liability. A type of company limited by both shares and a guarantee. A Hybrid Company has two classes of members - Shareholders and Guarantee Members (Guarantors). A Guarantor is elected into membership of the company by the directors on condition that the member undertakes to contribute a fixed sum to the debts of the company up to a certain specified maximum amount. A hybrid can be structured to function as a quasi-foundation or quasi-trust.
The hybrid company can effectively separate shareholder members from guarantors and limit the rights of shareholders and guarantors so as to comply with the laws of the member's domicile in the most tax-efficient way. When used as a quasi-trust, the hybrid company is typically structured with voting shares, which have no rights to dividends and no participation in the capital or income of the company in any way. The Guarantors have no voting rights but participate fully in the income and capital of the company. However, if liquidated, it is possible that all assets pass to the Guarantor. Thus control of the Company legally rests with the Shareholders, but all benefits flow to the Guarantors. The shares are then issued to professional managers or nominees, who act rather like ‘quasi-trustees’ – having legal ownership of the Company and its assets but unable to receive financial benefit from holding the shares.
All of the financial benefits flow to the Guarantors, placing them in a position rather like the beneficiaries of a typical trust. A Guarantor’s interest may be extinguished on death to eliminate succession problems, remove any probate requirements and therefore may eliminate any inheritance tax/estate duty implications. Depending on how the Articles of Association are drafted, the guarantor may transfer his rights and duties to the Company, in part or in whole, to third parties.
|
